Franchise Growth Hampered by Uncertainty

Although the overall growth of franchise establishments jobs and output is still exceeding that of the overall economy, the International Franchise Association has announced today in that anxiety over potential tax hikes and a lack of credit have kept industry growth and job creation from reaching previously forecast levels. According to a third-quarter update of its 2012 economic forecast, an IFA report prepared by HIS Global Insight indicates the number of new franchise establishments in the U.S. will increase by 1.5 percent instead of the predicted 1.9 percent. Economic output estimates have also been bumped down to 5.2 percent from a midyear forecast of 5.3 percent. “There is a wealth of job creation waiting to be tapped in the franchise sector, but existing and prospective franchise business owners are waiting on the sidelines to open new stores until they have more certainty and confidence that Congress will not raise their taxes,” said IFA President and CEO Steve Caldeira. “A short-term deal that prevents the fiscal cliff at the end of the year would serve as a critical bridge and provide some much-needed short-term certainty, until lawmakers in the next Congress can consider a comprehensive overhaul of the tax system, so extending the current tax rates would be a great place to start.” The report was not all bad news, as the IHS projects franchising’s contribution to the GDP will increase by 4.9 percent to $460 billion, up from $438 billion in 2011. Sectors performing above industry average include business services, personal services and lodging.