Each year, the International Franchise Association (IFA) and FRANdata, two valuable FranNet partners, issue their annual economic outlook report. The 2022 edition was recently released and FranNet has reviewed the contents to bring you the key takeaways from their highly anticipated prognostications. To give credit where credit is due, Christina Niu, a senior research analyst with FRANdata compiled and disseminated the statistical data featured in the 2022 Franchising Economic Outlook.
The full report clocks in at 36 pages, but our review produced the following highlights for your reading pleasure. If a positive outlook is what you were hoping for, we doubt you’ll be disappointed – and that’s a reason for any entrepreneurial-minded individual to feel optimistic.
U.S. Economic Recovery Remains Robust
Franchising had a pretty strong year in 2021, especially from a business outlook perspective, and this trend is expected to continue. The overall growth rate for franchising in general last year came in at +2.8%, with a total of 774,965 franchise establishments. In 2022, franchising’s gross domestic product (GDP) output, a key indicator for industry growth, is expected to rise by +3%. Franchise-related employment is forecasted to grow with a gain of +3.1% — which works out to thousands of new jobs. How many new franchise units will launch in 2022? The report pegs that number at 17,000. Not bad at all…
What are the Franchise Growth Industries?
Many entrepreneurial-minded folks keep an eye on the most favorable industries for launching a new franchise operation. In the 2022 IFA report, the Personal Services sector is predicted to have a big year, leading the pack for franchise growth at a rate of +3.1% overall. Another sector in recovery, real estate both residential and commercial, clocks in at second overall for growth, with a predicted increase of +2.7%. With plenty of room to recover, the QSR and Hospitality/Lodging sectors are expected to continue doing well, with net gains in the single digits.
Tracking Franchise Growth by State
Though this statistic is inexorably tied to the business climate and adjusted population for each individual state, the report has a top-10 prognostication for franchise growth. Texas leads the pack, followed by Florida, Arizona, South Carolina, Idaho, Tennessee, North Carolina, Montana, Nebraska, and Nevada rounding out the top-10.
The IFA’s 2022 Economic Outlook Report includes the requisite caution concerning the decades-high inflation rate we’re currently experiencing. While it may or may not play a factor in the lending activities, especially in light of the Fed’s planned interest rate hikes, the report does foresee a ‘deceleration,’ as “…consumers shift back to their normal buying patterns to services from goods and the Fed likely raising interest rates.” Regarding the other leading concern – supply chain bottlenecks, the news is even more promising. The report states, “the World Bank forecasts supply bottlenecks and labor shortages will gradually dissipate throughout 2022, and in the second half of the year, inflation and commodity prices would also gradually decline.”
The executive summary included in the annual IFA/FRANdata report concludes that 2022 should be a year of “rebalancing and normalization”, a clearly positive and upbeat forecast. The evidence is also becoming clearer that the “Great Resignation”, which played out over 2021, has provided the franchising industry with plenty of entrepreneurial newcomers. The FRANdata calculations reveal marginal increases across franchising’s three biggest factors. Overall, franchising is expected to expand at a rate of 2.2%, and related employment is expected to hit 3.1%. Lastly, franchising’s GDP output is expected to rise by 4.9%.
Amidst this optimistic backdrop, it appears small business development for the entrepreneurial-minded will continue to stay in positive territory. If you’ve yet to capitalize on your dream of business ownership, FranNet can help you get started today by setting up a no-cost, no-obligation appointment with a qualified FranNet representative who both lives and works in your area. Together, we can find a franchise ownership opportunity that matches up perfectly with your lifestyle and income-oriented goals.