2010 Franchise Forecast

2009 was a tough year for franchises. Will 2010 be any better? According to the International Franchise Association, the answer is yes... but not as much as it could be.

The IFA recently released the Franchise Business Economic Outlook for 2010, a report prepared for them by PricewaterhouseCoopers LLP, which predicts a year of slow, marginal growth. Here are a few of the highlights:

Number of Establishments

• The report predicts that the number of business-format franchises will increase by 2 percent in 2010, for a total of 901,093 establishments.

• Of the ten major franchise industries addressed in the report, the only one expected to see a decline in number of establishments is Lodging.

• The greatest growth is expected in Quick-Service Restaurants (3.1%) and Real Estate franchises (3%).

• Jobs in franchise businesses are expected to grow 0.4 percent, for a gain of 36,000 jobs.

• The report predicts declines in employment in two industries: Lodging (-2.4%) and Commercial & Residential Services (-0.9%).

• All other industries are expected to increase their employment in 2010. The greatest projected percentage increase is 1.3% in Real Estate, but it's Quick-Service that's expected to employ the greatest number of people by far: 3,343,000.

• Overall economic output (the gross value of goods and services produced by franchises) is anticipated to increase 2.8 percent--to $868.3 billion.

• The report projects an increase in economic output across all 10 industries.

• QSR is the star once again, with a projected output of $203.6 billion--a 3.2 percent increase over 2009. But the Personal Services category will also shine with an expected 4.4 percent increase.

As small as this forecasted growth may seem, any growth is good growth when compared to the losses seen in 2009--a 0.1 percent decline in the number of establishments, a 0.7 percent decrease in economic output, and 409,000 jobs lost. So this report, while not exactly Pollyanna-esque, does seem to point toward recovery for the franchising world.

But according to IFA President and CEO Matthew Shay, the ongoing credit crunch will keep that recovery from being as swift or as strong as it could be. "We are pleased that the 2010 outlook for franchise businesses is projected to be more positive than 2009, but access to credit remains a major hurdle to increase jobs and economic output at the levels we have seen during past recoveries," said Shay. "An expected $3.4 billion shortfall in lending to franchise businesses in 2010 will result in 134,000 jobs not created and $13.9 billion in economic output lost. We urge Congress to quickly pass bills currently on the table that would close this lending shortfall and allow franchise businesses to operate at their full economic potential."