A Look Back: How Franchises Fared in 2021
2021 was an economic bounce back year for franchises despite the negative impacts of the COVID-19 pandemic on businesses in 2020, setting the stage for some very positive franchise industry outlooks in 2022 (link to the previous blog). In this post, we’re going to review what factors made 2021 a turnaround year for franchises and look at some of the data highlighted in The International Franchise Association (IFA)’s recently released 2022 Franchising Economic Outlook.
Which Franchises grew in 2021?
The U.S. economy is extremely resilient. Overall business start-up activity showed a strong increase in 2021, growing by 23.5% to 383,350 new businesses (a rate three times faster than 2020’s 7.7% growth). These new start-ups mostly came from the personal, professional, and food service industries. 2021 also saw strong franchise investment activity as well due to pent-up demand, favorable economic conditions, and higher vaccination rates supporting returns to work: business investment hit USD $3 trillion in Q3 of 2021 alone, and the number of franchised establishments grew by nearly 3 percent.
How Did Franchise Hiring and Wages Change in 2021?
With both franchise start-ups and investing on the rise, so too was job creation and economic growth.
Total compensation received by franchise employees increased by an average of 9.2% in 2021 compared to 2020. Average hourly earnings increased by 4.7% in 2021, a trend that is expected to continue in 2022.
The growth in pay and businesses led to the hiring of 8.2 million franchise employees in 2021, helping lower unemployment to 3.9% in from 6.7% in 2020. By year’s end, 8.8 percent more people were employed by franchises than in 2020.
Which Franchise Industries Prospered in 2021?
Across every sector, franchises were a significant engine powering the 2021 economic recovery and job market. IFA partner FRANdata studied franchises across eight industries and found that they were able to achieve business expansion in 2021 thanks to a strong labor market, increased consumer spending, government stimulus, and eased monetary policy.
But these headwinds aren’t the only things that make for a successful franchise. Here are a few of the tactics that successful franchises in these industries used to grow in a difficult environment:
Business Services Franchises
The business services industry consists of sub-industries that contribute to the operations of a business such as mailing, packing, staffing, shipping, broker services, advertising, accounting and payroll services. Business services were able to grow in 2021 by:
Adopting advanced technology for operational efficiency
Being in the right place at the right time for organizations struggling with remote IT, advertising, accounting, payroll and personnel services
Commercial and Residential Services Franchises
The commercial and residential services industry consists of sub-industries that operate in commercial and residential spaces, such as junk removal, janitorial services, and landscaping. These franchises were able to grow in 2021 due to:
Increasing vaccination rates led to greater usage of hospitality, retail and recreation facilities
Strong demand for renovations and construction in both the commercial and residential markets
Real Estate Franchises
The real estate industry consists of the management, buying and selling of commercial and residential properties such as property management franchises. Real Estate franchises were able to grow in 2021 thanks to several factors:
A continued boom in remote work led to more people looking for larger housing
Low mortgage rates
A strong labor market and household balance sheets
The lodging industry consists of sub-industries that provide temporary living accommodations such as hotels, resorts, and cruises. These franchises grew in 2021 thanks to:
Pent-up leisure demand combined with elevated consumer savings
Fiscal stimulus that allowed them to continue some level of operation
Retail Food, Products and Services Franchises
The retail food, products and services industry consist of categories providing consumers with goods or services such as grocery stores, clothing stores, and car washes. These franchises were able to grow thanks to:
Major investments in digital and supply chain improvements
The popularity of ship-from-store, buy online, and curbside or store pick up purchase options
Personal Services Franchises
Personal services franchises consist of self-improvement businesses provided directly to consumers, such as gym memberships, education centers, and healthcare centers. These franchises were hit especially hard in 2020, but recovered thanks to a number of virtual innovations such as:
Live and on-demand virtual classes, personal training, and small group training sessions for fitness studios
Telemedicine for healthcare centers
Online classes for education centers
Virtual entertainment programs, podcasts and video shows offered by wellness studios
Quick and Full-Service Restaurant Franchises
The quick and full-service restaurants industry consists of both fast-food restaurants as well as dine-in restaurants. These franchises were able to grow thanks to:
Broader distribution of digital menus and table-ordering options for customers.
Changing restaurant layouts for operational efficiency due to the changing business model.
More advanced technology and digital solutions, such as touchless payment systems, contactless in-store ordering options and using AI systems for drive-thru orders.
If you’re considering a franchise investment, there’s never been a better time to purchase a franchise. You can learn more about available franchises on our franchise opportunity search page.