Franchise Outlook

Franchise Forecast for 2015

Franchise businesses are expected to drive much of the job creation for 2015. The International Franchise Association announced this week that it expects to see 247,000 more jobs in franchise businesses in 2015, an increase of 2.9 percent. This is just slightly more than 2014’s 2.8 percent job growth.

2014 marked the fourth year that franchise businesses have outgrown other business models in providing jobs. In fact, franchise businesses have created a high proportion of all the jobs this century. The IFA reminds us that franchises employ more than many industries: there are more employees at franchise businesses than there are workers in the finance industry, in information technology, or in real estate.

Industry predictions suggest that this trend will continue in 2015. At the same time, there is concern about some of the big news in franchising from 2014, notably the “joint employer” ruling from the National Labor Relations Board. The NLRB confirmed in December that it was prepared to consider local small businesses and major multinational corporations joint employers. This decision is just one of a series of similar decisions affecting companies that outsource tasks and those that use workers from temp agencies. But while this lets regulators say “It’s nothing personal” to franchise businesses, there still could be serious consequences for franchises.

With 38% of franchise jobs in the quick service food sector, the demand for higher wages by fast food workers is also big news for franchise businesses. The Heritage Foundation estimates that market forces would lead to a 38% increase in fast food prices if a $15 an hour minimum wage were put in place as activists ask. Franchisees are in some cases moving toward “fast casual” restaurants rather than “fast food,” relying on the higher margins for this type of restaurant to provide some protection from the possibility of minimum wage hikes.

Increasing automation is another response to these concerns. While automation can involve investments in new hardware and software and training, the gamble is paying off for many. As consumers become more comfortable with automated ordering — and smartphones are providing a comfortable option — automation is increasingly less risky. Touch screen kiosks and automated food preparation are on the horizon, and management tasks are often automated by new technologies.

The rise of demand for personal services and customization is another big piece of news for franchise businesses. Franchises are built on standardization, but they can also be designed to provide customized personal services — or the appearance of them. Here, too, automation is on the increase, with spa and fitness services supported by automation.

Mobile services that go to the customer continue to increase in popularity. Today’s consumers are used to being able to shop from home, work, or a sidewalk cafe. They’re accustomed to being able to arrange for pickup or delivery. Mobile dog grooming, auto service, and tutoring services make sense to them as part of the omnichannel experience. Franchises built around the concept are in a strong position for growth in the coming year.

In fact, as the IFA’s predictions show, franchising is in a strong position in general.

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