Report: Restaurant sector boosts franchise growth

March 27, 2013

The International Franchise Association released its updated 2013 forecast today, which predicts that franchise businesses will continue to grow at a slightly faster rate than other businesses in job creation, new business formation, economic output and GDP contribution.

The IFA's first quarter update was prepared by HIS Global Insight for the IFA Educational Foundation. The forecast remains virtually unchanged from the initial forecast released in December.

"The report is good news and shows franchising remains an incredibly strong and resilient business model for all business lines in our industry that generates jobs and economic growth for the American economy," said Steve Caldeira, IFA president and CEO.

According to the report:

  • The number of franchise establishments in the U.S. will increase by 1.3 percent in 2013, just short of the 1.4 percent initially forecast, from 747,359 to 757,438, (an increase of 10,079);
  • The number of jobs in franchise establishments will increase 1.9 percent, down from the 2.0 percent initially forecast (following a gain of 2.1 percent in 2012) from 8.101 million to 8.257 million (an increase of 156,000)
  • The output of franchise establishments in nominal dollars in 2013 will increase 4.0 percent, down from the 4.3 percent initially forecast (following a 4.9 percent increase in 2012) from $769 billion to $802 billion (an increase of $33 billion); and
  • The gross domestic product (GDP) of the franchise sector is projected to increase 4.0 percent in 2013, slightly down from the 4.1 percent initially forecast (following a 4.6 percent increase in 2012) from $454 billion to $472 billion (an increase of $18 billion). This is approximately 3.4 percent of U.S. GDP in nominal dollars.

"All basic indicators of the health of the franchise sector will show growth rates near their 2012 pace, said James Gillula, managing director, Consulting for IHS Global Insight. "Yet the franchise sector will continue to outperform within many of the industries where franchises are concentrated."

Still, Caldeira says even more progress could be made.

"While the report is good news, it is certainly not great news," he said. "We could be growing at rates two to three times faster if policymakers adopted a pro-growth agenda that dealt with the uncertainty in long-term business planning facing the business community, particularly among small business owners and individual investors who continue to be threatened with the prospect of higher taxes and the onslaught of costs associated with the health care law."

The analysis groups franchise businesses in 10 sectors. The top two for growth include business services and commercial and residential services.

Quick Service Restaurants – the largest franchise business line – is expected to rank second this year in the growth of output and will see growth rates of employment and new businesses that are slightly higher than the franchise sector average. The QSR franchise footprint is predicted to grow 1.5 percent this year over last year, with employment expected to increase 2.1 percent and output to jump 5.2 percent.

Table and full-service restaurants are expected to grow just 0.8 percent for the amount of establishments and 2.1 percent for employment. However, they are also expected to increased their output by 4.2 percent.

Read more about franchising news.

Topics: Franchising & Growth , Operations Management , Trends / Statistics

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