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IHS Economics
January 2016
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Table of Contents
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EXECUTIVE SUMMARY
This report presents a forecast of the franchise sector of the US economy in 2016 prepared by IHS
Economics for the International Franchise Association Educational Foundation.
The US economy still faces headwinds from a weak global economy and a strong dollar, but recent data
confirm the mostly sound foundations of the US economic recovery led by solid growth in consumer
spending and housing. IHS expects that real GDP growth will accelerate between the fourth quarter of
2015 and the end of 2016. Consumer spending will rebound from a weak fourth quarter, and the
inventory cycle that depressed growth in 2015 will likely come to an end in the first half of 2016. In
addition, the drag from the plunge in energy-sector capital spending will wind down, and the recent
congressional agreement on taxes and spending will add 0.1-0.2 percentage point to growth over the
coming year.
As expected, the Federal Reserve Board raised the federal funds rate by 25 basis points in December.
We expect the Fed to continue to raise rates by 25 basis points in each quarter of 2016. But this will not
hinder the durability of the recovery. We expect real GDP growth to accelerate from 2.4% in 2015 to
2.7% in 2016.
With data for 2015 now nearly complete, we estimate that the franchise sector finished the year slightly
stronger than projected in our September 2015 report. We estimate that the number of franchise
establishments increased 1.7% in 2015, franchise employment was up 3.0%, and franchise output grew
5.6%. All of these figures are higher than our mid-2015 forecasts, and all represent an improvement
over rates of growth in 2014.
We see further improvement in the pace of growth of the franchise sector in 2016 as consumer
spending remains strong and business spending accelerates:
We expect the number of franchise establishments to increase by 1.7% in 2016, matching the
pace of growth in 2015.
Employment growth in the franchise sector will continue to outpace the growth of employment
in all businesses economy-wide, as it has in each of the last five years. We expect franchise
employment to increase 3.1% in 2016, while total private nonfarm employment will increase
1.9%. Over the six-year period, 2011-2016, average annual job growth in the franchise sector, at
2.7%, will be 0.5 percentage points higher than for all businesses economy-wide.
Growth of the output of franchise businesses in nominal dollars will accelerate to 5.8% in 2016
ahead of the 5.6% gain ion 2015 as output per worker in the franchise sector increases slightly.
The gross domestic product (GDP) of the franchise sector will increase by 5.6% to $552 billion in
2016. This will exceed the growth of US GDP in nominal dollars, which is projected at 4.4%. The
franchise sector will contribute approximately 3% of US GDP in nominal dollars.
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Page 1
6%
4%
Establishments
Employment
2%
Output
0%
GDP
-2%
-4%
2009
2010
2011
2012
2013
2014
2015
2016
Our analysis is based on a grouping of franchise businesses into 10 broad business lines. The growth
outlook differs among the groups, with output growth in 2016 ranging from a low of 4.4% in the
commercial & residential services business line to 6.6% in lodging. Other highlights of the industry
forecast for 2016 are:
As overall consumer spending maintains a 3% growth pace in 2016, the outlook for the retail
products & services franchises will remain strong. The retail business line is projected to rank
first in employment growth at 3.7% and second in output growth at 6.4%.
Business spending will also accelerate in 2016, giving a boost to business services franchises,
which are projected to rank first in growth of the number of establishments and tied for second
in employment growth with a 3.3% gain.
Both the quick service and table service restaurant business lines will continue to be among the
growth leaders, each with 3.3% employment growth and 6.3% output growth in 2016.
