Every year, the franchising industry anxiously awaits the annual Franchising Economic Outlook Report, compiled by the International Franchise Association (IFA) and FRANdata, a leading market research company. The report was released publicly last week and FranNet of DFW & Oklahoma has had the opportunity to review its contents so that we can share some of the industry’s exciting expectations for 2023.
The detailed projections and forecasts found in the multi-chapter report were built using both quantitative and qualitative data on the U.S. franchise industry. The report’s authors closely tracked thousands of brands and macroeconomic factors to determine accurate growth rates in several different business categories. The 39-page Franchising Economic Outlook report is packed with information, but FranNet of DFW & Oklahoma has selected a few highlights to share with our entrepreneurial audience.
A Recent Industry Perspective
The report tracks the progress of franchising in general, which experienced a boost during the onset of the pandemic in 2020. Half of the franchise-owning respondents surveyed revealed that the training, guidance, and support they received during the pandemic era was most helpful – especially during a time of rising inflationary pressures. Franchising experienced remarkable resiliency, bouncing back in 2021 with exceptional growth. The last two years have seen an industry in moderation, as many factors continue to settle from a period of extremes.
Additional Growth on the Horizon
The Franchising Economic Outlook is an important bellwether for the industry, due in large part to its annual collection of bold projections. It appears that 2023 will be no different when it comes to predicting specific growth figures. The authors expect to see an additional 15,000 units, bringing the total number of franchise establishments to 805,000, a 1.9% increase. An additional 254,000 jobs should take franchise-related employment to 8.7 million, a 3% increase. And franchise output is expected to grow by 4.2%, to $521 billion in GDP. Where does the report place the biggest gain in franchise growth? The Southern U.S., with the state of Texas topping the list!
Franchise Growth by Sector and Region
With the exception of real estate (-0.5%), every other franchise category forecasts positive growth. Which industries top the list of gains? Three sectors – quick-service restaurants (QSRs), personal services, and service-based franchises. Predictions for growth by region show the southwest (which includes Texas) at the top of the list, expanding at a rate of 5.3%. The top-five states for franchise growth? Texas, then Illinois, Florida, Georgia, and Tennessee.
Some Challenges Remain…
The 2023 Franchising Economic Outlook report once again predicts a year of positive growth for the industry in general but doesn’t gloss over the challenges facing many franchise owners in this post-pandemic landscape. Like many other major industries, franchising has experienced its fair share of headwinds related to higher-than-normal inflation. The same goes for another industry-wide obstacle – labor challenges, most of which involve a shortage of workers. Lastly, the overall lending environment typically curtails during a period of rising interest rates, though the franchising industry is well known for offering candidates multiple avenues to secure financial funding.
Hopefully, the rate of inflation will continue to decrease, following a trend in which it’s already come down three percentage points (9.0 – 6.0%) in just the past year. While it’s not as big a concern at the moment, many other micro and macroeconomic factors are inexorably tied to this key economic indicator. Regardless, this year’s economic impact report didn’t disappoint, and we look forward to another prosperous year of helping entrepreneurs make their business ownership dreams a reality. You can view the report in its entirety by following this link.
If you’d like to know more about franchise opportunities and ownership, please get in touch. FranNet of DFW & Oklahoma is uniquely qualified to match your potential with the possibilities that come from small business ownership through franchising. All you have to do is allow us to be your guide. Our no-cost, no-obligation consultations have helped hundreds of entrepreneurs in North Texas and Oklahoma secure a future that belongs to them and them alone. If you’d like to get started on your own entrepreneurial journey, we’d love to introduce you to a whole new world of possibilities through franchise ownership.