Are Franchise investments a good bet in 2025?

10 factors driving Growth within the Franchising Arena

1. Growth in Franchise Establishments:?The number of franchise establishments in the U.S. is projected to increase by over 15,000 units in 2024, a growth rate of 1.9%, bringing the total to approximately 821,000 units. This expansion indicates a robust and growing franchise sector, providing more opportunities for potential franchisees.
2. Job Creation:?Franchising is expected to add around 221,000 jobs in 2024. Total franchise employment is forecasted to grow by 3.0%, reaching 8.9 million jobs. This growth highlights the significant role franchising plays in the U.S. economy by creating substantial employment opportunities.
3. Economic Output:?The total economic output of franchised businesses is set to increase by 4.1%, from $858.5 billion in 2023 to $893.9 billion in 2024. This steady growth trajectory reflects the financial health and expanding influence of the franchising industry.
4. GDP Contribution:?Franchises’ contribution to the GDP is projected to grow by 4.3%, reaching $545.8 billion. This indicates that franchising is a vital part of the national economy, contributing significantly to economic stability and growth.
5. Sector Growth:?Personal services and quick service restaurants (QSRs) are expected to experience the strongest growth among franchising sectors in 2024. These sectors have shown resilience and adaptability, making them attractive options for new franchisees.
6. Health and Wellness Sector:?There is growing consumer demand for health and wellness services, driving the expansion of franchises in this sector. Fitness centers, healthy eating options, and wellness services are expected to see significant growth, presenting lucrative opportunities for franchisees.
7. Regional Trends:?The Southeast and Southwest regions of the U.S. are projected to lead in franchise growth in 2024. States like Texas, Florida, and Georgia are among the top performers due to favorable business climates, strong population growth, and diverse economies.
8. Revenue and Profitability:?The average revenue per franchise unit is forecasted to rise, reflecting positive profitability trends. For instance, the average revenue per franchise is expected to increase from $1,065,000 in 2023 to $1,088,000 in 2024, highlighting the potential for financial success in franchising.
9. Technological Integration:?The integration of advanced technologies such as AI, data analytics, and digital platforms is revolutionizing franchise operations. Franchises that leverage these technologies are likely to see increased efficiency, personalized marketing, and enhanced customer service, driving growth and competitiveness.
10. Sustainability Trends:?Franchises adopting sustainable practices and offering eco-friendly products are attracting a growing segment of environmentally conscious consumers. This trend not only meets consumer demand but also helps franchises comply with increasing regulatory requirements on sustainability.

These statistics and trends support a positive outlook for franchising in 2025. With substantial growth in establishments, job creation, economic output, and profitability, along with opportunities in emerging sectors and regions,?franchising continues to be a compelling option for aspiring business owners. The integration of new technologies and a focus on sustainability further enhance the appeal of franchising, making it a dynamic and resilient business model.

What was the Failure Rate for a Franchise in 2024?

There are so many variables to consider when asking what is the failure rate for a franchise. From the level of experience of the buyer and support they’ll get to the type of brand, its reputation, and the conditions of the market – meaning, the stats will vary.

Studies in the market have estimated that?failure rates for franchises can be as high as 50%, while others studies show lower rates around 20%.?With a range like this, you must research the potential risks of starting a franchise before deciding to invest.

Franchise Failure vs. Independent Business Failure

If you’re considering buying a franchise for your next investment, but are holding back due to fear of failure – what’s your alternative? People with entrepreneurial spirit like you usually want the freedom that comes with being your own boss. We understand that.?

However, independent business owners have their own hurdles to overcome as well. Like we said at the very beginning of our article…with any business venture, there is always risk of failure.?

So, we’ve compared and contrasted franchising vs independent business, so you can see which business opportunity is worth the risk.

Franchises…

• Have a higher initial investment cost, as buyers must pay a franchise fee and may have to purchase space and equipment before they launch. This can make it more difficult for a franchise to recover from financial setbacks or failure, since the buy-in is greater.
• Often have a reliable business model, which can provide a sense of security and stability for owners. However, this can also limit the flexibility for the franchisee to make their own decisions and adapt to changing market conditions how they see fit.
• Utilize the support and resources of the franchisor, which can help franchisees navigate challenges and uncertainty. However, this support can also come with strings attached, as franchisees may be required to follow certain guidelines according to the business model.

Independent Businesses…

• Have lower initial investment costs, since there are no franchise fees or mandatory purchases from the business owner. This can mean quicker recovery if hit by financial setbacks or failure. Essentially, there is less investment to lose.
• Typically have more flexibility with their business model, which can allow them more creative freedom. However, this can also make it more difficult for independent businesses to scale and grow, as they may not have the resources or support of that established brand.
• Are responsible for all aspects of their business – they are building from the ground up. From marketing and sales to managing their own finances and customer service strategies. This can be really challenging for people who may not have the prior history as a business owner, who find they are now navigating on their own.

Level of Experience

The first factor that could impact the failure rate of a franchise is the level of experience of the owner. Are you a professional who can manage and lead? Are you prepared to follow a business model? And how do you feel about adopting someone else’s marketing strategies? These are just a few questions – and your answer doesn’t have to be ‘yes’ to mean success.?

Owners who have previous business experience and are able to adapt to the brand’s franchise model may be more likely to succeed than say those who are new to the business world entirely. However, if you’re someone without that experience – there are ways for you to get your footing fairly quickly in the business. Franchisors typically provide training and support to help new owners get started and acclimated, but it’s still important for franchisees to have a solid foundation of knowledge and skills to build upon.

Here are a few characteristics that could make someone an ideal franchisee:

? Commitment to following established systems and procedure

? Willingness to work hard to grow the business

? Good communication & customer service skills

? Ability to adapt to changes in the market

? Openness to learning and implementing new ideas

Have you considered working with a franchise broker?

Having a broker in your corner is one of the best ways to gain this industry knowledge and confidence in your decision. They can help break down the numbers and statistics while also walking you through the process of becoming a franchise owner – from start to finish. Brokers also have access to the Franchise Disclosure Document (FDD).?The FDD is where you can actually see the success rate of a franchise.?The numbers are there, if you know how to calculate it or have a broker to help you understand it. So while the mass of general franchise success is hard to calculate, the individual franchise success is not, and our brokers have access to those numbers.

About Alan Goldberg

With more than 40 years of experience in advertising, marketing, business development, and franchising, Alan Goldberg is a respected expert in the entrepreneurial world, dedicated to helping others achieve success. Whether you’re an aspiring or current entrepreneur in need of guidance, support, or simply a conversation, you can connect with Alan ?at?mailto:[email protected]

So, here’s my question for you: What’s holding you back from exploring the world of franchising?

If you found this insight valuable, I encourage you to like this post and share your thoughts in the comments. Let’s discuss how franchising could be the next BIG thing for you. And if you think someone else might benefit from this perspective, feel free to repost!

#FranchiseSuccess #Entrepreneurship #WealthBuilding