The franchise sector is growing rapidly compared to the rest of the U.S. economy, according to a new report from the International Franchise Association, which was unveiled Monday at the Washington Post’s State of the Union Preview and delivered by Fast
sign’s CEO Catherine Monson.
This was also supported by recent Tax cut initiatives. The Tax Cuts and Jobs Act (TCJA) cuts the corporate tax rate from 35 percent to 21 percent, thereby benefiting franchises and other businesses by giving them a lower tax rate. As the rate cut is permanent, the TCJA provides franchises and other businesses with a predictable tax environment for the foreseeable future.
The franchise industry is expected to grow in 2018, with employment projected to climb 3.7% and business output rising 6.2%, according to the 2018 Franchise Business Outlook. “Regulations have been trimmed, taxes have been cut, and, as a result, the franchise community has continued its economic momentum,” said IFA President and CEO Robert Cresanti, CFE.
Among the key findings:
-Franchises are expected to grow 1.9 percent in 2018 to 759,000.
-Franchise employment is projected to grow 3.7 percent, outpacing the rest of the economy.
-The gross domestic product of the franchise sector is forecast to exceed U.S. GPD growth and increase by 6.1 percent to $451 billion. The franchise sector will contribute about 3 percent of U.S. GDP in nominal dollars, the report said.
-Franchise business output is expected to increase by 6.2 percent to $757 billion.
-Franchise personal services experienced strong growth over the past year and is expected to rank first in growth of the number of establishments and in employment in 2018.
Strong Growth Forecast for Home Care Franchise Sector
Home care franchises and others that specialize in personal services. Southwest states, in particular, could be a hotbed of growth.
The report broke the franchise sector into 10 categories; out of these, the “personal services” group is projected to have the most growth in number of establishments and employment in the coming year. The personal services category includes home care businesses, as well as educational, entertainment, recreational and other services. About 30% of the category encompasses “offices of physicians, dentists, other health care practitioners and home health,” Karen Campbell, consulting principal with IHS Markit, told Home Health Care News.
For the personal services category, 2018 growth is projected at a 3% year-over-year increase in the number of establishments, which would bring the total number of locations to about 113,500. Employment growth is pegged at a year-over-year increase of 5%, which equates to a total of about 517,000 workers.
The report also identifies the top states for total franchise growth in 2018. The Southwest dominates, with Nevada, Utah and Arizona leading the pack, followed by Florida and Colorado rounding out the top five.
Demographic trends are at play here as well, as population growth is strongest in the Sun Belt, according to the report. Nevada also has no state income tax, helping it snag the top spot.
These states also have rapidly growing populations of those 65 years old or older, according to separate data released last year, from the Administration for Community Living. Between 2005 and 2015, Arizona and Colorado experienced faster growth than any other states in their older adult populations. Nevada came in at No. 5.
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References: IFA Reports and Washington Post