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Report suggests slow franchise growth for 2010


December 22, 2009
By Canadian Pizza

December 22, 2009, Washington, DC – The International Franchise Association says that franchise businesses will experience a slow recovery in 2010, with a small increase in the number of jobs, economic output and number of establishments.

The Franchise Business Economic Outlook for 2010, prepared by PricewaterhouseCoopers LLP (PwC) for the International Franchise Association’s Educational Foundation, forecasts that the number of business-format franchise establishments will increase in 2010 by 2.0 per cent, from 883,292 to 901,093—a net gain of nearly 18,000 establishments.  Jobs in franchise businesses are expected to grow 0.4 per cent for a gain of 36,000 jobs after losing over 400,000 jobs in 2009.  Overall economic output, the gross value of goods and services produced by franchise businesses, is forecast to increase 2.8 per cent to $868.3 billion—an increase of $23.6 billion in 2010.

“The U.S. economy is expected to experience slow growth in 2010 as the nation begins to recover from the recession,” said Drew Lyon of PwC. “Our forecast is for output of all franchise business sectors to expand modestly in 2010 as the recovery takes hold.”

The report estimates that in 2009 franchise businesses reduced employment by 4.1 per cent, resulting in a loss of 409,000 jobs as declining consumer spending caused owners to reduce costs. The number of franchise establishments in 2009 was estimated to have stayed relatively flat, declining 0.1 per cent.  Output of franchise businesses was estimated to decline by 0.7 per cent in 2009, for a loss of $5.7 billion.

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“We are pleased that the 2010 outlook for franchise businesses is projected to be more positive than 2009, but access to credit remains a major hurdle to increase jobs and economic output at the levels we have seen during past recoveries,” said IFA president Matthew Shay.

All 10 franchise business lines examined in the report are forecast to see increases in the amount of economic output with personal services (4.4 per cent), quick service restaurants (3.2 per cent) and businesses services (2.6 per cent) forecast to see the largest percentage increase.

Employment is forecast to increase in quick service restaurants (0.8 per cent) and retail food (0.7 per cent).

The sectors predicted to experience the largest percentage increases in the number establishments include quick service restaurants (3.1 per cent) and retail food (2.4 per cent).