Franchise businesses are expected to grow and create more jobs at a faster pace than the rest of the economy in 2015 for the fifth consecutive year, according to the International Franchise Association’s annual Economic Outlook report for 2015.
But worries about Washington changing federal regulations continue to dampen the industry’s outlook, and could hold back the pace of growth.
“Franchising is an American success story,” said IFA President & CEO Steve Caldeira. “Franchising is a vital engine of economic expansion in the United States and 2015 looks to be another strong year for franchise businesses.”
Key findings from the economic outlook predict:
- Franchise businesses will add 247,000 new direct jobs this year, a 2.9 percent increase to 8.8 million direct jobs, over last year. That is on top of the 235,000 franchise jobs that were added in 2014.
- The number of franchise establishments will grow this year by 12,111, or 1.6 percent, to 781,794.
- Economic output from franchise businesses is estimated to increase by 5.4 percent over last year to $889 billion.
- The gross domestic product of the franchise sector is projected to rise by 5.1 percent this year, which is faster than the 4.9 percent GDP increase forecasted for the economy as a whole. The franchise sector will contribute about 3 percent of the U.S. GDP in 2015.
- Quick service restaurants rank first and retail businesses second in terms of increased employment expectations.
The outlook continues to be clouded by federal efforts to change the rules of franchising, however, Caldeira said.
“Last month, the National Labor Relations Board moved to upend decades of law and practice by issuing a complaint against McDonald’s saying that it should be considered a ‘joint employer’ with its franchisees. The entire business model of franchising is endangered by this ill-conceived complaint,” he said.
“Hundreds of thousands of franchisees must now operate not knowing whether they should believe what their contracts clearly state, that they are in charge of their own work place practices, including setting wages and hours, or that the corporations from which they license their trademarks are also responsible for those things. The ruling could put the brakes on what looks like a banner year of accelerated growth and job creation in the franchise sector.”
“The business model for franchising is under assault,” said Matthew Patinkin, a franchise owner of Auntie Anne’s Pretzel shops. “First, the complaint by the general counsel at the National Labor Relations Board leaves franchise business owners like me uncertain and very concerned about the future. The complaint targets McDonald’s, but all other franchises are also at risk.