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Rise in Franchise Business Index Continues for Fifth Straight Month In April

The Franchise Business Index (FBI), an index of the economic health of the franchising industry, increased by 0.2 percent in April, boosted by improvements in employment and sales in franchise-intensive industries, the International Franchise Association announced today. The index rose to 109.6 (Jan 2000=100), up 1.7 percent compared with April 2012. This was the fourth consecutive monthly increase in the index.

“Franchise business continue to create jobs and demonstrate that the franchise business model remains the best and most proven vehicle to quickly grow and scale a small business. While we are pleased the index grew for the fifth consecutive month, we remain concerned about the overall rate of growth in both new business formation and job creation. We believe comprehensive tax reform that eases the burden on small business owners by lowering the effective tax rate is essential to strong job and wage growth for all Americans.” – Stephen J. Caldeira, IFA President and CEO

Among other components of the index, credit availability for small businesses and the index of self-employment in the economy both declined slightly after posting gains in March. But the small business optimism index rose, and there was a further drop in the unemployment rate. The March value of the FBI, which initially showed a gain of 0.3 percent, was revised upward to show a 0.4 percent increase due to upward revisions of BLS employment data.

Designed to provide timelier tracking of the growing role of franchise businesses in the U.S. economy, the Franchise Business Index was developed by IHS Global Insight on behalf of the IFA Educational Foundation. The FBI combines indicators of growth in the industries where franchising is most prevalent and measures of the general economic environment for franchising.

“Consumer spending has been stronger than expected given the tax increases that were implemented at the beginning of the year,” said IHS Global Insight Senior Economist James Gillula, “but it will be difficult to maintain the recent pace, since households have managed to increase their spending only by sharply reducing the saving rate.”

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