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Page 2
Establishments
Output
($Billions)
Percent
Amount Change Over
Previous Year
Percent
Amount Change Over
Previous Year
Percent
Amount Change Over
Previous Year
Automotive
Business Services
Commercial & Residential Services
Lodging
Personal Services
Quick Service Restaurants
Real Estate
Retail Food
Retail Products & Services
Table/Full Service Restaurants
31,968
99,029
64,670
27,479
115,783
159,839
91,950
63,840
103,130
38,244
1.5%
2.0%
1.6%
1.8%
1.8%
1.5%
1.7%
1.5%
1.9%
1.6%
199.3
1,026.7
384.5
771.7
720.5
3,446.8
327.8
535.5
547.0
1,152.2
3.0%
3.3%
2.8%
2.8%
2.6%
3.3%
2.4%
3.2%
3.7%
3.3%
43.84
175.60
59.31
96.33
101.53
248.28
57.44
44.61
46.58
70.09
4.6%
5.9%
4.4%
6.6%
4.9%
6.3%
5.7%
4.7%
6.4%
6.3%
TOTAL
795,932
1.7%
9,111.9
3.1%
943.60
5.8%
The Franchise Business Index increased by an average 0.3% per month over the last three months
(September through November), and the index was up 2.5% in November compared to November 2014.
All components of the index made positive contributions to the FBI over this 3-month period. Among
individual components, strong gains in employment (as measured by ADPs franchise employment
series) and retail sales of franchise-intensive retailers contributed most. Small business optimism
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Page 3
improved steadily over the period. Month-to-month changes in credit conditions and were mixed but
still positive on balance over the 3-month period.
August
2015
Sept
2015
Oct
2015
Nov
2015
12-month
Nov-Nov
116.2
-0.1%
116.7
0.4%
116.9
0.2%
117.4
0.4%
2.5%
IHS Economics
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Page 4
INTRODUCTION
This report presents a first look at the outlook for the franchise sector of the US economy in 2016
prepared by IHS Economics for the International Franchise Association Educational Foundation.
The following section presents a summary of the current IHS forecast of the US economy in 2016, with
attention to economic indicators that relate to sectors of the economy where there is a significant
concentration of franchising.
We then present an overview of our estimates and forecasts of franchising for 10 business lines: 1
1. Automotive
2. Business Services
3. Commercial & Residential Services
4. Lodging
5. Personal Services
6. Quick Service Restaurants
7. Table/Full Service Restaurants
8. Real Estate
9. Retail Food
10. Retail Products and Services
For each of the 10 business format lines, the projections include estimates through 2015 and an initial
forecast for 2016 of:
Franchise establishments2
Franchise employment3
This report does not include estimates for product-distribution franchises, such as automotive and truck dealers,
gasoline service stations without convenience stores, and beverage bottlers.
2
An establishment is a single physical location at which business is conducted or services or industrial operations
are performed. A business may consist of more than one establishment. An establishment may be owned by the
franchisor or the franchisee.
3
Nominal output is the gross value of goods and services produced -- a concept that is comparable with "sales" for
most industries. In government input-output accounts, the output of goods-producing industries is measured by
the value of shipments. For most other industries, output is measured by receipts or revenues from goods and
services sold. A special case is the output of the wholesale and retail industries, which is measured generally as the
difference between receipts or revenues and the cost of goods soldthis difference is referred to as "margin."
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Page 5
0%
-1%
-2%
2013Q1
2014Q1
2015Q1
2016Q1
As expected, the Federal Reserve raised its overnight federal funds rate by 25 basis points at its
December policy meeting, signaling confidence in the recoverys sustainability. This was the first rate
hike in more than nine yearsand seven years since rates were pushed to zero. We expect there will be
four more 25-basis-point rate increases in 2016, but this gradual pace of rising short-term interest rates
will not slow the recovery.
The consumer outlook for 2016 remains positive. Real disposable income is expected to increase 3.1% in
2016 after a 3.6% gain in 2015. Real consumer spending growth is expected to increase 3.1% in 2015
and 3.0% in 2016. Auto sales still remain a bright spot, but less dependent on pent-up demand than in
the early years of the recovery. We expect light-vehicle sales to increase from 17.4 million units in 2015
to 17.8 million units in 2016.
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Page 6
The pending home sales index that measures contract signing activity has fallen in three of the last four
months, which suggests that there is underlying softness in the market for existing homes. Thus, existing
home sales are expected to improve modestly to 5.3 million units in 2016, up only 1.7%. However, the
outlook for housing starts is stronger. We expect starts to surpass a 1.3-million-unit annualized rate by
the end of 2016 up 14% for the year. New home sales will follow, averaging 588,000 units in 2016, the
highest level since 2007.
