Current Trends in Franchising
If you’re a current or aspiring franchisee or franchisor, it’s important to stay on top of the latest trends in the franchise industry to inform your business decisions. Let’s take a look at some of the most important franchise business and marketing trends and stats. We also included explanations about how to best use these trends to your advantage.
Why Look at Franchise Trends?
Put simply: because they matter. Franchise industry trends dictate or describe how the franchise industry is growing and shifting, and franchisors/franchisees who don’t pay attention risk getting left in the dust. Keeping trends in mind can help you ride the wave of new ideas or learn when to strike out on your own to make an impression. And it’s equally important to track trends at every level.
As both franchisees and franchisors, you need open communication about which trends you’re taking advantage of to avoid a disconnect between on-the-ground realities and enterprise-level data.
Franchising Industry Analysis And Statistics
Stay at the forefront of your industry by keeping tabs on these four franchise trends:
1. Franchise Market Share Is Substantial
The International Franchise Association’s 2022 Franchising Economic Outlook recorded 753,770 franchise establishments doing business in the United States in 2020, a 50% increase from 2017. After a decrease in franchise companies in the wake of the COVID-19 pandemic, franchise growth is expected to grow consistently in 2022 and beyond.
Franchise market share varies widely by industry. So which industries are most likely to franchise? Below, we listed the franchise-owned share by market (U.S. Census Bureau, 2017 Economic Census Franchise Statistics Report):
- New car dealers: 100%
- Private mail centers: 67.5%
- Hotels (except casino hotels) and motels: 57.9%
- Limited-service restaurants: 57.3%
- Automotive oil change and lubrication shops: 55.5%
- Diet and weight-reducing centers: 49.8%
- Soft drink manufacturing: 47.7%
- Electronics stores: 47.6%
- Other specialty food stores: 37.5%
- Exam preparation and tutoring: 37.1%
You can take two approaches: trending franchise markets may be crowded with competition, but they also prove that franchising that industry works. If you choose to franchise in an industry with a smaller market share, you’ll have fewer franchises to compete with, but may lose out to more established small businesses or non-franchised corporations.
2. Pandemic Recovery Will Be Strong for Franchises
There’s no doubt that the franchise industry has been impacted by the COVID pandemic. From 2016 to 2019, annual average franchise employment growth approached 3%. Franchise employment declined by a whopping 11.2% in 2020, shedding almost a million jobs due to limited business capacity and lost revenue. The number of franchise establishments also declined by 2.6% in 2020.
The good news is that while future franchise trends will be guided by the pandemic for a few years, we’ve already seen growth. The International Franchise Association estimates the industry added more than 21,000 locations and over 660,000 new jobs nationwide by the end of 2021. The year-over-year increase in franchise establishments in 2021 is projected at 2.8%. According to Entrepreneur, commercial cleaning, home improvement, and lifestyle brands are among the current top industries driving this growth.
3. Franchises Still Fare Better than Independent Businesses
The survival rate for new businesses is often surprising for many new entrepreneurs. According to the SBA Office of Advocacy, approximately half of all new businesses last for five years or more. Only about a third of new establishments survive for 10 years or more. The new-business survival rate, however, did improve in the few years prior to the COVID-19 pandemic.
Having the support of expert franchisors and a network of experienced franchise-owner peers seems to have a positive impact on business success and longevity. Franchise digital marketing can piggyback off national brand awareness and trust, leaving more room to spend marketing and advertising money on specific initiatives. For franchises, the two-year success rate is eight percent higher than the success rate of independently owned new businesses. The one-year success rate for new franchises is 6.3% higher than for independent companies.
4. A Shift Toward Franchise Digital Marketing Initiatives
Nearly half of franchise professionals think traditional marketing methods like advertising, direct marketing, and public relations are no longer worth their time or money. Building digital marketing channels is no longer a vanity project – without optimized local listings, social media accounts, and websites, a franchise system is virtually destined to sink.
And while the need for a digital strategy is proven, many franchisees still feel lost in digital marketing. Franchisors traditionally provide basic digital marketing support and resources to franchise owners, but a 2016 BIA/Kelsey survey revealed that 33% of franchisees feel they need more training in digital advertising. The survey also showed that the average franchise owner uses up to 20 advertising or marketing channels. A complicated approach like this is difficult to execute.
The good news is, Oneupweb created guides to make franchise marketing easier:
- If you’re a franchisee in need of more guidance, check out our Franchise Owners’ Digital Marketing Playbook for help.
- If you’re a franchisor wanting to improve your system-wide marketing, read our original Franchise Marketing Playbook.
Strengthen Your Franchise with Smart Marketing
A strong marketing strategy keeps your business competitive and growing. It can be difficult to manage it all with a small, in-house marketing team. Call Oneupweb at (231) 922-9977 or reach out to us online to discuss a new digital marketing strategy for your franchise business – at a national, regional or local level.