US Franchising Statistics Report: 2023 Recap and 2024 Forecast

Overview of Franchising Industries


The franchising industry encompasses various sectors, each with unique trends and performance metrics. The table below provides a summary of key statistics for major franchising sectors in 2023 and forecasts for 2024.

Source: FRANdata, 2024 Franchising Economic Outlook

Pet Ownership Statistics:

Industry Breakdown: Home-Based Franchise Industry

The Home-Based Franchise Industry has become increasingly popular, offering flexibility and lower investment costs. Below is a table highlighting key aspects of this industry:

Market Overview:

• Percentage of Small Businesses Home-Based: Over 51% of all small businesses in the United States are home-based.
• Annual Revenue: Home-based businesses generate nearly $430 billion per year nationally.
• New Business Start Rate: It's estimated another home-based business starts every 12 seconds.
• Success Rate: 70% of home-based businesses are still considered "successful" after three years of founding.
• Employee Statistics: Approximately 60% of home-based businesses do not have additional employees.

Key Attractions:

Source: FRANdata, 2024 Franchising Economic Outlook

The Rise of "Parentpreneurs":

A growing segment of home-based franchisees is parents seeking to balance career and family commitments. Franchising provides a structured business model with support from the franchisor, making it an attractive option for parentpreneurs.

Challenges and Considerations:

• Stigma: While diminishing, there can still be a perception challenge around the legitimacy of home-based businesses.
• Isolation: Working from home can lead to feelings of isolation and require discipline to maintain productivity.
• Zoning and Regulations: Home-based businesses must comply with local zoning laws and may face restrictions on certain types of activities.

Industry Breakdown: Retail Franchise Industry

The Retail Franchise Industry is closely tied to the overall economy, with consumer disposable income being a key driver. The industry is evolving rapidly, especially in the integration of in-store and online experiences.

Future Outlook:

• Projected Growth (2023): 3.2% increase in franchise retail output, amounting to a $4 billion rise over 2022.
• Pandemic Impact: Accelerated the merging of in-store and out-of-store customer experiences.
• Industry Focus: Increasing customer touchpoints by providing holistic solutions, such as curbside pickup, same-day delivery, and flexible payment options.

Big Trend: The Retailing of Healthcare

• Healthcare Franchises: Increase in healthcare-related retail franchises, such as vision care, hearing aids, and chiropractic care.
• Consumer Shift: Healthcare providers are adopting retail-like goals, including convenient locations and lower-cost care delivery systems.
• Retail Makeover: Healthcare services are increasingly being offered in retail settings, enhancing the customer experience.

Key Factors for Success:

• Marketing: Understanding the target market and effectively reaching customers through marketing is crucial.
• Location: For physical retail franchises, selecting the right location is essential for success.

Industry Breakdown: Gym and Fitness Franchise Industry

The Gym and Fitness Franchise Industry has shown resilience and innovation, especially in adapting to the changes brought about by the pandemic. Below is a table highlighting key aspects of this industry:

Market Overview:

• Market Size (2023): $7 billion
• Major Franchisors: Anytime Fitness, F45 Fitness, Jazzercise, Planet Fitness, Orangetheory Fitness, Snap Fitness, Xponential Fitness

Source: FRANdata, 2024 Franchising Economic Outlook

Future Outlook (Through 2028):

• Projected Growth: Focus on healthy lifestyles, convenient establishments, and up-to-date fitness technology.
• Trends: Gyms offering meal planning, goal tracking, online personal training, and user forums are expected to attract a large customer base.
• Challenges: Rising healthcare costs due to obesity and related health ailments.

Adapting to the Pandemic:

• Hybrid Fitness Model: The pandemic accelerated the shift towards a hybrid model, combining in-person and online workouts.
• Consumer Preferences: Home workouts and digital fitness options have become more popular, leading to changes in how fitness franchises operate.

Buying a Fitness Franchise:

• Success Factors: Former athletes have found success by applying their sports discipline and game planning to franchising.
• Initial Investment: Costs vary depending on the franchise, with factors such as real estate and equipment influencing the total investment.

Key Considerations:

• Ongoing Fees: Franchisees should expect to pay royalty fees for the use of trademarks and operational support.
• Market Research: Understanding customer behavior and preferences is crucial for success.

The Top 10 States For Franchise Growth in 2024

In 2024, the franchise industry is poised to drive economic progress by creating employment and business opportunities across various levels in the United States. The Southeast region is anticipated to lead, hosting about 30% of all franchised businesses in the country, with a significant workforce and substantial revenue generation. The Midwest follows, with a considerable number of establishments and economic output.

Source: FRANdata, 2024 Franchising Economic Outlook

FRANdata's analysis suggests that the Southeast and Southwest regions will see the most substantial growth in franchising in 2024, outpacing the national average. This expansion is attributed to demographic shifts and a burgeoning industry landscape attracting more workers to the South.

The landscape of economic growth is diverse across states, influenced by factors such as the business climate, population dynamics, infrastructure, and industry composition. FRANdata's projections indicate that the top growth markets for franchising in 2024 will include states like Texas, Florida, Georgia, and North Carolina, among others. Texas, with its strong economy and growth in both industry and population, is expected to maintain its position as a leading state for franchising.

The Southeastern U.S. is experiencing population growth as people move in search of lower living costs and job opportunities. States like South Carolina and Florida are witnessing rapid growth due to their attractive living conditions and pro-business policies, which are expected to boost their franchising sectors.