Nonresidential construction, which grew at a spectacular 42.8% annual rate in the second quarter as
spending on manufacturing plants soared, has plateaued. Manufacturing construction, which is at
elevated levels, is set to contract significantly in 2016.
The trade-weighted dollar exchange rate was 10% higher at the end of 2015 than it was at the start. IHS
expects the dollar to strengthen further over the first half of this year because of tightening Fed policy
and accelerating US growth. Thereafter, as world growth picks up and other countries start to raise
interest rates, the dollar should begin a slow multiyear descent. Exports and imports will respond to the
stronger dollar, taking small slices off growth every quarter, but not enough to keep overall growth from
accelerating in 2016.
2012
2013
2014
2015
2016
2.2%
1.5%
2.4%
2.4%
2.7%
1.7%
1.7%
1.9%
2.1%
1.7%
3.2%
3.6%
3.1%
3.1%
1.7%
Personal Services
1.3%
1.0%
1.6%
1.2%
0.3%
3.1%
-1.4%
2.7%
3.6%
3.1%
1.5%
1.7%
2.7%
3.1%
3.0%
Food Services
2.1%
1.3%
3.1%
4.6%
3.6%
Accommodations
5.5%
3.0%
2.6%
3.8%
2.5%
Personal Services
1.7%
0.4%
3.7%
3.2%
2.3%
4.9%
3.9%
3.9%
2.1%
3.7%
8.9%
9.0%
-3.0%
5.9%
1.7%
13.2%
6.8%
12.6%
11.1%
6.3%
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Page 7
We estimate that the number of franchise establishments increased by 1.7% in 2015, and we
expect this pace of establishment growth to be maintained in 2016.
Franchise employment was up an estimated 3.0% in 2015, and we project a comparable gain of
3.1% in 2016. In comparison, total non-farm private sector employment is projected to increase
1.9% in 2016 after a 2.4% gain in 2015.
Growth of the output of franchise businesses in nominal dollars will accelerate from an
estimated 5.6% in 2015 to 5.8% in 2016 as output per worker in the franchise sector increases in
several business lines.
The gross domestic product (GDP) of the franchise sector will increase by 5.6% to $552 billion in
2016. This will exceed the growth of US GDP in nominal dollars, which is projected at 4.4%. The
franchise sector will contribute approximately 3% of US GDP in nominal dollars.
2008
Establishments
Percent change
Estimates
2009
2010
2011
2012
2013
2014
Forecast
(Jan. 2016)
2015
2016
782,573
1.7%
795,932
1.7%
Employment ('000)
Percent change
8,028
0.4%
7,800
-2.8%
7,780
-0.3%
7,940
2.1%
8,127
2.3%
8,334
2.5%
8,573
2.9%
8,834
3.0%
9,112
3.1%
Output ($Billions)
Percent change
696
3.2%
674
-3.2%
699
3.6%
734
5.0%
768
4.7%
804
4.7%
845
5.0%
892
5.6%
944
5.8%
GDP ($Billions)
Percent change
410
1.8%
405
-1.2%
414
2.2%
434
4.8%
453
4.4%
473
4.4%
496
4.8%
523
5.5%
552
5.6%
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The following chart shows how the franchise economy has fared over the last three years, along with
our 2016 forecast, by various measures. Growth rates of output and GDP are in nominal dollars.
Franchise Business Growth, 2013-2016: January 2016 Forecast
8%
6%
2013
4%
2014
2%
2015
0%
2016
-2%
-4%
Establishments
Employment
Output
GDP
To provide background for our view of how different segments of the franchise sector will fare in 2016,
we review IHS forecasts of employment and output in the industries where there is a large
concentration of franchise businesses. Key drivers of the franchise economy drawn from the IHS US
Industry and US Macroeconomic forecasts are summarized below.
