Despite inflation in the United States reaching its lowest point in three years and the Federal Reserve’s cutting of interest rates for the first time in four years, franchisors are less confident they’ll meet 2024 growth goals.
Just 33.3 percent of the nearly 700 franchisor chief executive, chief financial and chief development officers surveyed for BoeFly’s Franchise Growth Confidence Index said they expect their brand will meet its franchise growth goals this year, given the economic environment.
“That’s our lowest number yet,” said BoeFly CEO Mike Rozman as he noted that figure is down from 48.6 percent in June and a marked dip from the 67 percent of respondents who in February said they felt sure their brand would hit its goals.
Financial technology company BoeFly conducted its survey September 19-October 2, with respondents coming from several industries including automotive, education, fitness, health and beauty, home services, restaurants and retail. BoeFly helps franchisors qualify their applicants and also connects those candidates with lending options.
Mike Rozman is the CEO of financial technology company BoeFly.
“The Fed lowered interest rates by 50 basis points in the survey period,” Rozman said of the central bank’s decision September 18 to lower its key overnight borrowing rate by a half percentage point, so he was surprised to still see confidence was shaky.
“It’s not enough yet. There’s still a lot of anxiety among franchisors who are concerned about their franchisees’ ability to develop,” he said. “Access to capital is definitely a concern.”
Despite the rate cut, 83.3 percent of respondents said interest rate levels have negatively impacted their brand’s growth plans. And the same percentage said the inflation rate negatively impacted franchise sales. Both those figures are up slightly from the June survey.
Also up was the number of C-suite executives—just over 58 percent—who said uncertainty with the upcoming presidential election is having an adverse effect on growth. That’s an increase from 54.3 percent this summer.
“People just don’t like uncertainty,” said Rozman. “I think we’re all hopeful that come November 6, we’ve all moved forward and that we’re not still talking about the election in December and January.”
At pet care franchise Scenthound, which last week opened its 109th location, CEO Tim Vogel said the brand is “definitely on a high growth trajectory” but is adjusting where it funnels resources to account for the broader economic headwinds.
Tim Vogel is the founder and CEO of Scenthound.
“We’ve put more resources behind the franchise development team and into improving the financial literacy on the part of franchisees so they can have a better dialogue with banks,” said Vogel, who launched the concept, based in Jupiter, Florida, in 2013.
Scenthound, which finished 2023 with 76 locations offering dog grooming, teeth cleaning and other pet wellness services, is still opening about one location a week on average, but Vogel said he’s forecasting it to finish the year at 80 percent of planned new units open. Real estate, he noted, is challenging to find. Scenthound is putting additional support behind the site selection, lease negotiation and buildout process, he added.