Hope Incoming? A Look at What’s Ahead for the Franchise Industry

Soaring inflation. Historic labor shortages. Pandemic-fueled angst — just a few of the challenges facing the franchise industry in 2022. Luckily, the industry has a steady hand helping guide it through the storm: Matthew Haller, president of the International Franchise Association (IFA).

In a May 12 interview with SmartBrief.com, Haller touched on various topics affecting the franchising industry, including the soaring inflation rate. But his top concern, he said, is the historic labor shortages arising from the “Great Resignation” (the pandemic-era trend that’s seeing U.S. workers resign from their roles en masse).

“The labor scarcity has experienced an important effect on the franchising sector,” said Haller. “Currently, four out of five franchise programs are going through a labor lack and impacted advancement as an end result, and the availability of skilled labor is an even larger obstacle.”

But Haller also noted a positive trend emerging from the Great Resignation — a massive upswing in franchise sales. Call it the “great reimagination,” he said.

“Across the country, people are looking at their 9-to-5 job and realizing they want the independence and self-management that opening their own business offers,” he said. “Still, they may be concerned about a lack of brand recognition or feel they don’t know enough about corporate property's nuts and bolts. While not all franchises are created equal in terms of the type and quality of support they provide their franchisees, the franchise model generally addresses these concerns by offering a partnership with a brand, plus training and support in exchange for initial and ongoing fees.”

As for the other challenges facing the industry, Haller said the IFA is working tirelessly to help businesses navigate the headwinds. After all, challenges are nothing new to him.

When he took over as president and CEO in 2021, the organization was still reeling from its most challenging year to date. The pandemic had dealt an unprecedented gut punch to the industry: More than 40,000 franchise businesses had closed in 2020, and more than 1.5 million jobs were lost.

Fast forward to now, and things are looking a lot better. Fueled by solid consumer spending, the franchise industry helped lead the U.S. economic recovery, with franchise establishments increasing by nearly 3% and employment increasing by 8.8%.

As for what sectors are poised for expansion in 2022 and beyond, Haller offered some interesting insights.

“Every sector of the industry is poised for growth in 2022, which is great news for entrepreneurs and employees,” he said. “In terms of economic output, we expect the personal services sector — gyms, movie theaters, hair salons, and more — to see the most impressive growth at a 10.5% increase over 2021.

“As Americans pick up their travel itineraries again, we expect the lodging sector to increase their employment by nearly 7% over 2021,” he added. “Additionally, with the housing market hot and many companies returning to offices, we expect the commercial and residential services sector to continue to expand the number of establishments by almost 3%, compared to average growth of 2.2% across all industries.”

“There will also be regional differences,” he concluded, “and we foresee that the states with the most franchise growth in 2022 will be in the Mountain West and the Southeast, with Texas, Florida, and Arizona rounding out the top three.”