Franchises Growing Faster Than Economy



What would the economy do without franchises at the moment?

According to the latest report by the Roseland, New Jersey-based human resources firm ADP, franchised businesses added 25,000 jobs in October, a growth of 0.3 percent that, again, easily outdistanced the overall economy. In fact, one out of every five private sector jobs created that month was in a franchise business.

Total nonfarm private employment that month rose by just 0.1 percent, or 130,430 jobs.

The additional jobs means the franchise sector is healthy and growing, and that franchise owners feel confident enough in the future of the economy that they're willing to build and to expand. But at the same time, many industries that use franchising as a business model—like, say, restaurants—rely on a healthy, employed workforce for sales. That franchises continue to lead employment growth in the U.S. is a demonstration of the economy's overall weakness.

Many franchise businesses, like restaurants, typically provide entry level jobs that pay lower wages. That they're among the few industries regularly adding workers has increased pressure on policymakers to increase the minimum wage, and on restaurant CEOs to boost pay.

And because overall employment isn't growing as strongly, the customer counts aren't keeping up with the expansion. Consider this: The restaurant industry added 11,520 jobs last month, or about 46 percent of franchise job growth in October. Yet that same month, same-restaurant traffic fell 1.4 percent, according to the market research firm Black Box Intelligence, which tracks same-store sales in the restaurant industry. In other words: the expansion is making an already competitive industry even more competitive.

The next largest employment gain came among auto parts franchises which added 5,120 jobs. Hotels added just over 2,000 jobs, and professional services added 1,120 jobs.

All but a few industries in the franchise sector added jobs. Only three saw an employment decline: rental companies (down 120 jobs), food retailers (down 710) and leisure concepts (down 790 workers).

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About This Blog

News, notes and commentary on franchise financing, including SBA lending, both the SBA 7(a) program and the SBA 504 program, franchise finance programs, development incentives, big deals and startup lending.

  Mary Jo Larson is the publisher of Franchise Times Magazine and its sister publication, the Restaurant Finance Monitor. She is a frequent speaker at meetings and conferences, and at the Restaurant Finance & Development Conference. You can find her on Twitter at @mlarson1011.
  Reporter Jonathan Maze covers restaurants and finance for Franchise Times. He also writes for our sister publication, The Restaurant Finance Monitor, and writes a daily blog on the restaurant industry at www.restfinance.com. You can also catch him on Twitter at @jonathanmaze.

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