Automotive: On the commercial vehicle side, capacity in the trucking industry is tight and getting
tighter. As the economy continues to recover and grow, the demand for shipping has roared back. The
American Trucking Association reported their advanced seasonally adjusted For-Hire Truck Tonnage
Index equaled 135.1 (2000=100) in September, which was the second highest level on record; the alltime high of 135.8 occurred in January 2015. Trucking companies will need to make investments in new
fleet capacity as well as try to maintain the current fleet. Thus, it will also behoove fleets and individual
owner operators to step up their equipment maintenance.
The growth of light vehicle sales is forecast to slow to 2.1% in 2016 after growing an estimated 5.8% in
2015. However, the age of the average vehicle on the road is near record highs. The continued
improvement in the labor market, along with continued low interest rates in the near term, should help
boost confidence for bigger ticket item purchases. Economy-wide, consumer spending on auto parts is
expected to increase 4.3% in 2016. We estimate that output of the automotive franchise business line
increased 4.6% in 2015, and the forecast for 2016 shows growth continuing at this pace.
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Employment in the automotive business line is expected to be up 3.0% in 2015 and to continue this pace
in 2016. While this will outpace the overall auto parts and tire sales industry, it will keep the automotive
business line among the slowest growing of the 10 franchise business lines, ranking sixth in employment
growth and ninth in output growth.
Commercial & Residential Services: Nominal spending on household services is expected to rise 4.4%
in 2016 after increasing 4.7% in 2015. Existing home sales grew an estimated 5.9% in 2015, but growth is
expected to slow to 1.7% in 2016. However, housing starts increased an estimated 11% in 2015 and are
forecast to grow 14% in 2016. This should boost such businesses as architectural, project management
and contracting firms and special trade contractors. Our estimates of employment and output of the
commercial & residential services business line in 2015 show growth of 2.8% and 4.4%, respectively,
which is slightly stronger growth than we forecast in our September report. We expect a similar pace of
growth for this business line in 2016.
Table/Full Service Restaurants: As the job market continues to improve, gasoline prices remain low and
wages are starting to see some modest pick-up, consumers are able to spend more on food away from
home. It appears that one area where consumers have spent some of their windfall in purchasing power
from lower gasoline prices is in eating out, as economy-wide sales in both segments of the industry are
on a pace to finish the year with growth rates near 8-9%. Full service restaurant sales growth outpaced
the QSR segment in three of four years during 2011-2014 and likely did so again in 2015.
Within the franchise full service restaurants business line, we have boosted our forecast of 2015 sales
slightly, and it now shows a 6.1% increase in 2015. We project 6.3% growth of sales in 2016. This will
translate into higher productivity, as we project a 3.3% increase in employment in 2016.
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Quick Service Restaurants: Improving employment and wage growth in the overall economy is
particularly good for the QSR industry as time for meals becomes crunched with more people working
and spending time commuting. As reported above, we expect total nonfarm employment growth
(including government employment) of 1.7% in 2016 slightly lower than the 2.1% growth in 2015. The
improving economy along with prospective increases in the minimum wage in many states is tightening
the labor market especially for the restaurant industry. Some QSR restaurants have increased their
benefits in efforts to attract employees. We estimate the number of QSR establishments increased by
1.4% in 2015, and we expect a slight uptick in 2016 to 1.5% growth. The QSR business line will remain
among the leaders of the franchise sector in employment growth in 2016, with a 3.3% gain, and we
expect QSR output (sales) to grow by 6.3% in 2016.
Retail Food: A sharp increase in spending on food away from home has come to some extent at the
expense of slower growth of consumer purchases of food for off-premises consumption. Economy-wide
consumer spending on food and beverages for off-premises consumption grew an estimated 1.3% in
nominal dollars in 2015 below the average pace of 2.1% of the previous three years.
The retail food franchise business line ranked last in establishment growth of the ten industries in 2015
and this ranking is expected to hold in 2016 with establishment growth of 1.5%. Retail sales of food
stores of all types (including their sales of non-food items) grew by 2.7% in 2015, and their sales growth
is expected to increase to 3.1% in 2016. We expect franchise employment and output within the retail
food business line to outpace these industry-wide growth trends. Our forecast for this business line
shows a 3.2% increase in employment and sales (output) growth of 4.7% in 2016.
