IFA releases 2022 Franchising Economic Outlook

February 24, 2022

Blog Post

On February 15, 2022, the International Franchise Association released its 2022 Franchising Economic Outlook. The 2022 Franchising Economic Outlook is the IFA’s annual study detailing the franchise sector’s performance for the past year and projected economic outlook for the year ahead, as well as an in-depth state outlook for all 50 states and Washington, D.C.

Key highlights from the 2022 report include:

Following 2020 shutdowns, output for franchises rebounded by over 16% in 2021, reaching nearly $788 billion in output.
Franchise growth is expected to stabilize in 2022, expanding by 2.2% to reach a total of 792,014 franchise establishments, 17,000 more than in 2021.
Franchises’ GDP contribution to the overall economy will remain stable at 3% in 2022, but the growth rate is likely to slow to 5.7%, still higher than the pre-pandemic level.
In 2021, franchise employment increased by 8.8%—adding over 46,000 jobs per month. Franchise employment is forecasted to grow at a slightly lower rate of 3.1% to a total of 8.5 million jobs, back to the pre-pandemic level, a net gain of up to 300,000 jobs.
Franchised establishments in the Personal Services sector are predicted to lead the growth in 2022, followed by Commercial & Residential Services.
58.1% of franchise employment will be in the Quick Service Restaurant (45.1%) and Table/Full Service Restaurants (13.05) sectors.

On the state and regional level, the report shows that states have experienced different rates of economic recovery due to disparities in business climates, migration trends, and changes in consumer preferences.

On the state level, it is predicted that:

States in the West and South will experience the fastest upward trajectory of franchise business growth in 2022.
The Southeast region, which has the largest franchise concentration in the U.S., will have an estimated 231,500 total establishments by 2022, employing 2.6 million workers and contributing $235.9 billion in output to the U.S. economy.
The top 10 states for franchise growth in 2022 are projected to be: Texas, Florida, Arizona, South Carolina, Idaho, Tennessee, North Carolina, Utah, Montana, and Nebraska.
Ohio is projected to have:
- A franchise growth rate of 2.25% in 2022 with over 30,000 franchise establishments.
- Franchise employment growth rate of 3.1% in 2022.
- Franchise revenue growth rate of 4.9% in 2022.

The franchise industry will continue to face headwinds in 2022 relating to increased commodity costs, automation and technology expenses, rising inflation, interest rate increases, wage inflation, and labor shortages. In addition, the projections are subject to divergent economic recovery patterns and changes in discretionary consumer spending preferences.

This decision only adds to to the growing circuit split on the application of the “hypothetical test” or the “actual test” in bankruptcy, and may lead a higher court to consider the issue. For franchisees in the Sixth Circuit who desire to reorganize in bankruptcy, however, this decision provides clarity about which test parties may use to determine if a contract could be assumed.

This ruling reveals the limits to the rejection power of the Bankruptcy Code. While a bankrupt franchisee can use bankruptcy to unburden itself of future monetary liabilities due to a franchisor, such franchisee cannot completely rid itself of those bargained-for equitable remedies that are there to protect the integrity of the brand and the confidential, proprietary information that the franchise arrangement is designed to protect.

IFA releases 2022 Franchising Economic Outlook

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