Franchising Provides Over 10% of US Workforce

September 15th, 2010 Posted by Jan Norman, small-business columnist

More than one in every 10 (10.5%) U.S. businesses that have employees is a franchise, reports the U.S. Census Bureau, based on the latest Economic Census data. This is the first time the Economic Census has gathered comprehensive data about franchising, which is a way of doing business whereby a successful company contracts with independent owners to use a trade name and method of operations in exchange for a fee and usually ongoing royalties.

Some of the world’s best known brands are franchises, including Subway sandwich shops, 7-Eleven convenience stores and H&R Block tax preparation. Among the franchising companies based in Orange County are Taco Bell in Irvine, AM/PM Mini Markets in La Palma, Budget Blinds in Orange and Aussie Pet Mobile in Dana Point.

According to the Economic Census: Franchises have total annual sales of $1.3 trillion; Franchised firms employ 7.9 million workers; Franchised firms have total payrolls of $153.7 billion; New car dealers were the top franchises in sales, $687.7 billion, followed by gas stations with convenience stores and fast-food restaurants; Fast-food restaurants have the most franchise establishments, 124,898; Franchises dominate some industries: 100% of new car dealers are franchises, 74.4% of fast food restaurants are franchises; 62.7% of diet and weight loss centers are franchises.

However, the Economic Census collected its data in 2007, and franchises like every other aspect of the economy have been hit by the recession. It is likely, for example, that many of franchisees counted for the construction industry three years ago are now out of business.

The International Franchise Association and PricewaterhouseCoopers have done two economic impact studies of the franchise industry. In December, that report indicated that franchising in general had lost 409,000 businesses and $5.7 billion in 2009. The same report forecast a recovery in 2010, but actual economic activity for 2010 won’t be reported until the IFA convention in February 2011.

Tom Mesenbourg, deputy director of the Census Bureau said, “The understanding we gain from these statistics about what impact franchise businesses have on the U.S. economy is a good example of how government and business can partner to provide relevant quality data to the business community.”
IFA Chairman Ken Walker said, “Franchising plays a vital role in our nation’s economy and drives new job creation. This 2007 Economic Census Franchise Report will provide valuable data for the IFA’s third edition of the Economic Impact of Franchised Businesses, conducted by PricewaterhouseCoopers.
The inclusion of franchising questions in the 2007 Economic Census came from cooperation between the Census Bureau and IFA, the trade organization said.

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