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Lodging: The lodging industry has posted several years of solid growth, with sales gains continually
outpacing the annual increase in employment. Employment growth in the industry in 2015 is estimated
at 1.3%, and it is expected to slow to less than half a percent in 2016. Recent data on the lodging
industry from the ADP National Franchise Report and our industry data indicate that the franchise
segment of the industry has shared in these trends. We estimate that franchise employment in the
lodging business line grew 2.8% in 2015 and will show a similar increase in 2016. Output growth in the
lodging business line is expected to slow to 6.6% in 2016, but it will remain the fastest growing business
line based on output.
Real Estate: As noted above in discussing the commercial & residential services business line, we expect
existing home sales to show further gains in 2016, but at a somewhat slower pace than in 2015. Despite
the recent action by the Federal Reserve to begin what will likely be a series of increases in the federal
funds rate, we do not expect mortgage interest rates to rise enough to derail the housing market
recovery. The federal funds rate will likely be more than 1 percentage point higher in the fourth quarter
of 2016 than in the fourth quarter of 2015. But we expect the 30-year conventional mortgage rate to
increase by only 0.7 points over the year, from 3.9% in 2015:Q4 to 4.6% in 2016:Q4.
We estimate that the output of the franchise real estate business line increased 5.2% in 2015, and we
expect a 5.7% increase in 2016 near the average for the franchise sector as a whole. Employment in
the real estate business line is expected to increase 2.4% in 2016.
Retail Products & Services: Retail sales excluding food and automotive products grew an estimated
3.4% in 2015 and are expected to grow 4.5% in 2016. However, growth will slow in two categories of
retailers sporting goods and hobby stores where growth is projected to slow to 3.2% growth in 2016
after seeing 6% growth in 2015, and clothing and accessory stores where growth will slow to 2.0%
growth in 2016 after 2.9% growth in 2015.
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Employment data from the ADP National Franchise Report indicate that the franchise retail products &
services business line continues to outperform the franchise sector as a whole and other retail
industries. This business line will rank number one in terms of employment growth in 2016 (at 3.7%) as
it did in 2015. This will support strong sales growth of 6.4% in 2016 and establishment growth of 1.9%
ranking it second in terms of growth by both measures.
Business Services: The IHS US Industry Service forecasts healthy growth in 2016 in a wide range of
business services. Employment in all professional and technical services is expected to be up 4.5%,
including accounting and bookkeeping services up 2.0%, and architectural and engineering services up
4.4%. The franchise business services industry has been one of the leaders among franchise business
lines in establishment and employment growth, with increases of 2.0% and 3.3%, respectively, in 2015.
We project similar growth rates in 2016, and this will support output growth of franchise business
services of 5.9%, ranking it fifth among business lines.
Personal Services: The personal services business line includes a diverse array of services such as
educational services, health care, entertainment and recreation, personal and laundry services, and
selected financial activities. Economy-wide personal consumption spending in the category that includes
most of these personal services grew by an estimated 3.6% in 2015 down slightly from our mid-year
forecast. However, 2016 growth in spending on these personal services is expected to improve to 4.5%.
We estimate that employment in franchise personal services increased 2.6% in 2015, with output up
4.9%. We expect similar growth rates by both measures for this business line in 2016.
