3 Economic Factors Impacting Franchise Brands in 2016

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The growth and success of franchise brands is tied to the overall direction of the American economy. It has consistently been a pathway to entrepreneurship for many people who have always dreamed of owning and operating their own business.

In reality, the franchise industry is a major factor in the economic health of the U.S., contributing upwards of 3 percent of total gross domestic product in 2016, according to the IFA Educational Foundation’s “Franchise Business Economic Outlook for 2016.”

Future Looks Bright for Franchising

Overall, the health of the franchise industry is in great shape. The sector continues to generate year-over-year growth in nominal dollar output and promotes job creation.

“We are forecasting that for the sixth consecutive year, franchise businesses will grow at rates that exceed the economy-wide growth of industries where franchises are concentrated,” said IFA President and CEO Robert Cresanti on the IFA website.

With a positive broad outlook, there are a number of factors that many in the franchise industry are thinking about:

  1. Matching economic growth in 2015
    Last year was a largely successful one for franchise brands. In 2015, the revenue generated by franchise businesses hit 5.6 percent, which was 0.2 percent better than the initial estimate. Meanwhile, the current expectation for the industry is that total output will reach 5.8 percent. Additionally, the number of franchise establishments is predicted to grow by 1.7 percent, reaching more than 13,300 locations. With this, job growth is expected to jump 3.1 percent, which means the industry will generate 9.1 million jobs.
  1. Consumer spending continues to rise
    So far, consumer spending has been fairly strong. According to Kiplinger’s latest forecasts, retail sales and consumer activity are expected to grow at a steady rate – 3.9 percent – through the end of 2016. Over the past 12 months, all non-gasoline sales in the U.S. have grown at a rate of 4.7 percent, as the numbers for December and January were better than expected. Other factors contributing to the increase in disposable income for American consumers is the drop in unemployment and the recent gains in wages. All of this, ultimately, is a benefit for franchise brands that rely on consumer spending.
  1. Commercial real estate trends
    The commercial real estate market in the U.S. has become increasingly dynamic, according to a recent report from PricewaterhouseCoopers titled “Emerging Trends in Real Estate.” A big development is rise of the 18-hour city, which is best exemplified in places like Austin, San Diego and Denver. They’re not traditionally major commercial hubs, but they’re increasingly popular locations for entrepreneurs looking to establish their own businesses. However, they’re relatively volatile compared to more mature markets, meaning the risk and reward are a big consideration. At the same time, the pre-recession construction boom has ushered in an era of renovation of existing buildings and alternative property types, which gives franchisees a more options when choosing real estate.

What Franchise Opportunity Is Right for You?

Now is an ideal time for aspiring entrepreneurs to think about the ideal entry point into the world of business ownership. There are many different types of franchise brands with distinct operations and levels of complexity.

Investing in the right franchise system demands serious consideration of which direction you’d like your entrepreneurial journey to take.

What are you waiting for?

Category: | Published: February 22, 2016