However, the franchise industry faces challenges at the state level, including minimum wage increases in 25 states, which will raise labor costs. States like California and Washington are predicted to experience slower growth in franchising due to rising costs and regulatory changes. In particular, California's new law banning "junk fees" will impact restaurants and quick-service establishments by requiring menu prices to reflect the total cost, potentially deterring consumers with higher perceived prices.

Source: FRANdata, 2024 Franchising Economic Outlook

These states exhibit diverse economic landscapes, with Texas and Florida benefiting from strong population growth, a favorable business climate, and a diverse economy. Georgia and North Carolina have seen significant investments in infrastructure and business development, making them attractive destinations for franchise expansion.
On the other hand, states like California and New York, despite being economic powerhouses, face challenges such as high operating costs and regulatory hurdles, which may impact franchise growth. In contrast, emerging markets like Arizona and Colorado offer growth opportunities due to their growing populations and business-friendly environments.
The franchising industry's state-level performance is also influenced by sector-specific trends. For example, the Southeast's booming real estate market boosts demand for home services franchises, while the popularity of fast-casual dining in urban areas drives growth in QSR franchises.

Source: FRANdata, 2024 Franchising Economic Outlook

Investment trends in franchising have shifted towards sectors with lower initial investment costs and higher potential returns, reflecting a strategic approach to capital allocation. The average initial investment required to open a franchise varies significantly across different sectors, with some sectors like QSRs and personal services offering more affordable entry points compared to more capital-intensive sectors like lodging.

The profitability of franchises has been impacted by various factors, including labor costs, supply chain challenges, and regulatory changes. However, successful franchises have leveraged operational efficiencies, technological innovations, and strategic pricing to maintain healthy profit margins.

Looking ahead to 2024, the franchising industry is expected to continue its growth trajectory, driven by consumer demand, technological advancements, and the expansion of franchise brands into new markets. Franchisors and franchisees will need to closely monitor financial performance metrics to ensure sustainable growth and profitability.

Emerging Franchising Trends and Innovations of 2024

The franchising industry is constantly evolving, with new trends and innovations shaping its future. Below is a detailed table highlighting key emerging trends and their implications for the franchising sector:

Source: FRANdata, 2024 Franchising Economic Outlook

Challenges and Opportunities of 2024

The franchising industry faces several challenges, but with these challenges come opportunities for growth and innovation. Below is a detailed table highlighting key challenges and opportunities in the franchising sector:

Source: FRANdata, 2024 Franchising Economic Outlook

Franchise Development and Expansion of 2023 and 2024 Forecast

The franchising industry is experiencing dynamic growth and expansion, driven by innovative strategies and market demands. Below is a statistical table highlighting key trends in franchise development and expansion:

Source: FRANdata, 2024 Franchising Economic Outlook

Key Insights:

• Multi-Unit Franchising: The trend towards multi-unit ownership continues to grow, with an increasing number of franchisees expanding their portfolios to include multiple locations.
• Co-Branding Opportunities: Franchises that combine two or more brands under one roof are seeing significant revenue growth, indicating a successful strategy for maximizing space and attracting diverse customer segments.
• Emerging Markets: Franchisors are increasingly looking towards emerging markets for expansion, with a projected 20% growth in franchise establishments in these regions by 2024.
• Franchise Unit Growth: Although the overall growth rate in the number of franchise units is expected to slightly decrease, the industry continues to expand, indicating a healthy and robust franchising sector.
• International Expansion: The interest in international expansion is on the rise, with 30% of franchisors expected to explore overseas markets by 2024, highlighting the global appeal of franchising as a business model.

Consumer Trends Impacting Franchising

The franchising industry is significantly influenced by evolving consumer trends. Below is a statistical table highlighting key consumer trends impacting franchising:

Source: FRANdata, 2024 Franchising Economic Outlook

Legal and Regulatory Considerations

Franchises must navigate a complex legal and regulatory landscape. Below is a table highlighting key legal and regulatory considerations impacting franchising:

Source: FRANdata, 2024 Franchising Economic Outlook

Key Insights:

• Franchise Disclosure Document (FDD): Regular updates to the FDD are essential to reflect changes in the franchise system and regulatory requirements.
• Intellectual Property Protection: Vigilant protection and enforcement of intellectual property rights are vital for maintaining brand integrity.
• Employment Laws: Franchises must stay informed and adaptable to changes in employment legislation to ensure compliance and protect their operations.
• Zoning and Land Use: Understanding local zoning laws is crucial for successful site selection and avoiding costly legal disputes.
• Data Privacy and Security: Implementing robust data protection measures is critical in an increasingly digital world to prevent data breaches and comply with privacy laws.
• Antitrust Regulations: Fair competition practices must be upheld to foster a healthy market environment and avoid legal scrutiny.
• International Regulations: Successful international expansion requires thorough research, local partnerships, and compliance with diverse legal frameworks.

Final Thoughts

In as we look forward to 2024, the industry is expected to continue its growth trajectory, driven by evolving consumer preferences, technological innovations, and strategic market adaptations. Franchisors and franchisees alike will need to stay agile and responsive to capitalize on emerging opportunities and navigate the challenges ahead. The future of franchising remains promising, with ample potential for entrepreneurs and businesses to thrive in this ever-changing landscape.