Stock market data shows the durability of franchise companies
Franchise companies have been powerful job creators for the American economy for decades, so it’s no surprise that franchise companies are thriving as the economy begins to rebound.
A new report by franchise industry analyst FRANdata shows just how important franchises have been during and after the recession. According to the company’s FRANdex, the top 50 publicly traded franchise companies saw their stocks rise 17 percent in the first quarter of 2012, compared to 12 percent for the S&P 500.
A longer-term view provides an even more impressive picture: Since the third quarter of 2008 — as the nation’s financial crisis was at its peak and the recession was entering its worst months — the franchise industry has been incredibly resilient, outperforming both the S&P 500 and the Russell 2000 indices every single quarter for three-and-a-half years!
Even more impressive, the chart shows that franchises have been building momentum the entire time. As the economy recovers, franchising has been the roaring engine driving progress.
Franchise broker FranNet recently put out its own report pointing to the growing role of franchising in the nation’s recovery. According to FranNet, it placed 33 percent more clients into franchise ownership in the first quarter of 2012 than the company did a year earlier. These numbers show that the franchise environment is even more robust than the International Franchise Association predicted at the end of 2011.
What makes franchising so special?
Running a business is complicated. If you’ve never run a business before, you’ve probably never had to deal with point of sale systems, human resources issues, business accounting, accounts receivables and payables, etc. Franchisees succeed because franchisors are experienced businesspeople who have already set up systems that work.
Franchise companies are built to last and often outperform non-franchise businesses. Franchises are more systematized and come with structured training and support programs that give franchise owners the ability to focus on driving sales.
The built-in benefits of franchising are leading thousands of professionals to jettison their corporate jobs and seize control of their futures through franchise ownership. The International Franchise Association predicted that 14,000 new franchise businesses will open in 2012, creating 168,000 new jobs.
Based on the early growth figures from FranData for 2012, the industry is set to far exceed these predictions and franchise system expansion is well on its way to reinvigorating the American economy.
Tasti D-Lite chairman and CEO Jim Amos has more than 30 years of experience guiding successful franchise companies such as Mail Boxes Etc. He was inducted into the International Franchise Association’s Hall of Fame in February.