Despite a still depressed economy, franchises are poised to make a comeback in 2012. Automotive, business services and lodging franchises are particularly poised for growth.
That's the finding of a new report from the International Franchise Association, which anticipates the number of U.S. franchises to grow by 1.9 percent in 2012. That equals 13,928 new franchise opening in 2012. This increase is expected to raise the total number of franchises in the United States from 735,571 to 749,499 establishments in the new year. This comes after three consecutive years of limited growth due in large part to the recession.
While growth is not expected to bring franchises to pre-recession levels where there were 774,016 establishments in 2008, this represents the first positive growth since 2008.
"The forecast for modest growth is good news for the franchise industry and the overall economy, given franchising supports 12 percent of the U.S. private sector work force," Stephen Caldeira, International Franchise Association president and chief executive officer, said. "However, the rate of growth is far below the growth trends we experienced before the recession. Pro-growth policies out of Washington, D.C., to provide certainty to the franchise industry, such as comprehensive tax reform that lowers the corporate and individual tax rates, as well as increasing the flow of credit to small businesses by the lending community, will help to get us on a more aggressive path of growth and job creation."
The outlook for various franchises according to the report is:
- Automotive franchises are expected to grow 1.4 percent
- Business services franchises are expected to grow 2.6 percent
- Commercial and residential services are expected to grow 1.2 percent
- Lodging franchises are expected to grow 3.1 percent
- Personal services franchises are expected to grow 2.7 percent
- Quick service restaurants franchises are expected to grow 2.6 percent
- Real estate franchises are expected to grow 1.9 percent
- Table and full-service restaurant franchises are expected to grow 2.1 percent
Additionally, these new franchises will add 168,000 jobs in the coming year. This job increase will boost franchise jobs by 2.1 percent in the next year, raising direct employment numbers at franchises to an estimated 8.1 million.
While all franchise segments are expected to rise in the coming year, many potential franchisers and franchisees continue to complain about the ability to get funding necessary to open new franchises. Two-thirds of franchisors stated that access to capital and credit needed to open new franchises remains a large problem and has not improved in recent months. More than 80 percent of franchisors and 55 percent of franchisees say that this limited access to capital negatively affects their business.
Despite these challenges, 85 percent of franchisors plan to increase franchises in 2012, with 35 percent planning on increasing establishments by six percent. Two thirds of franchisees agree and expect to see significant or moderate growth in 2012.
The information in this study was taken from the International Franchise Association Business Leader Survey. The survey was conducted by IHS Global Insights, an economic analysis and forecasting firm.
Reach BusinessNewsDaily staff writer David Mielach at Dmielach@techmedianetwork.com. Follow him on Twitter @D_M89.