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Page 13
30,012
Percent change
Business Services
Percent change
Commercial & Residential Services
Percent change
Lodging
Percent change
Personal Services
Percent change
Quick Service Restaurants
Percent change
Real Estate
Percent change
Retail Food
Percent change
29,687
2011
2012
2013
2014
29,984
30,344
30,648
31,002
Forecast
(Jan. 2016)
2015
2016
31,481
31,968
-5.2%
-1.1%
1.0%
1.2%
1.0%
1.2%
1.5%
1.5%
89,691
89,147
90,035
91,746
93,581
95,268
97,130
99,029
-6.9%
-0.6%
1.0%
1.9%
2.0%
1.8%
2.0%
2.0%
62,650
61,272
60,169
60,951
61,804
62,666
63,660
64,670
-4.1%
-2.2%
-1.8%
1.3%
1.4%
1.4%
1.6%
1.6%
25,588
25,410
25,003
25,553
25,987
26,490
26,980
27,479
-3.7%
-0.7%
-1.6%
2.2%
1.7%
1.9%
1.8%
1.8%
106,510
106,100
105,463
107,572
109,293
111,728
113,739
115,783
-3.8%
-0.4%
-0.6%
2.0%
1.6%
2.2%
1.8%
1.8%
150,316
149,547
147,902
151,156
152,970
155,189
157,429
159,839
-1.0%
-0.5%
-1.1%
2.2%
1.2%
1.5%
1.4%
1.5%
88,372
86,153
84,947
86,221
87,687
88,945
90,383
91,950
-6.6%
-2.5%
-1.4%
1.5%
1.7%
1.4%
1.6%
1.7%
60,374
60,173
60,474
60,776
61,323
62,070
62,924
63,840
-3.0%
-0.3%
0.5%
0.5%
0.9%
1.2%
1.4%
1.5%
97,519
96,921
96,630
96,823
97,840
99,321
101,187
103,130
Percent change
Table/Full Service Restaurants
-1.0%
35,614
-0.6%
35,688
-0.3%
35,507
0.2%
36,217
1.1%
36,724
1.5%
37,103
1.9%
37,660
1.9%
38,244
Percent change
Total
-1.7%
0.2%
-0.5%
2.0%
1.4%
1.0%
1.5%
1.6%
746,646
740,098
736,114
747,359
757,857
769,782
782,573
795,932
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Page 14
1%
0%
-1%
-2%
-3%
-4%
2009
2010
2011
2012
2013
2014
2015
2016
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Page 15
Automotive
Percent change
Business Services
Percent change
Commercial & Residential Services
Percent change
Lodging
Percent change
Personal Services
Percent change
Quick Service Restaurants
Percent change
Real Estate
Percent change
Retail Food
Percent change
Retail Products & Services
Percent change
Table/Full Service Restaurants
Percent change
Total
Forecast
(Jan. 2016)
2015
2016
Estimates
2009
2010
2011
2012
2013
2014
174,889
173,546
177,885
180,198
183,802
187,875
193,510
-5.4%
-0.8%
2.5%
1.3%
2.0%
2.2%
3.0%
3.0%
889,721
874,087
883,702
903,143
933,850
961,927
993,766
1,026,669
199,316
-6.8%
-1.8%
1.1%
2.2%
3.4%
3.0%
3.3%
3.3%
343,531
336,317
342,034
347,849
355,502
363,999
374,089
384,462
-3.9%
-2.1%
1.7%
1.7%
2.2%
2.4%
2.8%
2.8%
671,702
674,953
691,827
699,437
709,229
730,264
750,681
771,673
-3.6%
0.5%
2.5%
1.1%
1.4%
3.0%
2.8%
2.8%
618,069
622,864
635,321
647,392
661,635
684,503
702,304
720,524
-3.8%
0.8%
2.0%
1.9%
2.2%
3.5%
2.6%
2.6%
2,887,550
2,882,638
2,951,821
3,046,279
3,140,714
3,238,075
3,337,993
3,446,816
-1.1%
-0.2%
2.4%
3.2%
3.1%
3.1%
3.1%
3.3%
295,954
290,329
294,974
301,168
308,095
313,541
320,223
327,801
-6.6%
-1.9%
1.6%
2.1%
2.3%
1.8%
2.1%
2.4%
468,868
468,172
473,790
481,844
490,035
503,450
518,819
535,491
-3.0%
