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Franchise Industry Shows Signs of Recovery

The Wall Street Journal reports that the franchise industry can expect to see modest growth in 2011, according to two new studies to be released this week. Franchise businesses are forecast to add more store units and employees, based on an analysis by consulting firm PricewaterhouseCoopers on behalf of the International Franchise Association, a Washington D.C. trade group. This positive outlook is largely attributed to the recently enacted tax and unemployment benefits package, which includes payroll and income tax cuts.

According to the PWC study:

  • Franchise units are predicted to grow 2.5% in 2011 to 784,802, compared to the scant growth of 0.3% in 2010
  • Franchises are expected to create 194,000 new jobs in 2011, a 2.5% increase that will bring total employment to approximately 7.8 million
  • Economic output is projected to increase 4.7%, or $33.3 billion, for franchise businesses in 2011, reaching an estimated $739.9 billion
  • All business sectors except business services are projected to increase in store volume and employment this year, with the largest gains expected in lodging, automotive and retail products/services
  • In regard to economic output, the industries that can expect the greatest increases are automotive, commercial and residential services, personal services and retail food

Meanwhile, the franchise association conducted a recent survey of 142 franchisees that also indicates 2011 will be better year for businesses. This study revealed:

  • Nearly three-quarters of respondents expect "moderate to significant" increases in same-store sales over the next year
  • 45% of respondents said they anticipate to increase employment "moderately to significantly"
  • 40% of respondents said they expect an improvement in business conditions
  • Obtaining funding remains a major obstacle, with 30% of franchisees saying that lack of credit has had a significant impact on their ability to expand, and 42% of franchisees reporting no improvement in access to credit in recent months

"Without more consistent access to credit, franchisees can't grow," said Steve Caldeira, president and CEO of the association. "We're beginning to see some light at the end of the tunnel, but clearly again we have a long way to go."

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