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.
Franchise Industry Analysis
To stay at the forefront of your industry and local market, examine these four franchise trends:
1. Franchise Market Share Is Substantial
The U.S. Small Business Administration reported in 2016 that franchises accounted for 5.3% of small employers and 9.6% of large employers in the United States. FRANdata reports that the North American franchise industry includes approximately 420,000 franchise units and has demonstrated consistent growth for the past decade.
Franchise market share varies widely by industry. Below, we listed the franchise-owned share by market (U.S. Census Bureau, 2012):
- Optical goods: 93%
- Private mail centers: 63%
- Fast-food restaurants: 54%
- Diet/weight-loss centers: 53%
- Used car dealerships: 3%
- Warehousing and storage businesses: <0.01%
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%. During 2020, franchise employment declined by a whopping 11.2%, 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 the franchise industry is expected to add more than 26,000 locations and nearly 800,000 new jobs nationwide by the end of 2021. The year-over-year increase in franchise establishments in 2021 is projected to reach 3.5%. According to Entrepreneur, this growth will be driven by the fast food, commercial cleaning and fitness industries.
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. 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. 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 Digital Marketing for Franchise Businesses
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 when it comes to 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.