-0.1%
1.2%
1.7%
1.7%
2.7%
3.1%
3.2%
464,036
468,883
476,385
483,531
494,169
508,635
527,240
546,958
-1.1%
1.0%
1.6%
1.5%
2.2%
2.9%
3.7%
3.7%
985,999
988,044
1,012,745
1,036,038
1,056,759
1,080,731
1,115,369
1,152,235
-1.7%
0.2%
2.5%
2.3%
2.0%
2.3%
3.2%
3.3%
7,800,319
7,779,833
7,940,484
8,126,879
8,333,790
8,573,000
8,833,994
9,111,945
-2%
-4%
2009
2010
2011
2012
2013
2014
2015
2016
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Page 16
($billions)
Automotive
Percent change
Business Services
Estimates
2009
2010
2011
2012
2013
2014
Forecast
(Jan. 2016)
2015
2016
31.16
33.56
36.32
37.62
38.72
40.08
41.92
43.84
-7.2%
7.7%
8.2%
3.6%
2.9%
3.5%
4.6%
4.6%
175.60
128.62
132.61
137.38
142.60
149.45
156.49
165.77
Percent change
-4.1%
3.1%
3.6%
3.8%
4.8%
4.7%
5.9%
5.9%
46.32
46.55
48.23
50.20
52.36
54.40
56.80
59.31
Percent change
-4.3%
0.5%
3.6%
4.1%
4.3%
3.9%
4.4%
4.4%
62.79
67.62
72.83
75.82
79.23
84.80
90.38
96.33
Lodging
Percent change
Personal Services
Percent change
Quick Service Restaurants
Percent change
Real Estate
Percent change
Retail Food
Percent change
Retail Products & Services
Percent change
Table/Full Service Restaurants
Percent change
Total
-7.6%
7.7%
7.7%
4.1%
4.5%
7.0%
6.6%
6.6%
74.43
77.85
82.29
85.42
88.15
92.22
96.77
101.53
-2.3%
4.6%
5.7%
3.8%
3.2%
4.6%
4.9%
4.9%
173.55
179.51
187.48
197.23
209.26
220.77
233.55
248.28
1.2%
3.4%
4.4%
5.2%
6.1%
5.5%
5.8%
6.3%
44.83
42.18
42.82
46.16
49.29
51.63
54.34
57.44
-8.7%
-5.9%
1.5%
7.8%
6.8%
4.7%
5.2%
5.7%
31.92
34.12
36.47
37.75
39.11
40.74
42.60
44.61
-7.9%
6.9%
6.9%
3.5%
3.6%
4.2%
4.6%
4.7%
31.89
34.19
36.41
37.94
39.37
41.24
43.79
46.58
1.0%
7.2%
6.5%
4.2%
3.7%
4.8%
6.2%
6.4%
70.09
48.78
50.64
53.48
57.22
59.28
62.15
65.94
-0.8%
3.8%
5.6%
7.0%
3.6%
4.8%
6.1%
6.3%
674.30
698.84
733.71
767.97
804.22
844.52
891.85
943.60
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Page 17
0%
-2%
-4%
2009
2010
2011
2012
2013
2014
2015
2016
Distribution by Sector
This section focuses on the distribution of the 10 franchise business lines in terms of the number of
establishments, employment, and output, based on our forecast for 2016. The quick service restaurants
business line is the largest category, with 20% of all franchise establishments, and accounts for 38% of
franchise employment. This business line is expected to contribute 26% of total output in 2016. Second
in size in terms of the number of establishments is the personal services line, with 15% of the total.
However, these are generally smaller businesses. The personal services group will account for only 8% of
franchise employment and 11% of output.
The table/full service restaurants group occupies the second-largest share of employment, accounting
for 13% of the total. The business services segment, which has higher ratios of output per establishment
and per employee, is the second-largest contributor to the value of output in the franchise sector, with
19% of the total.
