Economic Health of Franchise Industry Stronger Compared To One Year Ago

WASHINGTON (Press Release – March 22, 2012) – A new economic index that provides a current reading of the economic health of the franchise sector-The Franchise Business Index (FBI)-increased 0.3 percent in February to 107.7 (Jan 2000=100) – the sixth consecutive monthly gain, the International Franchise Association announced today. The index was up 1.4 percent compared with February 2011.

Designed to provide more consistent and timely tracking of the growing role of franchise businesses in the U.S. economy, the index was developed by IHS Global Insight on behalf of the IFA. 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 industry is a unique business sector and a vitally important contributor to the U.S. economy spanning some 300 lines of business, supporting nearly 18 million jobs, 825,000 establishments and providing for over $2.1 trillion in economic output,” said IFA President & CEO Steve Caldeira. “Measuring the strength of the franchise industry through the Franchise Business Index provides another indicator of the health of the economy as a whole. While the index shows we are moving in the right direction, more certainty in the tax and regulatory environments would help franchise businesses grow faster, creating more jobs and economic output at the local, state and national levels.”

Following a period of flat to declining values in mid-2011, the FBI turned up in September and has shown increases of 0.3 percent in three of the last five months.

Increases among the components of the index tied to the labor market and small business optimism contributed most to the February gain in the FBI. An improvement in consumer demand, which had been flat at the end of last year, gave a small boost to the index. Credit conditions showed no change in February.

IFA also released an update to its 2012 economic outlook prepared by IHS Global Insight in December 2011. The updated forecast shows little change from the initial forecast.

“Since our December 2011 forecast report was prepared, there have been a number of positive economic releases,” said James Gillula, managing director at IHS Global Insight. “However, negative factors that could restrain an economic rebound remain.”

The revised forecast indicates that the number of franchise establishments in the United States will increase by 1.6 percent in 2012, down slightly from the original forecast of 1.9 percent. Employment and economic output growth forecasts are unchanged at 2.1 percent and 5 percent respectively.

IFA plans to update the Franchise Business Economic Outlook on a quarterly basis beginning in 2012 instead of just an annual outlook.

Index, Jan 2000 = 100

Source: IHS Global Insight, March 2012

About The IFA Franchise Business Index

The Franchise Business Index is a measure of the economic environment for franchise business activity constructed with timely economic indicators that provide a current reading of the industry’s health. It combines indicators of the growth or decline of industries where franchise activity has historically been concentrated with measures of the demand for franchise business services and the general business environment.

The components of the IFA Franchise Business Index for the U.S. include:

  • Employment in Franchise-intensive Industries* (BLS)
  • Number of Self Employed* (BLS)
  • Unemployment Rate* (BLS)
  • Consumer Demand in Franchise-Intensive Services* (BEA)
  • Small Business Optimism Index* (NFIB)
  • Small Business Credit Conditions Index* (NFIB)

Research for the IFA Franchise Business Index and the quarterly forecast reports is underwritten by a generous grant from Jani-King International to the IFA Educational Foundation.

About the International Franchise Association

The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.

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