IFA: Franchising Sector Showing Strong Growth, New Jobs
The latest from the International Franchise Association:
18%: Growth of the franchising sector of the economy 2001 to 2005
140,0000: New businesses franchising added 2001 to 2005
1.2M: New jobs franchising added 2001 to 2005
40%: Increase in direct economic output of franchises in 2005
$880 billion: Direct economic output of franchises in 2005
900,000: Number of franchised businesses in the U.S.
Franchising Outpaces Other Sectors of Economy in Growth, Jobs
New Study Shows 18% Expansion from 2001 to 2005
WASHINGTON, March 12 /PRNewswire-USNewswire/ — The franchising sector of the economy expanded by over 18 percent from 2001 to 2005, adding more than 140,000 new businesses and 1.2 million new jobs to the nations economy, according to a new economic impact study released today. Direct economic output of franchises grew by more than 40 percent to $880 billion in 2005.
Franchising now provides more jobs than many other sectors of the economy, including the durable goods manufacturing and financial activities sectors, said Matthew Shay, president and CEO of the International Franchise Association. It is clear that franchising is a critical engine of economic growth in the United States, powering local communities across the country.
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The study, prepared by PricewaterhouseCoopers (PwC) on behalf of the International Franchise Association Educational Foundation, shows that from 2001 to 2005 franchise businesses have outpaced the economy as a whole in terms of the rate of growth of jobs, payroll and output. In fact, the rate of growth in employment was three times higher for franchise businesses than for the economy as a whole.
In sheer numbers, the jobs and payrolls of franchised businesses were greatest in California, Texas, Florida and Illinois in 2005, noted Shay. Franchising had the greatest impact on jobs and payroll in Nevada, New Mexico, Arizona and Mississippi and it accounted for the largest share of state output in Nevada, Arizona and Florida.
Payrolls among franchised businesses also grew at a faster pace than other businesses. Between 2001 and 2005, franchise payrolls expanded nearly 22 percent to $279 billion.
The impact of franchised businesses goes beyond direct employment and payroll contributions, the study found. Franchised businesses purchase products and services from non-franchised businesses and their owners and workers contribute to the growth of non-franchised businesses.
As a result of these spillover effects, the total impact of franchising was to provide 21 million jobs and $660.9 billion of payroll in 2005, said Shay. Output produced because of franchised businesses grew to more than $2.3 trillion in 2005.
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Franchised businesses operate in every state, the District of Columbia and in every Congressional District in the country. Franchising is a method of distributing products and services that involves a franchisor who lends their trademark and business system to a franchisee who, in return, pays a royalty for the right to use that trademark and system in their business.
There are more than 900,000 franchised businesses in the country operating in many lines of business, including automotive, commercial and residential services, quick-service and full-service restaurants, retail food, lodging, real estate, retail products and services, business services and personal services.
About The International Franchise Association
The International Franchise Association, the worlds oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of more than 1,300 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA website at www.franchise.org.
About the IFA Educational Foundation
The IFA Educational Foundation serves as the research and educational arm of the International Franchise Association. The Foundation is a 501 (c) (3) non-profit organization and donations are tax deductible. The Foundation conducts research to expand the knowledge and awareness of franchisings role in the economy; provides continuing education and professional development programs through the Institute of Certified Franchise Executives (ICFE); and works to increase opportunities for women and minorities in franchising through the IFA Diversity Institute.
SOURCE International Franchise Association
WHAT DO YOU THINK? COMMENTS WELCOME.
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3 opinions for IFA: Franchising Sector Showing Strong Growth, New Jobs
Louisville KY real estate
Mar 15, 2008 at 7:16 pm
Thanks for the raw data; I appreciate being able to see how franchising has affected the economy.
Carol Cross
Jul 23, 2008 at 12:25 pm
We see how franchising picks up in slow economies when middle class and upper class citizens with resources are looking for a means of producing income when their jobs are gone and new jobs aren’t available. In recessions, prospective franchisees are not in short supply and franchising grows because it appears to offer a solution to a hard problem to the naive and inexperienced prospects looking for a good job and profits as well.
The IFA alwaysd uses the job statistics produced in franchising in the Congress to protect the status quo that protects the franchisors’ use of franchisees as resources to maximize profits.
The status quo of franchise regulation does not make franchisors prove their proven plans to new prospects and fraud is rampant and growing. The unit performance statistics of franchisors are not required to be disclosed to new buyers of franchises under federal or state law and this permits some franchisors to lie, cheat, and steal with immunity under the law.
LET THE BUYER BEWARE —The growth of franchising and the growth of fraud must be related.
Carol Cross
Jul 23, 2008 at 12:49 pm
Apparently, the Congress approved the SBA’s Patriot Express Loan pilot in 2007 as a means to improve the job situation for returning VETS and their families who would find that good jobs are scarce in our economy. This special loan is advertised as being in honor of a veteran’s service to his country which certainly implies an endorsement of franchising by the federal government.
But, does the Committee who approved this SBA loan pilot program know that the failure rate of franchises can be intentionally obscured from new buyers under federal regulatory policy and that many VETS and their families may become victims of predatory franchisors who sell unviable and unprofitable franchises to the public with immunity and impunity under the law?
There is no doubt that the Pilot Program will help to stimulate the economy but at what cost to those Veterans and their families who will have to post collateral and sign personal guarantees to buy franchises that have a high risk of failure for first-owner franchisees.
Obviously, franchisors survive recessions because they don’t share in the risk of building the physical units that wear brand names, but we have no research (and why not?) as to what happens to first-owner franchisees in recessions.
Shouldn’t the Congress care about what happens to veterans and their families when ineffective regulatory policy is permitted to exist and to mislead their veteran constituents and their families into investments that can destroy them?
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