By Danny Klein
QSR Magazine

In what’s been a common theme through economic headwinds, the franchising sector in 2024 outperformed expectations for the second straight year, according to the International Franchise Association’s annual Franchising Economic Outlook Report, released this week. On top of 2.2 percent expansion in 2024, which topped a 1.9 percent projection, the data forecasts franchises to grow an addition 2.4 percent this year—a faster clip than the 1.9 percent estimated for the broader economy by the Congressional Budget Office.

In that view, the personal services and retail food, products, and services sectors were marked to lead growth in establishments, by 4.3 and 3.5 percent, respectively.

Quick-service restaurant outlets are expected to rise by 2.2 percent. Lower inflation and stabilizing interest rates, the IFA, should boost consumer confidence and discretionary spending. Increased return-to-office efforts will help traffic as well, namely at breakfast and lunch. That growth would bring the QSR franchise sector north of 204,000 units. Employment is also projected to hike 2.6 percent, surpassing 4 million. Additionally, overall industry output, the report outlined, will rise 5.4 percent, increasing from $305.3 billion in 2024 to $321.8 billion in 2025.

The franchised full-service sector is headed for 2.4 percent growth, which would take it to about $81.9 billion. Establishments in the sit-down arena are projected to expand by 1.3 percent, eclipsing 34,500 jobs, and contributing nearly 16,100 jobs.

As the report pointed out, 2024’s result arrived despite persistent inflation and heightened operational costs. Same-store sales and customer traffic were consistently lower during the first nine months of the year compared to the same period in 2023 (National Restaurant Association data). Financial distress led to a 50 percent increase in bankruptcy filings over 2023 levels. The response—more promotions, value, and efforts to retrench with price-sensitive customers.

Yet 2025, once operators leave January’s weather challenges behind, offers some promise of optimism on, as noted, lower inflation and settling interest rates. Customers could open their wallets in a loosened-up climate and return to past dining patterns as they start heading into offices again. Reduced borrowing costs, the IFA added, will encourage franchisors to expand systems by taking advantage of more affordable financing options.

“Although consumer spending is expected to remain strong, diners are anticipated to become more selective, focusing on the perceived value and personalization of their dining experiences rather than merely seeking discounted prices,” the IFA said.

That lines up well for quick-service and fast-casual brands that offer superior quality-to-price ratios. The IFA expects counter service to outperform in response, “maintaining their appeal to cost-conscious consumers.”

Meanwhile, expect full-service brands to continue diversifying revenue streams through efforts like catering and merchandising.

With takeout and digital ordering representing a significant revenue block, restaurants are expected to adopt company-owned, AI-powered predictive ordering platforms and delivery systems to decrease reliance on costly third-party vendors, the IFA said. The implementation of voice automation in drive-thru ordering and robotic assistance in kitchen operations is anticipated to improve efficiency, reduce labor demands, and enhance consistency as well.

The IFA added more than 70 percent of consumers consider sustainability to be an important factor in their dining choices (National Restaurant Association study). So nutritional and health-focused foods, from plant-based to protein-rich, could find real estate on more menus across both aisles. Also, increased transparency in ingredient sourcing and dietary choices.

“Restaurants investing in eco-friendly practices are likely to benefit from stronger customer loyalty, cost savings through waste reduction, and better supply chain optimization,” the report said.

Elevated food prices—up 29 percent since 2019, per the U.S. Department of Agriculture’s Consumer Price Index—and increasing labor costs pushed by minimum wage hikes in 21 states, will press on profit margins as they always do.

Here’s a look at how franchise establishments have tracked in recent years:

2018

  • Quick-service restaurants: 194,395
  • Full-service restaurants: 32,843

2019

  • Quick-service restaurants: 196,794
  • Full-service restaurants: 33,160

2020

  • Quick-service restaurants: 183,543
  • Full-service restaurants: 31,004

2021

  • Quick-service restaurants: 188,402
  • Full-service restaurants: 32,027

2022

  • Quick-service restaurants: 191,605
  • Full-service restaurants: 32,901

2023

  • Quick-service restaurants: 195,245
  • Full-service restaurants: 33,675

2024 (estimate)

  • Quick-service restaurants: 199,931
  • Full-service restaurants: 34,113

2025 (projection)

  • Quick-service restaurants: 204,366
  • Full-service restaurants: 34,557

The wider output picture:

2018

  • Quick-service restaurants: $256.6 (billion)
  • Full-service restaurants: $73

2019

  • Quick-service restaurants: $267.9
  • Full-service restaurants: $76.5

2020

  • Quick-service restaurants: $241
  • Full-service restaurants: $55.1

2021

  • Quick-service restaurants: $261.2
  • Full-service restaurants: $72.8

2022

  • Quick-service restaurants: $275.1
  • Full-service restaurants: $76.4

2023:

  • Quick-service restaurants: $290.8
  • Full-service restaurants: $78.3

2024 (estimate):

  • Quick-service restaurants: $305.3
  • Full-service restaurants: $80.0

2024 (projection):

  • Quick-service restaurants: $321.8
  • Full-service restaurants: $81.9

The top 10 states for franchise growth in 2025:

  • 1. Georgia
  • 2. North Carolina
  • 3. Virginia
  • 4. Arizona
  • 5. South Carolina
  • 6. Pennsylvania
  • 7. Tennessee
  • 8. Florida
  • 9. Colorado
  • 10. Maryland

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