Franchising In The Downturn And Recovery

Franchised businesses performed relatively well during the Great Recession and weak economy recovery that followed.

economic recovery

According to data provided in the Franchise Business Economic Outlook: March 2012, prepared by IHS Global Insight for the International Franchise Association Educational Foundation, the number of franchised establishments declined 3.1 percent; the number of employees at franchised outlets fell 2.4 percent; and the inflation-adjusted dollar value of output dropped 2.2 percent between 2007 and 2009.

These numbers are relatively modest in comparison to what happened to the economy as a whole.

Moreover, franchised businesses have rebounded relatively strongly since 2009. While the number of franchised establishments declined an additional 1.5 percent from 2009 to 2011, employment at franchised outlets grew by 1.7 percent. Moreover, the inflation-adjusted value of output increased 3.6 percent over the two-year period.

Efficiency is higher now than before the recession. By shrinking the number of outlets, and increasing employment at the locations that remained, owners have improved both output per outlet and output per worker. Output per establishment increased 6.1 percent in real terms from 2007 to 2011 – up from an average of $969,000 to $1,028,000 in 2012 dollars. Output per worker rose 2.1 percent in inflation-adjusted dollars, increasing from $93,400 to $95,400.

Economic Recovery Photo via Shutterstock


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

6 Reactions
  1. Thanks for this franchise data update, Shane.

    You wrote that, “By shrinking the number of outlets, and increasing employment at the locations that remained, owners have improved both output per outlet and output per worker.”

    One reason for this shrinking is that some franchisors haven’t sold as many new franchise units in the past couple of years. I don’t know of too many franchise company executives that would purposely decrease the number of units…unless they had to.

    Great news on the productivity front, though.

    The Franchise King®

  2. I think the increased productivity stat is something you see in almost every sector of the economy. Everyone had to become more effective and efficient. Thanks for the post.

  3. Martin Lindeskog

    Do you see any special segments of the franchising industry that are recovering very strong?

  4. Good to see existing franchises doing more with the same head count (I think this is a hallmark of the recession for all businesses) but I’d still like to see some expansion.

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