Franchise Industry Remains Strong After Year of Uncertainty

There’s no doubt that 2016 was a year filled with uncertainty, especially in regards to the presidential election. With a significantly divided country, this year’s election was bound to impact the franchising industry in a major way. Heated topics like minimum wage, immigration and overtime regulations were on the tip of everyone’s tongue from January through December.

Despite the resulting anxiety, the franchise industry saw a very strong year, says SMB Franchise Advisors founder Steve Beagelman. Not only was their significant growth amongst existing franchises, but plenty of new franchises, like Pool Scouts, No Limits Martial Arts and The Gyro Shack, entered the industry, too. Other areas of growth included  franchises that saw exceptional success with multi-unit operators, like Toppers Pizza and Buffalo Wings & Rings.

Beagelman also attributes much of this year’s growth to the increased presence of private equity firms, which have begun paying significant sums for brands they want to take part in. “Private equity plays a very strong role in franchising today,” says Beagelman. “It was alive and well throughout 2016, and I have no doubt it will continue into 2017.”

On the other hand, franchising has also continued to be more and more appealing to businesses that are looking to expand. Beagelman points to K9 Resorts, a luxury boarding and doggy daycare business, as a prime example. “As opposed to opening more locations, K9 has utilized franchising to build out their business and collect royalties. Realistically, it would have been challenging for the original K9 owners to expand on their own because of the significant costs,” says Beagelman. “At SMB, we’re seeing more business owners going the franchisor route to expand.”

From a franchisee perspective, Beagelman says that semi-absentee ownership has been a major draw. The ability to continue a full-time position and earn extra income as part of a business investment has become more accepted as society moves towards increased opportunities for jobs with flexibility, like driving for a ride-sharing service or completing simple tasks for others with apps like Takl and TaskRabbit. Ultimately, franchisees enjoy the rewards that comes with ownership. Whereas an employee only reaps the value of hours worked, a long-term investment in business ownership can have a significantly longer-lasting return.

“Getting to be your own boss is an enticing notion,” says Beagelman. “Franchises are offering the opportunity for individuals to be minimally involved. It’s a popular category that a lot of people like.”

In regards to the presidential election results, Beagelman feels that president-elect Donald Trump’s administration will have a positive impact on the franchise industry. Many in the industry appear to agree, with definite excitement about some of his cabinet nominations. The IFA, for example, applauded Trump’s nomination of franchise maven Andy Puzder, IFA board member and Chief Executive of CKE Restaurants, to serve as secretary of the U.S. Department of Labor.

“Whether you like the new president or not, the bottom line is he is business focused,” says Beagelman. “I’m very hopeful it will be a good thing for small businesses and franchising in general. Time will tell, but I’m optimistic about what this new administration holds for us in 2017 from a franchising standpoint.”

Overall, Beagelman expresses that the number one thing those in the franchising industry must do to survive, as government regulations change and the integration of technology increases, is to be willing to adapt. “You can’t expect the system to adjust to you,” says Beagelman. “If you don’t adjust, you’re going to fall behind. Fortunately, 2016 has shown positive steps for the franchise industry. As long as you’re willing to evolve, I’m confident that the industry will continue to improve into 2017.”