The impact of franchising in the U.S. economy continues to grow, as supported by a recent study conducted by PricewaterhouseCoopers for the International Franchise Association.  Released in mid-March 2008 and based upon data collected through December 2005, several key findings of the study include:

  •  Franchising accounts for approximately 21 million jobs in the U.S. economy, or 15.3% of all domestic, private-sector jobs.
  •  There are over 900,000 franchised business establishments operating across the U.S.
  •  Franchised businesses in the U.S. generate $2.3 billion of annual output, or 11.4% of all private-sector output in the U.S. economy.

Locally, the study estimates there are approximately 26,000 franchised businesses operating in Virginia, employing over 625,000 people and generating $69.45 million.

In the Richmond metropolitan area, the franchising presence is estimated as follows:

  •  In the 3rd Congressional District (including the city of Richmond and all or portions of Henrico, New Kent, and Prince George Counties), there are more than 4,400 franchised businesses responsible for more than 81,000 jobs and $7 million in annual output.
  •  In the 7th Congressional District (including all or portions of Henrico, Goochland, Hanover, Chesterfield, Louisa, Spotsylvania, and Orange Counties), there are approximately 3,900 franchised businesses responsible for more than 68,400 jobs and $6 million in annual output.

As local evidence of the growing popularity and acceptance of franchising, nearly 1,000 people attended the recent Central Virginia Franchise & Financing Expo on March 1-2, 2008 at the Greater Richmond Convention Center.  Eric Perkins, a franchise attorney in Richmond, Virginia, believes that franchising’s impact will only continue to grow.  “The statistics speak for themselves.  Franchising has consistently and steadily grown over the past 25 years and there is no indication that franchising is losing any momentum,” says Perkins, who works with both franchisors and franchisees.

For people wanting to transition away from the corporate world and go into business for themselves, franchising can offer some attractive benefits—an established business system, professional training and assistance, and instant name recognition, among others.  Perkins cautions, however, that franchising is not for everyone and careful research must be done before investing in a franchised business.  “Next to the contract of marriage you enter into with your spouse, signing a franchise agreement is likely the most important contract you will ever sign,” suggests Perkins.  “Prospective franchisees should carefully study the franchise documents until they understand exactly what they are signing and/or seek professional assistance before moving forward.”

Similarly, for businesses exploring efficient ways to grow their business, franchising offers many advantages, with potential for rapid growth at a reduced cost perhaps being the most obvious, but traps for the unwary exist that can lead a company to financial ruin.  “Many business owners fail to fully understand the unique nature of the franchise relationship and what it takes to get a franchise program off the ground,” observes Perkins.  “Structuring and implementing a successful franchise system requires careful planning and a long-term commitment and investment of resources.”

The influence of franchising extends well beyond the franchisor-franchisee relationship.  For commercial real estate developers and landlords, the popularity and stability of franchised businesses can translate into lower vacancy rates and higher traffic counts at their shopping centers.  As suggested by the statistics above, franchised businesses should be welcomed with open arms by local government officials for the positive economic impact they can bring to a region.