Why Franchises Hire More People, Drive More Sales, and Pay Better Wages Than Non-Franchise Businesses The CEO of the International Franchise Association details a new report on franchising's economic impact.
Opinions expressed by Entrepreneur contributors are their own.
America is on the rebound. Although we're still battling against fluctuations in consumer and small business confidence in light of the delta variant of COVID-19, the nation's economy is nonetheless returning to life. Families counting on sustained progress can rest assured that America's 730,000 local franchise businesses are open for opportunity and ready to help in every community.
Often overlooked in conversations surrounding small business development, independent franchises are a major aspect of the small busisness sector, and far more diverse than most people realize. For many, local franchises may be associated with prominent fast-food chains, but in fact, three-quarters of franchises are in other sectors. Only 16 percent of franchise brands have a national presence, while 84 percent are either regional or local brands. A majority of franchise locations represent true local brands, steeped in Main Street character and designed to meet wide-ranging needs across America's neighborhoods, from fitness and auto repair to health care and business services such as sign-printing or shipping centers that support other local businesses.
Now, a new study from Oxford Economics, The Value of Franchising, underscores what these businesses really mean to a country on a path back to prosperity. For example, the report demonstrates that local franchises create 2.3 times as many jobs as comparable non-franchise businesses and produce sales that are 1.8 times higher. These essential businesses are largely locally owned and contribute millions in taxes to their communities each year.
Franchises also deliver job opportunities for American workers to meaningfully earn and grow in their careers. Franchises provide competitive compensation and benefits with wages up to 3.4 percent higher at franchises, and the majority of workers are offered health insurance (65 percent) and vacation, holiday, and sick leave (76 percent). Franchise workers are also promoted to manager at higher rates. These statistics are an even more critical attribute of jobs at franchises given the record-high rate of inflation facing consumers today, are should be cheered by franchise brands and local owners who are desaprate for workers due to the critical labor shortage.
Franchises are supporting entrepreneurship at a time when we need it most, given the displacement in the workforce caused by COVID. Franchising supplies aspiring business owners with a trusted business model, support from a community of fellow franchisees, supply chain savings, marketing support through the franchisor, and in many cases, access to capital. It's no wonder that 30 percent of respondents in the Value of Franchising survey said they would not have gone into business without franchising. This corresponds to 60,000 fewer local businesses and 1.8 million fewer jobs in the U.S. if the franchise business model did not exist.
The franchise business model holds special promise for many groups that were disproportionately affected by COVID-19, too. For instance, female franchise owners are especially likely to say the franchise opportunity was critical to their ability to go into business for themselves. In light of the additional challenges many women have have faced returing to the workforce in the wake of the pandemic, franchise businesss business ownership can provide an alternative for those seeking increased flexibility and independence of entrepreneurship.
Similarly, underrepresented people of color own franchises at higher rates than non-franchises. Black-owned franchise businesses have higher success rates than their non-franchise counterparts. Local franchises that are Black-owned earn 2.2 times more than other Black-owned businesses. Franchising gives minority entrepreneurs greater access to the capital, banking, and business development support necessary to succeed, putting company survival and success in easier reach. It's no wonder we've seen so many of our member brands step up their recruitment of minority and Black franchise owners in recent years, including Yum! Brands and Choice Hotels, as well as smaller concepts like FASTSIGNS and Tropical Smoothie Café.
The benefits of franchising extend beyond jobs, wages, and revenues, however. Operating an independent franchise means claiming a coveted spot as a local business leader, and franchisees take their responsibility to their communities seriously. Most franchises recruit and train local residents, rather than bringing in workers from other parts of the country, and local sourcing of goods and services is critical. Some 65 percent of independent franchises also donate to charity, with industry-wide contributions totaling an estimated $1.5 billion and 18 million hours of volunteer activity.
The numbers contained in the Oxford Economics report tell a compelling story about the franchise business model, but franchising comprises many more narratives. For those, we must turn to the millions of Americans who got their first job experience in a local franchise, earned their first promotion in a franchise, and launched their first business as a franchise – including many who were the first in their family to become an entrepreneur and local business owner.
Look at the variety of faces in that crowd, learn about all the places they came from and all the futures they are planning for themselves, their families, and their communities and you will know one thing for sure—the American dream of a prosperous, diverse, and inclusive tomorrow is alive and well in franchising.
Because franchises are truly open for opportunity.