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Franchise Growth Rates to Remain Constant Throughout Second Part of the Year

Jun 12, 2013 12:56 PM EDT | By Staff Reporter
A tax return form
A tax return form(Photo : Creative Commons)

The franchise sector is expected to continue on an upward swing  and grow at a slightly faster rate than other businesses, but the rate of growth remains unchanged from the 1st quarter 2013 forecast, according to IFA's 2nd quarter update to The Economic Outlook for Franchise Businesses report 

The report, prepared by IHS Global Insight for the IFA Educational Foundation, found that comprehensive tax reform would accelerate growth rates moving forward.

"Franchise growth continues to outpace other sectors of the economy as franchising remains the fastest way to grow and scale a business, despite the still uneven economic recovery and the onerous public policy environment facing our members and the small business community," said IFA President & CEO Steve Caldeira in a statement. "We are concerned the headwinds facing the industry continue to hold back franchise development and job creation from its full potential."

Caldeira said that the intricacy of the tax code creates an uneven playing field for the subchapter S-corporations and LLCs, which make up the lion's share of the franchise  industry, who may pay a higher effective tax rate than larger businesses paying taxes under the corporate code.  

"Congress should address the challenges small businesses face with the current tax code in a comprehensive manner, not in a piecemeal approach, and commit to reforming both the corporate and individual codes as swiftly as possible," he said.

According to the forecast:

  • The number of franchise establishments in the United States will increase by 1.5 percent in 2013.
  • The number of jobs in franchise establishments will increase 2.0 percent in 2013, following a gain of 2.2 percent in 2012.
  • The output of franchise establishments in nominal dollars in 2013 will increase 4.3 percent, following a 4.9 percent increase in 2012.
  • The gross domestic product (GDP) of the franchise sector is projected to increase to $472 billion in 2013. This is approximately 3.4 percent of U.S. GDP in nominal dollars.

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