One in Ten Employers a Franchise
WASHINGTON — Franchise businesses account for a whopping ten and a half percent of America's employers, according to a new survey of 4.3 million establishments surveyed by the U.S. Census Bureau.
In data collected for 2007, 453,326 businesses with paid employees in 295 industries had ties to franchising. They were either franchised or company-owned by a franchisor. Franchise businesses accounted for $1.3 trillion of the $7.7 trillion in total sales for all of the surveyed industries. That's almost 17 percent.
Years ago the Census Bureau did franchise surveys, but these were limited franchise questions for only fast food and full service restaurants. The 2007 report is the first comprehensive survey by the Bureau.
"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," said Tom Mesenbourg, Deputy Director of the U.S. Census Bureau.
In a phone interview with Blue MauMau, Mr. Mesenbourg's office said that the IFA, and really no other franchise trade association, had requested a survey for years.
Ms. Francine Lafontaine, a professor of business economics and public policy at the University of Michigan's Ross School of Business, observes: "The IFA has done the industry a great favor by supporting the development of these data."
Ken Walker, this year's chairman of the International Franchise Association, states, "This new report represents the first comprehensive 'census of franchising' by the government and demonstrates that franchise businesses provide many options for entrepreneurs who may be considering starting a franchise business." Walker, who is also the chairman and CEO of the franchising firm Driven Brands, gives a tip of the hat to the federal government, saying, "We appreciate the efforts by the Census Bureau to collect and make this data available."
But Professor Lafontaine thinks that there is a limitation in the collected information. "The data include only employers. This is a limitation given that franchising occurs in some industries where people (franchisees) may work alone. But for most industries, I suspect this is not much of a problem. And in any case, these data tell us how franchising impacts others besides franchisees as they tell us how many businesses that employ people are operated by franchisees and franchisors. Still, the estimates generated should be viewed as lower bounds on the importance of franchising in the surveyed industries, and overall in the economy."
Among franchise businesses, 77.4 percent of the establishments were franchisee owned, accounting for $1.1 trillion in sales, $125.1 billion in annual payroll and employing nearly 6.3 million workers. Franchisor-owned businesses made up 22.6 percent of franchise businesses, with $210.4 billion in sales, $28.6 billion in annual payroll and 1.6 million workers.
New car dealers (100 percent) and private mail centers (67.9 percent) had the highest percentage of franchise establishments. New car dealers also led in sales for franchise establishments ($687.7 billion), followed by gas stations with convenience stores ($131.1 billion).
Lafontaine says that the survey's highlights do not really surprise her. "They confirm many of the patterns and the order of magnitudes I have had on my mind. But it is great to have these hard data to point to, and I very much look forward to future installments of these data so we can begin to really track the success of franchising over time in different industries."
The IFA plans to use the tax-paid 2007 Census report by having consultant, research and accounting firm PriceWaterhouseCoopers use the data in its own report in February, 2011, which the IFA commissioned. It will estimate the indirect impact of products and services that franchises purchase from other businesses. These numbers will include measurements of both GDP (Gross Domestic Product) and economic output by line of business, and by state and congressional district. It will be a metric to show congressional leaders how important franchising is, and nudge the International Franchise Association in a better position as the lobbying force for franchisors — and for franchisees, when they agree with franchisors.
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