The Ups and Downs of Franchising in 2015

franchise business

2015 is shaping up to be another banner year in franchising. Franchise owners and franchisors have seen record growth over the previous four years. This year is expected to yield a variety of results for the industry as major policy changes have a dramatic effect on how the franchise industry operates.

The Ups

Franchise businesses continue to represent the fastest growing segment of the economy. Many entrepreneurs turn to franchising as the best way to establish a business and take control of their destiny in what has been an unstable economy.

The International Franchising Association (IFA) estimates that more than 12,000 new franchise locations will open in 2015. Franchise businesses are expected to add nearly 250,000 new jobs this year. This will bring the total number of jobs at franchised businesses to 8.8 million in the US alone and represents a nearly 3% increase over the gains seen in 2014.

With more franchise locations opening and more jobs being created, the IFA estimates that franchise businesses should generate nearly $890 billion in business in 2015.

The Downs

Even with all this growth and the positives that are sure to come, industry experts point out several areas of concern. Many franchise owners are concerned about the ongoing impact of Obamacare. With 66% of franchisors and 85% of franchise owners citing that Obamacare has a negative impact on business, there is room for concern about the long term affects that the Affordable Care Act could have on the franchise industry.

There is also concern throughout the franchise industry about the trend of state and local governments reviewing minimum wage laws. The IFA recently reported that 85% of franchisees and franchisors are concerned about the negative effects of increases in minimum wage.

These concerns combined with the “joint employer” filing round out the main concerns facing the franchise industry. The joint employer filing stated that the franchisor was equally responsible for setting wage and hour guidelines as the franchisee. This leaves franchisees uncertain about the status of their franchise agreements. More than 80% of those surveyed by the IFA expect the ruling on this issue will have a “significant” impact on industry operations.