Franchise Business Index Hits Post-Recession High


WASHINGTON, Aug. 14, 2013 – The International Franchise Association announced that two important economic indicators validate that the franchise industry continues on a slow, but steady growth path. However, sound, pro-growth public policies out of Washington would strongly support and strengthen the industry’s ability to accelerate job creation and economic output, according to the IFA.

The Franchise Business Index (FBI), an index of the economic health of the franchising industry, increased 0.3 percent in July to 110.2 (Jan 2000=100).  This is the highest level for the index since prior to the recession in November 2007.  The July increase in the FBI was driven by gains in both employment and sales of franchise-intensive industries, and improvements in small business confidence.

“Franchise businesses continue to create jobs and demonstrate that the franchise business model remains the best and most proven vehicle to quickly grow and scale a small business,” said IFA President & CEO Steve Caldeira. “While the record high FBI underscores the inherent strength of the franchise industry, concerns remain, particularly the rate of growth in new jobs.”

According to the ADP National Franchise Report, the franchising industry added 12,300 new jobs in July, after a very strong June.

“While we’ve seen continued job creation, despite the ongoing economic and public policy headwinds, our industry would be growing much faster if lawmakers in Washington could put aside their partisan differences to enact comprehensive tax reform and provide much-needed relief within the Affordable Care Act to mitigate the most costly, burdensome and onerous mandates that are clearly throwing a wet blanket on further job growth,” Caldeira said.

The ADP report only reports actual job growth in a given month. It is a concurrent data point meaning that it looks only at current conditions. It does not attempt to be predictive of future months. Meanwhile, the FBI measures employment, credit conditions, small business optimism and other measures. Essentially, it takes both concurrent and forward-looking measures into account. It provides a snapshot at the state of the industry not just today, but going forward.

Designed to provide timelier tracking of the growing role of franchise businesses in the U.S. economy, the FBI was developed by IHS Global Insight on behalf of the IFA Educational Foundation.  The FBI combines indicators of growth in the industries where franchising is most prevalent and measures of the general economic environment for franchising.

“Despite a pattern of mixed economic reports, the business environment for the franchise sector continues to improve,” said IHS Global Insight Senior Economist James Gillula, “and we expect further improvement in the second half of the year.”

About the IFA Franchise Business Index

The Franchise Business Index is a measure of the economic environment for franchise business activity constructed with timely economic indicators that provide a current reading of the industry’s health. It combines indicators of the growth or decline of industries where franchise activity has historically been concentrated with measures of the demand for franchise business services and the general business environment.