By Matthew Liedke
FranchiseTimes

Franchise businesses have the potential to cross a major milestone this year thanks to a strong economic forecast.

A new report from the International Franchise Association, produced in partnership with Frandata, projects an economic output from franchised companies in the United States to exceed $936.4 billion this year. That crosses the $900 billion benchmark, as 2024’s economic output from franchising totaled $896.9 billion.

The numbers were released in the IFA’s annual Franchising Economic Outlook, which included final statistics for 2024 and expectations for the years ahead. The IFA reported there were 830,876 franchised establishments that have created 8.8 million direct jobs.

Contributing to the strong numbers for franchising was robust consumer spending, as well as moderate improvements in the labor market. For the year ahead, growth is expected to continue as the number of establishments is projected to increase by about 20,000 to 851,402.

Employment is expected to stay on an upward trend, as the report projects another 213,000 jobs to be added, pushing the total above 9 million in 2025.

The anticipated growth is driven by “a combination of favorable economic conditions, changing consumer preferences and supportive economic policies,” according to the study. Specifically, it notes ongoing efforts to stabilize interest rates and inflation, creating a more predictable business environment, “encouraging investment and expansion within the franchising sector.”

Though the report did warn for possible pressures from tariffs and geopolitical tensions.

As a whole, personal services brands are expected to have a particularly good year. The number of establishments is predicted to rise by 4.3 percent to 132,045, and the number of jobs is set to increase by 3.8 percent to 625,158. By economic output, the category is expected to increase by 7.5 percent to $48.7 billion.

All projected increases surpass other categories in the report, which states the growth is aided by “expansion of established brands, as well as the emergence of new brands catering to niche markets.”

The QSR sector, meanwhile, is expected to have 2.2 percent growth in the number of establishments, reaching 204,366, and a 5.4 percent jump in economic output, coming to $321.8 billion, while employment is set to cross 4 million, up from 3.94 million in 2024.

Last year started slower for QSR brands because of persistent inflation and higher operating costs, the report found. However, there was more success later in the year as brands began using promotional strategies and releasing value options.

For 2025, consumer confidence and discretionary spending is expected to improve, though the report sees diners being more selective. Per the study, customers will likely be focused on the perceived value and personalization of their dining experience, rather than seeking only discounted prices, meaning QSRs offering superior quality-to-price ratios will outperform others.

The real estate category, meanwhile, is expected to see more modest growth. The number of establishments is projected to increase by just 0.7 percent from 69,290 to 69,775, and economic output for real estate is set to rise by 3 percent to $66.1 billion.

In 2024, the sector struggled as high mortgage rates deterred home sellers, while a lower supply of existing homes drove up prices. In 2025, mortgage rates are predicted to remain above 6 percent, and interest rates are expected to decline marginally.

Home price growth is likely to stabilize, though, thanks to an increase in the availability of newly constructed homes, ultimately improving affordability. The report therefore sees a slow yet steady recovery for franchised brokerages and franchised home inspection services.

Regionally, southern states are on track to have the most success, as the top 10 listed for franchise growth for the year included Arizona, Colorado, Florida, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee and Virginia. Of those states, Georgia is expected to have the most growth, with a 2025 economic output of $37.4 billion.