Recent studies indicate a positive economic forecast for the franchising industry

FRANdata, an International Franchise Association report, forecasts that despite fiscal challenges, the franchising industry is expected to see growth in both unit development and economic output by the end of 2023. In 2022, there were 790,492 franchised establishments with an economic output of $825.4 billion, exceeding 2021 numbers.

The report predicts that by 2023, the industry will have a total of 805,436 franchised locations and an economic output of $860.1 billion. The number of new franchisees has been impacted by recent economic challenges, but the unit and financial statistics have remained positive, according to Jania Bailey, CEO of franchise consulting firm FranNet.

“A lot of the information that was in the report was in alignment with what we’ve seen and what we’re feeling,” Bailey said. “Despite the units in franchising growing in 2022, the new franchisees coming in or buying was really slow compared to what we’ve seen in the past.”

According to Jania Bailey, CEO of FranNet, inflation, higher interest rates, and lack of confidence have led to fear of the unknown among potential American franchisees. The ongoing COVID-related economic issues and the war in Ukraine have also impacted the franchise world. However, Bailey believes that overall, the projections for the franchising industry are promising, with March being the best month in a couple of years.

Marco’s Pizza President and Co-CEO, Tony Libardi, attributes the franchise model’s success to its ability to adapt and be resilient, and to provide support and guidance to franchisees during challenging times. Franchise systems can better address supply chain challenges, leverage centralized marketing efforts, and share resources and best practices among franchisees, which is a significant benefit of the franchise model.

Franchising strong in the South

According to the report, the Southeastern and Southwestern regions are the fastest-growing areas for franchising in the United States, with Arizona, Colorado, Florida, Georgia, Illinois, North Carolina, South Carolina, and Texas being the top 10 states for growth.

The report projects that franchise establishments will increase by 2.9 percent in the Southwest and 2.2 percent in the Southeast in 2023, with the highest economic output growth in the Southwest at 5.3 percent and the Southeast at 4.5 percent. Bailey notes that Central Florida is seeing significant growth due to its business-friendly climate and lack of income tax.

Marco’s Pizza, which is based in Ohio, is expanding across the country, particularly in southern states. For instance, the company recently signed a 15-unit deal for Tampa, Florida, and a 46-unit agreement for Phoenix. According to Marco’s Pizza President and Co-CEO Tony Libardi, one of the key advantages of the franchise model is its ability to scale rapidly.

The company currently has more than 200 stores in various stages of development and has awarded hundreds of agreements. In 2022, Marco’s Pizza opened over 90 new stores and granted 140 franchises, effectively doubling its footprint in the last six years.

QSRs remain king, personal service concepts grow

According to the report, the number of quick-service restaurants (QSRs) in the US is expected to increase by 2.5% from 192,057 in 2022 to 196,858 in 2023. QSRs are expected to have the largest economic output, projected to increase by 5.1% from $257.7 billion to $289.6 billion in 2023.

Personal service brands are also expected to grow, with a projected increase of 2.5% in the number of units, from 117,368 to 120,302. In terms of economic output, personal service brands are expected to have the biggest increase percentage-wise, rising by 6.7% from $39.5 billion to $42.1 billion. Boutique fitness is one such personal service brand that is experiencing growth, as people prioritize fitness and seek non-traditional gym experiences.

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