The Future of Franchising: What to Expect in 2024

While the franchise industry faced various economic challenges in 2023 such as inflation, labor shortages, and rising interest rates, it still met or exceeded projections. According to the 2024 Franchising Economic Outlook published by the International Franchise Association (IFA), employment growth saw a 2.9% increase in 2023 and output growth increased by 4.2%. 

Economic challenges are certainly not over, and 2024 is set to be a “transitional year for the U.S. economy and franchising”. However, despite the obstacles, franchising is still expected to grow in 2024. 

A “Transition Year” for Franchising  

IFA Key Forecasts for 2024

“While the Federal Reserve is not expected to hit its target inflation rate of 2% until 2025,  investors are optimistic that a series of rate cuts are on the horizon for 2024. Ultimately, lower  interest rates will reduce the cost of borrowing, making franchising more affordable.” (IFA report) 

Lower interest rates would certainly have a positive impact when it comes to the growth of franchising. The IFA report continues to make the following key forecasts: 

  • Overall Growth: franchise establishments will increase by almost 15,000 units, or 1.9%
  • Job Growth: total franchise employment will grow by 2.6%  
  • Output Growth: total franchise output will increase by 4.1%
  • GDP Growth: franchises’ GDP will grow at a pace of 4.3%

Which Franchise Industries Will Grow the Most in 2024?

Of course, not every industry in franchising will grow at the same pace. The following industries are projected to see the most growth in 2024: 

  • Personal Services Sector: projected to lead growth in franchise establishments, growing by 3% to 124,508 units. Personal services include services related to beauty, health and fitness, storage, moving, education, childcare, sports and recreation, pets, and travel
  • Quick Service Restaurants (QSRs): projected to increase by 2.2% to more than 199,000 units. QSRs are limited-service restaurants that serve meals at lower price points and typically provide fast service, a limited menu, and limited table service.
  • Lodging Industry: projected 0.9% increase in the number of franchises, reaching  36,000 locations. Lodging includes a wide range of accommodation types including hotels, B&Bs, resorts, hostels, motels, and others that provide a place to stay overnight. 

Where in the United States Will Franchising Grow the Most in 2024?  

There are a couple of leading areas for the most franchise businesses in the region. The Southeast is home to about 30% of all U.S. franchised businesses, which amounts to 2.6 million employees and $268.2 billion in franchise revenue. The Midwest follows the Southeast as the second-largest region for the amount of franchise establishments. 

The IFA’s “Top 10 States For Franchise Growth in 2024”:

  1. Texas 
  2. Florida 
  3. Georgia 
  4. North Carolina 
  5. South Carolina 
  6. Tennessee 
  7. Maryland 
  8. Arizona 
  9. Colorado 
  10. Virginia

Is 2024 Your Year to Start Franchising?

Despite an uncertain economy, franchising is still expected to grow by every metric. The industry continues to provide incredible opportunities to aspiring entrepreneurs. Is 2024 a good year to buy a franchise? If you’re ready to take that step, then the answer is yes! FranNet is here to help. Our expert franchise consultants will help you find the right franchise to join and walk you through the process from start to finish. Schedule your free consultation to get started!

Source link