A Bright Outlook for the Franchising Industry in 2018
Thanks to tax reform, deregulation and growing consumer confidence, the franchising industry can look forward to another year of growth in 2018 ‑ the industry’s eighth in a row. In fact, it is expected to outpace the growth of the rest of the nation’s economy.
According to the Franchise Business Economic Outlook for 2018, published by the International Franchise Association (IFA), the industry can expect to see growth in many areas:
- Franchise establishments are expected to grow to 759,000, an increase of 1.9 percent
- Franchise employment is anticipated to increase by 3.7 percent, outperforming the rest of the U.S. economy
- The gross domestic product (GDP) generated by the franchise industry is predicted to beat U.S. GDP growth by 6.1 percent, or $451 billion
- The industry will contribute about 3 percent of the nation’s GDP in nominal dollars
- Output by franchise businesses is anticipated to increase by 6.2 percent to $757 billion
Among businesses to benefit from slashed corporate tax rates in 2018 are franchises. Franchisors can now increase small business investments, which spur growth. With permanent tax cuts and scaled back regulations, businesses should have an easier time creating continued growth.
Regardless of the economy, the franchise model will remain strong. It’s best described as being in business for yourself, not by yourself. The model consists of the franchisor – a company or person who grants a license to another company or person to conduct business using the franchisor’s product or service, trademark and name – and the franchisee, the party receiving the license. A franchisor typically receives a franchise fee and a royalty based on a percentage of the franchisee’s sales. It’s a proven way of helping entrepreneurs become business owners, with franchisors providing name recognition, training, marketing, operating systems and support in return.
Consumer Spending in Retail
Consumer confidence, which flexed its muscles in 2017, is expected to grow stronger in 2018. This means franchise owners may see more sales, and franchisors can remain confident about scheduled royalties.
Consumer spending in the retail sector promises to be especially high in 2018 after finishing strong in 2017. Retailers experienced their best holiday season in 12 years, with sales up 5.9 percent. While e-commerce and catalog sales accounted for a large chunk of those sales, in-store sales rose 4.2 percent – the most since 2014. As early as November, the start of the holiday shopping season, retail sales for clothing and accessories, as well as appliances and home furnishings, were better than their three-month averages. Sales in 2018 are expected to grow 4.7 percent.
With robust consumer spending for goods and services on the horizon, franchisees and franchisors alike can look forward to a rewarding 2018.
Recession Memories Help Resale Retailers
The economy is healthy, businesses have a smoother road ahead and consumer confidence is up. However, memories of the 2008 recession remain engrained in the minds of many consumers. Millennials (born between 1982 and 2004), who came of age during the recession and currently are the largest spending demographic, tend to search for good deals before they purchase anything. This bodes well for resale franchises.
Winmark brands successfully captured those sales. Four of its concepts were recently ranked on Entrepreneur Magazine’s Franchise 500 List, which awards the rankings based performance areas such as financial strength, stability, growth rate and size of the system. Once Upon A Child® was named the top retail children’s franchise in the U.S., and Plato’s Closet® was ranked as the top retail franchise. Style Encore®, which Winmark Corporation founded in 2013, made the list for the first time and was ranked No. 4 in the Retail Apparel and Accessories category. Play It Again Sports® was ranked No. 2 in the Sports Equipment and Apparel category.
If you’re interested in the resale industry and want to learn more about resale franchise opportunities with Winmark, visit our website.