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New Tools to Demonstrate the Economic Impact of Franchising

In my travels as IFA CEO, I continually hear from franchise executives about the need for more real-time industry-wide data to benchmark how the franchise industry is performing vis-à-vis the broader economy. While IFA’s annual Franchise Business Economic Forecast provides solid projections in December for growth in establishments, jobs and economic output for the year ahead, the industry never had updated information throughout the year that measured how changes in the availability of credit, consumer spending or new laws and regulations would impact that forecast.

To meet the growing demand for more real-time information, IFA launched two new initiatives last month thanks to a generous research grant by Jani-King: quarterly updates to the annual Economic Forecast for Franchise Businesses and a monthly Franchise Business Index (FBI). These initiatives dovetail with the association’s increased investment in research to support our overall mission to protect, promote and enhance the business environment for franchising.

In the last decade, with credit flowing and consistently low tax rates, franchise businesses grew at a rate far outpacing other industries. With the growing presence of franchising in our lives, IFA saw the need to develop an aggressive research and public awareness campaign to demonstrate the economic impact of franchising to policy makers so they understand how regulatory burdens impact franchise businesses. A key aspect of this campaign is the quarterly economic forecast updates and the FBI.

The FBI will measure the strength of the franchise industry on a monthly basis and will provide a reliable indicator on the health of the economy. According to the first FBI, franchising is stronger today than a year ago, and has experienced six consecutive months of improvement, increasing 0.3 percent in February to 107.7 and up 1.4 percent compared with February 2011.

While the index shows we are moving in the right direction, more certainty in the tax and regulatory environments would help franchise businesses grow faster, creating more jobs that our country so desperately needs. IFA strongly feels that Congress must address comprehensive tax reform as soon as possible. IFA believes any proposal addressing tax relief should lower the overall rate for both corporations and individuals.

The health care law’s employer mandate provision is also casting a dark shadow with potentially grave consequences over many franchise business owners, creating additional uncertainty about expanding their operations or hiring new workers. Lastly, access to credit is still an issue for our industry. If you can’t obtain financing, you can’t get into business as an aspiring entrepreneur, and if you’re an existing franchisee, you can’t expand your current network, so the franchisor can’t sell additional franchise businesses, which prohibits them from growing top and bottom line sales. We are urging Congress to ensure that regulations on the financial sector are not having unintended consequences by stifling lending and ultimately small business growth.

If the recession has taught us anything over the past two years, the business community and the franchise industry are constantly changing as the global economy becomes more connected. Franchise business owners and IFA members need real time data in order to make sound financial decisions about creating jobs and expanding their business, and policy makers need to know how their decisions impact an important part of the economy that supports nearly 18 million jobs, 825,000 establisments and over $2.1 trillion in economic output. We are pleased to be able to provide the industry with the FBI and quarterly updates to our forecasts and hope you will find it an important tool in your business planning moving forward. 


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