- Written by Mike Marshall
WASHINGTON, Sept. 18 – New data continues to show strong growth in the franchise industry with both jobs and overall franchise business conditions improving in August. The Franchise Business Index (FBI), an index of the economic health of the franchising industry, advanced 0.4 percent in August to 110.6 (Jan 2000=100), the International Franchise Association announced today. According to the ADP National Franchise Report (NFR), released today, the franchise industry created more than 16,000 jobs in August.
“Over 300 franchise business owners have spent the past few days in Washington with policymakers, and today’s reports’ confirm what they have been saying: the franchise business model is the most secure and reliable mechanism to create jobs,” said IFA President & CEO Steve Caldeira. “However, the index also underscores the urgency for our meetings with lawmakers: there is simply too much public policy uncertainty for small businesses to effectively plan, stunting what could much more robust growth.”
All components of the FBI showed gains except for the small business optimism index, which was down slightly. Despite steady modest improvement in employment and sales indicators, small business owners remain cautious about future prospects. This was confirmed by IFA’s Franchise Business Leader Survey, which showed that in spite of growing optimism, franchisors and franchisees have business and regulatory concerns including labor shortage, tax policy, and Obamacare. IFA’s 3rd Quarter Franchise Forecast also showed that even though franchises are projected to continue to grow faster than the broader economy in 2013, the growth rate is still expected to be far below pre-recession levels.
“IFA has consistently advocated for pro-growth policies that would empower our industry to grow and put more people to work, and that was the clear, unequivocal message that lawmakers received from their constituent franchise business owners this week,” Caldeira continued. “With real reforms that roll back costly regulations and implement common-sense solutions, we can get the franchise industry back to pre-recession growth rates and lift the broader U.S. economic recovery.”
Only minor revisions were reported to last month’s data for individual components of the index, and the July value of the FBI was unchanged at a 0.3 percent increase. After recording year-over-year growth rates that averaged 1.8 percent during the first four months of 2013, the pace of gains in the FBI picked up to average 2.3 percent over the past four months.
Designed to provide timelier tracking of the growing role of franchise businesses in the U.S. economy, the Franchise Business Index was developed by IHS Global Insight on behalf of the IFA Educational Foundation. The FBI combines indicators of growth in the industries where franchising is most prevalent and measures of the general economic environment for franchising.
“The franchise sector continues to exceed the modest pace of overall economic growth, as improvements in the housing market have had a positive impact on consumer spending,” said IHS Global Insight Senior Economist James Gillula “and we do not expect higher mortgage rates to choke off the recovery.”