2015 Franchise Industry Outlook
There is a lot of decision-making that goes into the process of buying a franchise. At the outset, it’s very important to get the help of an accountant and especially a lawyer because they will help you understand the conditions of the agreement and if you will be able to turn a profit in this economy. The complexity and risk that go into becoming a franchisee discourage some from ever completing the process, but good economic trends may soon entice more entrepreneurs to get involved in franchising.
Though recent turmoil in the European Union and Greece are putting a damper on the international economic outlook, the economy in the United States continues to grow steadily. Since the recession, the U.S. economy has been able to add millions of jobs, and franchise investments are starting to look a lot better for many entrepreneurs. As consumers are getting more money in their bank accounts, their spending is increasing, and this is a great environment to start a new business.
Positive Outlook from 2015 IFA Report
When the International Franchise Association released its 2015 outlook earlier this year, all signs were positive in the United States. The organization predicts that franchise-related jobs will grow by almost 3% this year. The IFA expects 12,000 new franchises to open this year as more and more people take advantage of the market’s substantial opportunities. In terms of franchise-related output, industry insiders are predicting output to grow by over 5% and for total output to reach almost $900 billion in 2015.
All of this information should make entrepreneurs take a second look at opening a franchise, because the potential rewards are enormous. With that being said, no one should quickly rush into a franchise agreement in order to capitalize on the market conditions. This positive outlook will likely continue for the next few years, so potential business owners should take their time and find the best opportunity. That will give them the best chance to succeed.
Setting the Pace in the Economy
According to the report, franchises are expected to grow and create more jobs at a faster pace than the rest of the economy in 2015 for the fifth consecutive year. In fact, the number of franchise establishments is expected to grow this year by 12,111, or 1.6 percent, to 781,794. Economic output from franchise businesses is estimated to increase by 5.4 percent over last year to $889 billion.
The outlook for growth among the different types of franchises will differ, with quick service restaurants ranking first and retail businesses ranking second in terms of increased employment.
Here are a few more specifics from various industries:
Automotive — Economy-wide, the growth of consumer spending on auto repair services will increase from 1.9% in 2014 to 4.4% in 2015. Spending on auto parts and tires is projected to grow 2.3% in 2015 (up from the 2.0% growth in 2014).
Quick-Service Restaurants — It is estimated that the number of QSR establishments to increase by 1.6% growth in 2015 and that the QSR business line will lead the franchise sector in employment growth in 2015 with a 3.2% increase. Franchise QSR sales growth is projected at 5.7%.
Personal Services – The personal services business line, such as educational services, health care, entertainment and recreation, personal and laundry services, and select financial activities, was the leader in the growth of new franchise establishments in 2014 and is expected to rank first again in 2015 with a 1.9% increase in the number of establishments.
Real Estate — Home sales are expected to increase by 10.3% to 5.43 million units in 2015. In line with this, the sales of franchise businesses in the real estate business line are expected to increase 6.3% in 2015 compared to 4.8% growth in 2014.
Retail — The Consumer Sentiment Index continues to improve and is forecast to rise to 91.2 in 2015. Across the full range of retailers, industry-wide sales growth is expected to improve to 5.6% in 2015 compared to 3.7% in 2014.
Family Franchising: An Upward Trend
The recent report also revealed that more franchises are being opened and operated by multi-generational families. Experienced business owners are teaming up with their adult children to open up franchises and create a stable source of wealth for the whole family.
In these types of arrangements, older family members can provide larger amounts of financial investment and business experience, while younger family members have the knowledge to attract and hold on to young consumers. Family-owned small businesses have always been an important and respected part of the American economy, and these families are seeing the advantages to opening a franchise instead of starting from scratch.
A Deeper Look
The more serious you are about becoming a franchisee, the further you should look into the report, so that you can become familiar with all of the economic numbers. This is a great time for investment and starting a business, and with the right franchise, you’ll be perfectly positioned to take advantage of these economic trends.