By Huaiyi Jiang, FRANdata

The business services industry encompasses a broad range of sectors, including professional services such as accounting, consulting, and legal solutions, as well as personnel management, printing and publications, security services, and operational support like logistics, telecommunications, and storage. The largest sectors in the business services industry are Advertising and Promotions (10% of franchised brands) and Full-time/Temporary Personnel (8.0%). This diversity highlights the industry’s crucial role in supporting companies as they navigate essential operational challenges.

AI, Digital Ads, and Post-Pandemic Shifts Drive Industry Growth

In 2024, the business services industry experienced steady growth, supported by factors such as increased outsourcing, technological advancements, and evolving market demands.

• Rise of Automation and AI: Companies are embracing AI-powered tools such as recruitment platforms, predictive analytics, and automated payroll systems to enhance efficiency and reduce costs. These technologies are transforming traditional operations for franchises that provide staffing, accounting and tax services, etc.

• Shift Toward Digital Advertising: Digital channels now account for over 68% of U.S. ad spending, signaling a significant evolution in the advertising and promotions sector. Franchises in this space are leveraging innovative strategies to deliver personalized campaigns, aligning with the growing demand for measurable results and ROI. These efforts include integrating advanced targeting methods, optimizing multi-channel approaches, and focusing on customer engagement to drive success.
• Post-Pandemic Transformation: The pandemic led to notable changes in workforce dynamics, consumer behavior, and business operations. As a result, companies are increasingly relying on professional services—such as financial consulting, IT support, and compliance management—to address these evolving challenges and adjust to the new business landscape.

These drivers have directly contributed to the industry’s improving performance, as reflected in the following analysis.

Modest Growth in Units, Strong Revenue Gains Driven by AI and Evolving Market Demands

According to FRANdata, the number of franchised establishments grew modestly, increasing from 37,955 in 2019 to 40,031 in 2023, at a CAGR of 1.3%. In 2023, the business services industry achieved an average unit revenue of $960,704, representing a compound annual growth rate (CAGR) of 5.2% from $826,288 in 2020. While revenues peaked at $1,054,659 in 2022, a slight decline occurred in 2023. These figures highlighted the sector’s resilience and ability to adapt to changing business needs and economic conditions.

The total number of franchise establishments showed an increasing trend from 2019 to 2023. (Source: FRANdata)

Average Unit Revenue steadily increased from 2020 to 2022 before declining in 2023. (Source: FRANdata)

More specifically, the personnel services segment generated $3.2 million in average unit revenue in 2023, with a CAGR of 4.5% from 2020, making it the largest contributor to industry revenue growth. Some sub-sectors, such as Full-Time/Temporary Personnel Services, have seen growth due to labor shortages and the increasing need for businesses to adopt more flexible workforce solutions to address difficulties in finding qualified labor. What’s worth noting is that, with rising labor costs, staffing companies are turning to AI-powered recruitment platforms to cut costs and improve hiring efficiency, while also diversifying into areas like workforce training, compliance management, and employee wellness to expand market opportunities.

Franchises in the advertising and promotions segment have also shown greater growth compared to others, with average unit revenue reaching $442,756 in 2023, growing at a steady CAGR of 11.4% since 2020.

With a 22.4% CAGR in average unit revenue for the accounting and financial sector, and a 26.2% CAGR in average unit revenue growth for the information, payroll, and research services sector, these trends reflect businesses’ increasing reliance on outsourced financial expertise.

Emerging Trends Shaping the Industry

There are also emerging trends that are likely to transform the business services landscape:

• Sustainability as a Strategic Focus: Franchises are offering eco-friendly solutions and operational strategies to help businesses align with environmental regulations and consumer expectations. For example, packaging and shipping brands like Navis Pack & Ship and Pak Mail offer eco-friendly solutions, including biodegradable or reusable packaging materials. Meanwhile, Postal Connections and PackageHub Business Center emphasize waste reduction by promoting digital documents and reusable office supplies.
• Franchises are increasingly adding 3D printing options to streamline on-demand production. For example, The UPS Store has integrated 3D printing to enable faster turnaround times for custom orders.
• Subscription-based pricing models have become more common for franchises in the business services industry, offering clients predictable costs and ongoing access to services. This trend is particularly evident in IT support, payroll management, and marketing solutions. Recurring revenue streams not only provide flexibility and scalability for businesses, but also ensure stable and reliable income for service providers, making it a win-win approach in a competitive market.

As companies are still facing rising operational costs and persistent labor shortages, many businesses now rely on temporary staffing companies for outsourced HR solutions, which have increased competition among franchises that offer such services. Additionally, AI-powered solutions have reduced the demand for traditional services, such as tax services. Franchises that fail to invest in new technology or adapt their offerings risk losing market share in this competitive environment.

In the coming years, the business services industry is expected to see significant growth in cybersecurity services as businesses prioritize data protection and digital security. The rise of remote and hybrid work will also increase demand for virtual workforce support, including remote onboarding and collaboration tools. Additionally, franchises offering employee wellness programs and mental health solutions will gain traction as businesses prioritize work-life balance. Blockchain technology is poised to transform sectors like logistics and accounting by enhancing transparency and efficiency, while the push for sustainability will create opportunities for green logistics services, such as carbon-neutral shipping and eco-friendly packaging.

Huaiyi Jiang is a credit analyst at FRANdata. For more information about IFA supplier member FRANdata, please visit franchise.org/suppliers/frandata.