THE FUTURE OF FRANCHISING
The franchise business today has been positively affected by the weak job market combined with a slowly loosening funding market. With fewer opportunities for high-income jobs, more people are turning to franchising as a means to generate the income they are accustomed to.
MBA’s deeply experienced in their trade and talented professionals are buying franchises at a rapid pace in today’s market.
Financing and funding options were limited from 2009-2012, but have been increasingly less difficult to obtain over the past six quarters. All in all, the franchise market has experienced growth of over 4.8 percent per year since 2011 which is exceptional. This of course is fueled by a rebounding economy and a market place that was decimated in 2009.
So where does this take us in the franchise market tomorrow?
Franchising will continue to expand as we see it. Even in a not-so-small business friendly political environment, the need for small business growth has become apparent. Franchising is one of the vehicles that effectively support small business growth in any economy by leading the way to new-found entrepreneurs and business owners.
This in turn creates jobs, opportunity and ultimately positive stimulation for our overall economy. According to the Franchise Business Outlook reports, findings have consistently shown that the franchise industry has emerged from the recession stronger than others, creating jobs at a faster rate than the economy as a whole.
In fact, the 2014 June Update of the Franchise Business Outlook shows an industry that is expanding faster than the rest of the economy.
Some quick numbers from the report which are extremely relevant to these statements include:
- Over 200,000 new jobs were created by franchising in the U.S. in 2014 alone
- The number of franchised businesses grew in 2014 by 1.7 percent in the U.S. outpacing overall economic growth
The food service segment of franchising has seen the single largest resurgence since 2009.
The segment was almost dormant after the economic collapse and in 2012 emerged as one of the fastest industry segments to recover. This trend will continue to follow the overall economy health and growth or downturns as restaurants and food service businesses tend to be sensitive to overall economic trends.
We see an enormous opportunity in the technology space for franchise growth.
Recent industry segments which have exhibited strong growth trends include: Mobile Technology Repair and Service concepts, Computer Repair models, SEO and Internet Marketing Service models and other technology related businesses.
This growth has been in both retail models and in work from home type franchise businesses. Because of the overwhelming increase in demand for technology and reliance on IT in both our personal and business lives, we see this trend continuing to expand for the foreseeable future.
Our work in the franchise market has us working closely with a wide array of service businesses which offer services ranging from construction, flooring, restoration, cleaning and other trades.
The lower initial investment and higher margins in these businesses have been attractive to, surprisingly, people with little to no experience in the field. Many times it is a “white collar” professional who just wants to get out of an office and do something with their hands who ends up in these fields.
Loosening of the financial markets has supported growth in the franchise markets allowing for more entrepreneurs to get started in a business. More programs have been put in place and implemented to encourage small business growth including programs for Veterans, Women Owned Businesses and Minority Owned Businesses.
Banks and lenders have been given strong incentives to loan to small businesses and help capitalize the economy’s “come back”. Franchises are typically looked at as a safer bet for lending institutions which mean that franchisees have a better opportunity to get the money they need to start a new business.
Overall, we are extremely optimistic for growth in the franchise market segment with continued potential for growth over the next three to five years as the economy continues to improve along with the push for small business growth in the U.S. and around the world.
Christopher Conner has spent the last decade in the franchise industry working with several hundred different franchise systems in management, franchise sales and franchise development work. His experience ranges across all fields of franchise expertise with a focus in franchise marketing and franchise sales but includes work in franchise strategic planning, franchise research and franchise operations consulting.
Christopher has worked with multiple International franchise and licensed organizations throughout the United States, Middle East, India and Europe. He has an MBA in Finance and Marketing from DePaul University in Chicago and a Bachelor’s Degree from Miami of Ohio.
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