Today, 3,400 US franchisors support 800,000 franchisees with 9 million employees grossing $1.7 trillion of annual sales and 3% of US GDP.

https://www.franchisedirect.com/information/is-your-franchise-fit-for-the-us

Click to access 2022%20Franchising%20Economic%20Outlook.pdf

Rationale

Franchising provides an opportunity for qualified individuals to own a business and earn equity-like rewards, without outstanding industry expertise, with lower business failure risk, requiring relatively modest equity investments and the opportunity for advantageous bank and small business loans.

Franchising provides the owner of a product or service concept with the opportunity to expand using “other people’s money”. It facilitates geographic and international expansion leveraging locally knowledgeable managers/investors. It allows differentiated products, services and systems to be replicated quickly and consistently. It provides legal agreements that ensure that the franchisor’s brand is enhanced and not damaged by the franchisee’s operations. It provides a system that strongly aligns the interests of local managers/owners with those of the central business.

History

Franchising has experienced several “boom and bust” periods, fraudulent deals and changing relations between franchisors and franchisees through time. Initial growth began in the 1850-1920 period together with the growth of the manufacturing and transportation industries. Automobiles, farm equipment, sewing machines, service stations, auto parts, pharmacies, soft drinks and train stop/car hop restaurants lead the way originally using the product franchising model. The depression interrupted the growth of franchising. Automobile dealers, service stations and soft drink distributors accounted for 80% of franchising before the depression.

Franchising accelerated again after WWII with fast-food restaurants leading the way, accompanied by a diverse set of laundry, hotel, rental car, real estate and convenience stores. These businesses were often still tied to products or patented equipment. However, McDonalds (1955) offered the first business format franchises which provided greater opportunities in a growing, travelling society.

Business format franchising “includes not only the product, service, and trademark, but the entire business format itself: a marketing strategy and plan, operating manuals and standards, quality control, and a continuing process of assistance and guidance.”

Click to access Chapter%201.pdf

With rapid growth came accounting fraud by franchisors, one-sided contracts, overlapping deals, pyramid schemes and conflicts between franchisors and franchisees. The Energy Crisis of the 1970’s bankrupted a large share of service stations. State and federal regulations enacted in the 1970’s ensured that standard disclosure agreements were used, allowing potential franchise owners to work with their lawyers to ensure that they understood the deals they were making.

https://www.tasanet.com/Knowledge-Center/Articles/ArtMID/477/ArticleID/1251790/Where-It-All-Began-The-Evolution-of-Franchising

https://www.entrepreneur.com/franchises/entrepreneur-franchising-the-big-bang/66000

A Brief History of Franchising

https://en.wikipedia.org/wiki/Franchising

Growth

Data on the franchising industry is not standardized. Two industry associations and the US Census Bureau provide somewhat inconsistent data. Nonetheless, the growth of franchising after the “bust” in the 1970’s is amazing. The number of establishments has grown from 375,000 (1973) to 420,000 (1988) to 530,000 (1990) to 775,000 (2021). Total employment has grown more slowly, from 7 million (1988) to almost 10 million (2017). Sales has grown much faster from $160 billion (1975) to $350 billion (1980) to $530 billion (1985) to $1 trillion (2004) to $1.3 trillion (2007) to $1.5 trillion (2012) to $1.7 trillion (2017).

https://www.latimes.com/archives/la-xpm-1990-09-27-fi-1859-story.html

A Brief History of Franchising

https://www.entrepreneur.com/franchises/entrepreneur-franchising-the-big-bang/66000

Click to access 2022%20Franchising%20Economic%20Outlook.pdf

Varied Opportunities

https://www.census.gov/library/stories/2021/12/franchising-is-more-than-just-fast-food.html

Leading sectors by annual earnings include senior care ($155K), real estate ($153K), personal services ($126K), business services ($122K) and pet services ($119K).

https://www.entrepreneur.com/franchises/the-highest-earning-franchise-categories-according-to/417572

Entrepreneur Magazine has been publishing its “Franchising 500” rankings since 1980.

https://www.entrepreneur.com/franchises/directory/franchise500-ranking

The fast-food restaurant industry remains the “killer app” for franchising.

https://www.statista.com/statistics/190330/employees-of-us-franchise-establishments-by-business-line-since-2007/

Franchisee Demographics

Strategic Emphasis in 2023

Sustainable resources; operations and marketing.

Nearer international and local supply chain sourcing.

Simpler operations and automation. Resilient, recession-proof.

Multiple brand retail locations.

Technology, digital operations.

Marketing/social media capabilities.

Home delivery services.

Personalized products and customer service.

Generation and minority group niche marketing and growth.

Fitness, health, and wellness services.

Home improvement services.

Food and restaurants recover.

Increasing role for multi-unit franchisees.

https://www.forbes.com/sites/forbesfinancecouncil/2023/01/04/franchising-trends-to-be-on-the-lookout-for-in-2023/?sh=969cf8949e91

https://www.franchising.com/guides/current_trends_in_franchising.html

https://www.linkedin.com/pulse/6-franchise-trends-watch-2023-teri-barber/

Hot Trends in Franchising for 2023

Current Trends in Franchising

https://blog.gitnux.com/franchise-trends/