Franchise business jobs projected to grow 2.1 percent, an increase of 168,000 jobs in 2012. After three years of restrained growth, due to the recession, franchise businesses show signs of recovery in the year ahead, according to a report by IHS Global Insight for the International Franchise Association Educational Foundation. The Franchise Business Economic Outlook: 2012 forecasts modest growth in the number of establishments, employment, output and contributions to U.S. gross domestic product (GDP).
According to the report, franchise business growth has been restrained over the past three years due to underlying factors, such as the weak rebound in consumer spending, that have been a drag on the economy as a whole. In addition, tighter credit standards have limited the formation of new franchise small businesses and the expansion of existing businesses. As these conditions improve, the IHS Global Insight report forecasts an acceleration in the number of franchise businesses in 2012 and continued modest growth in employment and economic output.
"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 workforce," said IFA President & CEO Stephen J. Caldeira. "However, the rate of growth is far below the growth trends we experienced before the recession. Franchisors and franchisees continue to identify access to credit as the major hurdle to business growth. Two-thirds of franchisors say they have seen "no improvement in credit access in recent months," compared to nearly the same result in an August survey (67.6%). More than 80 percent of franchisors say that limited access to credit continues to have a negative impact on their ability to expand. Nearly half (44.4%) of franchisees report "no improvement in access to credit" in recent months.
While franchisors are optimistic about plans for expansion in the number of establishments in 2012, they are less optimistic about an increase in same store sales or adding jobs — compared to the survey one year ago.
Nearly 85 percent of franchisors say they plan to increase the number of establishments in 2012, with more than one-third (34.9%) saying they plan increases of 6 percent or more.
In general, franchisees are less optimistic than franchisors about the prospects for improved consumer sales in the year ahead. Two-thirds (66.6%) of franchisees expect to see moderate to significant increase in sales in 2012.
Nearly half (46.2%) of franchisees say they expect to add jobs in the year ahead, with 15.4 percent saying they expect a significant increase in the number of jobs (6% or more). One year ago, nearly half (47.1%) said they expected to increase the number of jobs, with 5.9% who said they expected a significant increase.
Submitted by International Franchise Association, Washington DC. For more information about International Franchise Association, visit franchise.org. For IHS Global Insight, visit www.ihs.com.