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Franchise Growth Levels Off For Second Half Of 2013

Written by Ken Gaebler
Published: 6/20/2013

IFA predicts franchises will continue to outperform other sectors of the economy, but growth and additional employment opportunities will not reach full potential for the remainder of the year.

Franchises play an important role in the U.S. economy, employing a large portion of the nation's workforce. In recent years, franchising has experienced solid growth due to an influx of new franchisees and the gradually improving national economy.

Franchise Growth Trend Mid 2013

However, the International Franchise Association's (IFA) second quarter update to The Economic Outlook for Franchise Businesses report predicts that franchise growth will level off during the second half of 2013, despite the fact franchises will continue to perform better than independent businesses in many industries.

Among the IFA's well-publicized and ongoing concerns are opposition to the federal government's spending sequester and a call for a revision of federal tax code, making tax rules more equitable for franchised businesses. According to the IFA, current tax law imposes unfair conditions on S-corps and LLCs, business structures that tend to be favored in franchising.

"Franchise growth continues to outpace other sectors of the economy as franchising remains the fastest way to grow and scale a business, despite the still uneven economic recovery and the onerous public policy environment facing our members and the small business community," said Steve Caldeira, president of the IFA. "We are concerned the headwinds facing the industry continue to hold back franchise development and job creation from its full potential."

The IFA's adjusted forecast predicts:

  • The number of franchise businesses will increase by 1.5 percent in 2013 and the number of jobs provided by franchising will increase 2.0 percent, compared to 2.2 percent job growth in 2012.
  • Franchise sector GDP will total $472 billion in 2013 or 3.4 percent of U.S. GDP in nominal dollars.
  • Output of franchised establishments will increase 4.3 percent in 2013, slightly lower than the 4.9 percent achieved in 2012.

Typical growth business strategy planning considerations may or may not be effective for franchises interested in expanding their markets or improving their bottom lines. In some instances, franchise agreements and other contractual limitations may restrict franchisees from executing strategies that are second nature to independent business owners.

But by working with their franchisors to create and implement growth plans, individual franchisees can improve the odds of beating industry forecasts and achieving meaningful growth throughout the remainder of the year.

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