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Page 18
IHS Economics
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Page 19
IHS Economics
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Page 20
Estimates
2009
2010
Forecast
(Jan. 2016)
2015
2016
2011
2012
2013
2014
178,197
193,404
204,158
208,793
210,635
213,348
216,624
-1.9%
8.5%
5.6%
2.3%
0.9%
1.3%
1.5%
1.5%
144,563
151,710
155,461
157,895
160,033
162,685
166,810
171,040
219,949
Percent change
3.0%
4.9%
2.5%
1.6%
1.4%
1.7%
2.5%
2.5%
134,835
138,416
141,002
144,329
147,295
149,438
151,830
154,262
Percent change
Lodging
Percent change
Personal Services
Percent change
Quick Service Restaurants
Percent change
Real Estate
Percent change
Retail Food
-0.5%
2.7%
1.9%
2.4%
2.1%
1.5%
1.6%
1.6%
93,477
100,190
105,273
108,397
111,710
116,122
120,396
124,827
-4.2%
7.2%
5.1%
3.0%
3.1%
3.9%
3.7%
3.7%
120,430
124,994
129,528
131,943
133,234
134,723
137,789
140,915
1.5%
3.8%
3.6%
1.9%
1.0%
1.1%
2.3%
2.3%
60,102
62,273
63,514
64,745
66,629
68,180
69,967
72,033
2.4%
3.6%
2.0%
1.9%
2.9%
2.3%
2.6%
3.0%
151,469
145,293
145,151
153,254
159,996
164,662
169,682
175,234
-2.3%
-4.1%
-0.1%
5.6%
4.4%
2.9%
3.0%
3.3%
68,074
72,879
76,984
78,347
79,811
80,927
82,105
83,298
Percent change
-5.1%
7.1%
5.6%
1.8%
1.9%
1.4%
1.5%
1.5%
68,733
2.0%
72,920
6.1%
76,437
4.8%
78,470
2.7%
79,660
1.5%
81,074
1.8%
83,061
2.4%
85,160
2.5%
49,477
51,248
52,805
55,231
56,098
57,507
59,116
60,826
0.9%
3.6%
3.0%
4.6%
1.6%
2.5%
2.8%
2.9%
86,445
89,827
92,401
94,497
96,501
98,509
100,956
103,557
Percent change
Total
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APPENDIX
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Methodology
The statistics in this report were derived from various published sources as well as IHS Economics
propriety databases. The primary source for the report was the 2007 Economic Census Franchise Report.
This report provides US estimates of establishments, employment, and annual payroll and output from
business with paid employees by detailed sector for 2007. Data were aggregated to the 10 Business
Format Lines.
The 2007 Economic Census only covers businesses with paid employees; the data were integrated with
other data sources to include franchise businesses without paid employees. Other data sources were:
The 2007 Survey of Business Owners The US Census Bureau publishes the 2007 Survey of
Business Owners (SBO). From this data source we were able to determine the number of
franchised businesses for businesses without paid employees.
2007 Nonemployer Statistics The US Census Bureau publishes the 2007 Nonemployer Statistics
(NES). NES includes the number establishments and total annual receipts by industry of
businesses without paid employees that are subject to federal income tax. Most often,
nonemployers are self-employed individuals. IHS Economics determined the total number of
businesses without paid employees and combined it with the SBO data to derive franchise
businesses without paid employees and the number of independent contractors working out of
franchised establishments owned by others.
IHS Economics Business Market Insights (BMI) This is a database that is based on the Census
Bureaus County Business Patterns. It contains information on establishments, employees, and
sales at the country level at six-digit North American Industry Classification System (NAICS). The
data were integrated with the SBO to determine the number of businesses with paid employees
in NAICS 55, which was not included in the 2007 Economic Census Franchise Report.
To develop our estimates and forecasts, we reviewed and replicated previous studies done by PWC,
which had made estimates of franchise businesses for 2007-2010. Our estimates were largely in
agreement with theirs. We present our revised estimates, which are based on our work with the 2007
Economic Census and more up-to-date data from the Survey of Business Owners and Nonemployer
Statistics.
We also acquired and reviewed data from Dun & Bradstreet on the number of franchise businesses in
various years. These data did not cover all franchise establishments, but in some cases could be used to
assess recent growth in the number of franchise establishments.
IHS Economics estimated econometric models to create forecasts for establishments, employment, and
output of each of the 10 business lines. The models include both macroeconomic (credit availability) and
industry-specific variables, using a nested modeling approach (i.e., franchise establishment formation
affects employment requirements, which further influences output forecasts).
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Page 23