Franchise Sector Seen Growing Faster Than Broader Economy; Health Care, Regulation Top Franchisee Concerns

While the franchise sector is forecast to grow faster than the broader economy, franchisees are concerned by increasing government regulations and pessimistic about the future of small business.

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By Kate Taylor

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The franchise sector is expected to grow faster than the broader economy this year, despite concerns about government regulation and health care, according to analysis released today by the International Franchise Association.

Job growth is expected to increase 1.9 percent in 2013, still below the 3.7 percent average growth seen in the pre-recession years of 2001 to 2005, but stronger than the 1.6 percent growth expected for the broader economy, according to the IFA's 3rd Quarter Franchise Forecast for 2013 and Annual Franchise Business Survey.

The sector is "expected to start twice the amount of new businesses than the economy as whole in 2013," Steve Caldeira, president and chief executive of the IFA, said in a statement. In the past year and a half, the franchise sector has accounted for roughly 10 percent of all new jobs.

The franchise sector is expected to see more growth than it has in the last three years. Job growth and establishment growth are each expected to rise 0.6 percent this year from the post-recession average. Economic output, meanwhile, is not expected to pick up by the end of 2013.

Related: What Is the Real Survival Rate of Franchised Businesses?

For franchisors, 2014 represents a chance for economic output to begin to flourish. Seventy-six percent of franchisors expect business to be better in 2014. Additionally, 56 percent plan to hire in 2014, up from 48 percent a year ago.

Franchisees lack this optimism. Only 31 percent expect business to be better in 2013. While over half plan to hire in 2014, 54 percent plan to reduce full-time staff.

The reduction of full-time staff is reportedly linked to the Affordable Care Act, or Obamacare. Of the business owners surveyed in the report, most listed health care and government regulation as their top concerns. One participant is quoted in the report as saying, "Government regulations, the complicated tax code, and mandatory health care will bring a halt to the small businesses of America."

For franchisors, the main concern is sales closely trailed by health care and government regulation. Twenty percent of franchisors reported sales as the point of highest concern, 19 percent listed health care as the top concern and another 19 percent cited government regulations.

Related: Taxes, Healthcare and Immigration: Preview of the 2013 IFA Public Affairs Conference

Kate Taylor

Reporter

Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor. 

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