Franchising – Franchise Growth in 2012

Franchising numbers are up this 2012. The 2012 Franchise Business Economic Outlook by IHS Global Insight, a forecasting and financial analysis firm, projects a 1.9% growth in the number of franchise establishments. This amounts to almost 14,000 new locations to the existing 735,751 units. About 170,000 jobs will also be created and this will help the overall economy. The Salt Lake Tribune also reports sizable loan guarantees by the Small Business Administration for franchisees. Steve Caldeira, president of the International Franchise Association, is optimistic that franchising will rebound this year after three years of decline.

The more famous franchises include fast food, hotel, restaurant, health care and automotive store chains. Most franchises are considered small businesses because they employ less than 500 employees.

Franchising — the act of launching a small business by buying into a proven business model such as Carl’s Jr. or Big O Tires — is expected to grow in 2012 and to play a part in private-sector job creation that could aid the overall economy.

After three years of decline, the number of franchise establishments is expected to increase nationally by 1.9 percent in 2012 — adding 13,928 new locations to an existing 735,751 units, a recent report projects. In 2011, franchises employed 7.9 million workers, a pool that is expected to increase by 168,000 mostly entry-level jobs, according to the 2012 Franchise Business Economic Outlook by IHS Global Insight, a forecasting and financial analysis firm.

The report also forecasts that franchises will fuel a 5 percent growth in economic output this year, adding $37 billion to last year’s total of $745 billion. In 2011, franchises accounted for $439 billion of the U.S. Gross Domestic Product, an amount expected to increase in 2012 by 4.8 percent, or an additional $21 billion.

Steve Caldeira, president of the International Franchise Association (IFA), views franchising as a leading indicator of where the economy is headed.

Franchising is poised for a modest rebound in 2012,” Caldeira said in a recent email. “So while that’s good news for franchisors and franchisees after three years of declines … the industry could be growing even faster.”

Franchises run the gamut, from restaurants and hotels to health care companies and automotive stores. And most franchises fall within the ranks of small business, employing fewer than 500 workers.

Stan Nakano, Utah’s district director for the U.S. Small Business Administration, said that in fiscal year 2011 his office provided $29 million in loan guarantees to 57 franchises — a sizable amount but still less than 10 percent of its total loan volume.

“[Franchising] is a good alternative for somebody who might have limited resources,” Nakano said. “You have guidance in the startup phase, and there’s a business model that has already proved to be successful.” …

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