The International Franchise Association (IFA) today released its annual Franchising Economic Outlook showing that franchise growth exceeded projections for 2023, even in the face of ongoing economic uncertainty. On top of the 2.2 percent growth experienced in 2023, the report forecasts that franchises will grow an additional 1.9 percent in 2024, adding 15,000 units and 221,000 jobs in the United States which is another reason many visit FranchiseWire.com to
“More than anything, these reports demonstrate the resilience of the franchise business model,” said Matthew Haller, IFA President and CEO. “Even in the face of macroeconomic factors like high inflation, labor availability and the cost of capital, franchised businesses continue to outpace the growth of the broader economy. For those considering a franchise investment or IFA members growing their brands, franchising continues to be a major driver of economic growth and small business creation.”
“The data shows franchising continues to exceed economic expectations,” said Darrell Johnson, CEO of FRANdata. “Even amid rising interest rates, franchising grew ahead of our projections. With continuing inflation and labor challenges, a U.S. presidential election, geopolitical tensions, and technological advances in artificial intelligence, 2024 should be a transition year for the U.S. economy, but franchising continues to stand out.”
Key Findings from the 2024 Franchising Economic Outlook
Here are some of the main takeaways from the IFA’s 2024 Franchising Economic Outlook:
- Growth in Franchise Units: Franchise establishments in the U.S. are expected to grow by 1.9%, adding more than 15,000 new units. This continues the trend of steady growth, with a 2.2% increase in 2023, exceeding initial projections.
- Job Creation: In 2024, franchises are forecast to create approximately 221,000 new jobs, bringing the total number of franchise employees to 8.9 million.
- Revenue Growth: The total economic output of U.S. franchises is projected to increase by 4.1%, from $858.5 billion in 2023 to $893.9 billion in 2024.
- Industry Leaders: Personal services and quick-service restaurants (QSRs) are expected to see the strongest growth in 2024. These sectors will continue to be major drivers of the franchise industry’s expansion.
- Regional Trends: The Southeast and Southwest regions of the U.S. are predicted to see the highest growth rates in franchising. States like Texas, Florida, Georgia, and North Carolina are expected to lead the way, while California and Washington are anticipated to experience slower growth.
The report, conducted by FRANdata, a leading research and analytics firm, provides a detailed analysis of the current franchise landscape and projects key trends for the year ahead.
Overcoming Challenges in 2024
Despite its promising growth, the franchise sector faces significant challenges. The IFA’s 2024 Franchisor Survey identified several hurdles that franchises are navigating:
- Labor Shortages: According to the survey, 80% of franchises have unfilled job vacancies. The lack of available labor remains a top concern for many businesses, though it has slightly improved from 2023 when the issue was even more severe.
- Wages and Inflation: While inflation has dropped as a primary concern (with only 9% of respondents naming it their biggest issue, compared to 20% in 2023), rising wages continue to be a pressure point. Over 80% of franchise owners increased wages in the past six months, but only 61% plan to do so again soon due to uncertainties surrounding future regulations.
- Regulatory Uncertainty: The introduction of the Biden Administration’s joint employer standard is a significant worry for franchisors. Seventy-four percent of respondents expressed concern that this policy could alter the relationship between franchisors and franchisees, potentially leading to more oversight and legal complexities.
- Cost of Financing: Higher interest rates and the cost of borrowing are expected to be key challenges in the year ahead, making it more expensive for franchise businesses to expand and invest in new opportunities.
The Power of Franchising
Even with these challenges, franchising continues to offer substantial benefits for business owners and the economy. Franchising provides a proven business model that allows entrepreneurs to start their own businesses with the backing of an established brand, systems, and support.
Darrell Johnson, CEO of FRANdata, noted, “Franchising has consistently outperformed expectations, even during uncertain economic times. As we face a year marked by inflation, rising interest rates, and rapid technological advancements, the franchise model continues to stand out.”
This positive outlook highlights why franchising remains a popular option for individuals looking to start or grow a business. The structure, support, and resources provided by a franchise allow business owners to navigate challenging market conditions more effectively than independent businesses.
What’s Next for Franchising?
The IFA’s report shows that franchising will continue to play a crucial role in the U.S. economy, supporting millions of jobs and contributing billions of dollars in revenue. As more individuals explore business ownership, franchising offers a pathway to success backed by the strength and stability of established brands.
Franchising is expected to remain a key driver of economic growth, particularly in regions like the Southeast and Southwest, where demographic trends and market demand are pushing businesses to expand. For those considering investing in a franchise, the forecasted growth in 2024 presents a strong opportunity to enter the market.
About the International Franchise Association
The International Franchise Association (IFA) is the world’s oldest and largest organization representing franchising worldwide. For over 60 years, the IFA has worked to protect, promote, and advance the interests of franchisors and franchisees. The IFA’s members include over 300 franchise companies across different industries, individual franchisees, and companies that support the franchise industry.
Franchising plays a vital role in the U.S. economy, contributing nearly 3% of the country’s Gross Domestic Product (GDP). With 806,270 franchise establishments, the sector supports over 8.7 million direct jobs and continues to grow, providing opportunities for entrepreneurs and driving economic development across the nation.
In conclusion, while economic uncertainty continues, the franchise business model remains strong. With steady growth in both units and employment, franchising is well-positioned to remain a key pillar of the U.S. economy in 2024 and beyond. For prospective franchisees and franchisors, the future looks bright as the industry continues to thrive.
