Franchise Industry Continues to Grow Faster Than Rest of U.S. Economy

From dentist’s offices and housekeeping companies, to child care centers and pest control services, walk down just about any Main Street in America, and you’re likely to pass some sort of franchise along the way. That’s because today, there are more than 800,000 franchise establishments representing 300 lines of business. Together, these businesses support nearly 8.9 million direct jobs and generate more than $890 billion in economic output. And in recent years, franchises, which have long been associated with fast food names, have been entering into other business sectors.

According to the U.S. Department of Commerce’s International Trade Association’s 2016 Top Markets Report, franchise businesses continue to grow faster than the rest of the U.S. economy, and The Franchise Business Economic Outlook Report, released in January, said that for the past five years, the average annual job growth in the franchise sector was 2.6 percent. That was nearly 2 percent higher than all businesses economy-wide.

According to Eric Stites, the CEO of Franchise Business Review, the leading market research firm in the franchise sector, the upswing in the franchise business model is due, in large part, to the drive to rebound from the 2008 recession.

“Franchising has performed very well since the recession. There was a big shift in the U.S. economy during that time. We started to see a lot less U.S.-based manufacturing, and the manufacturing that was being done was very technology-driven. So while those industries were still growing, there were very few jobs,” Stites said. “But then you have all of the service-driven sectors out there—hair care, senior care, child care and more—that will most likely never be replaced by technology. Franchising is filled with service companies, and for a lot of people, this industry has been the answer in their search for an alternate—more secure—form of making a living. And for that reason, I personally believe that franchising will continue to see a huge boom in the next 10 to 15 years.”

The second piece of the puzzle as to why franchising has led the economy, Stites explained, has to do with the nation’s population of aging Baby Boomers. As 50-to-70-somethings reach retirement age, many have started seeking out more flexible ways to control their career or supplement their retirement. These older employees who have some savings, along with decades of experience in a given field, are the real driving force in franchising.

“Franchising is great for people in the corporate world who don’t have the money to retire full-time but aren’t interested in putting in the 60-plus hours a week that corporate work often requires. Others are hitting the corporate glass ceilings and finding that they have no option but to step down a level or two,” Stites said. “Franchising is a great option for them—it’s such a broad industry, and there are so many opportunities to repurpose those hard-earned skills and become their own boss.”

But perhaps one of the biggest contributors to franchising’s growing role in the U.S. economy is the fact that the very perception of the industry itself is slowly shifting.

“People see a brand and they don’t understand what franchising is and how the model works. We’re slowly overcoming that misinformation,” Stites said. “The franchise industry has matured so much over the past two decades. People used to cringe when they heard the word ‘franchise’ because, all too often, it was associated with a place like McDonald’s. Now, people understand that the word ‘franchising’ means that someone has your back; that someone is there to support you as your business grows; and that you’re given the tools needed to give back to your community in a meaningful way.”