Franchising growth is expected to grow significantly this year, according to new reports. FRANdata, which has been analyzing franchising activity for more than 25 years, reports that demand for franchise units is expected to increase by more than 12 percent this year, the highest rate of increase since 2009.
According to a news release, the 2014 Small Business Lending Matrix & Analysis, which was produced for the International Franchise Association Educational Foundation, also finds that the industry’s lending shortfall – the difference between projected loan demand and loan supply – will likely be cut in half this year, positioning the franchise industry for robust growth.
Additionally, the IHS Global Insight reported that the franchise sector will lead the nation’s economic rebound by creating an estimated 220,000 jobs this year.
"With seven out of 10 franchise business lines adding jobs faster than the private sector at-large, the franchise business model continues to provide jobs and entrepreneurship opportunities for workers and entrepreneurs in sectors as diverse as hotels, auto, business and personal services and restaurants," IFA CEO Steve Caldeira said in the release. “One reason for this success is that credit is steadily becoming more available for franchise expansion.”
Some highlights from the Small Business Lending Matrix and the Franchise Business Outlook include:
"Franchise demand for credit is projected to increase for the fifth consecutive year as the economy is finally back on track to a full recovery," Caldeira said in a release. "The lending gap is expected to decline by half in 2014, the greatest reduction since the most recent recession. The reasons for greater availability of credit include budget increases at the U.S. Small Business Administration and an increased willingness by conventional lenders to lend to small businesses."
The FRANdata report also notes that franchise operators' willingness to invest in old and new units is driven by an improved housing market, higher equity prices, and consistent increases in personal income. Meanwhile, bank lending to small businesses is expected to rise, due in part to the rise in commercial real estate values and the overall improvement in the health of the financial system.
The Franchise Business Outlook reports that franchise industry growth has outperformed the overall economy for the past six years.
At the National Restaurant Association Show in May, John Fawkes from the International Franchise Association, said traffic was better than it has been in the past couple of years, especially compared to 2009-2012, which he called “pretty rough.”
“The overall mood is up, and capital is opening more. Last year it started to trickle, and now it’s a bit steadier,” he said. “One of the obstacles in the industry has been access to money, and now the banks are starting to open up and there is more optimism. Franchising is going well; things are going well.”