Franchising is big business among small businesses in the US according to a study by the International Franchise Association Educational Foundation and PricewaterhouseCoopers. The study reports that franchised businesses account for 9.5% of the US private-sector economy.
According to the study, franchises directly employ 9.8 million people, about the same number as the US durable-goods manufacturing sector. Combine direct employment with indirect, and the study says the job total grows to more than 18 million, nearly 14 percent of US private-sector employment.
Two types of franchises are identified by the study:
- Business-format franchises such as automobile services, convenience stores, hotels, restaurants, and tax-preparation services.
- Product-distribution franchises such as gas stations, vehicle dealers, and beverage bottling and distribution.
Data for the study was collected from a variety of sources and much of the statistical information reflects 2001 numbers when 767,483 franchises were operating in the US.
Franchised businesses play a far larger role in the US economy than a surface view might suggest. While everyone recognizes the corner McDonalds as a franchise, how many realize the local Ford dealer is also one? Businesses that sell to small business would do well to recognize the growing trend of franchising and develop strategies for selling goods and services to master franchise holders. Pricing and service should take into account the value of building relationship with both individual franchisees and parent companies.