2024 Small Business Franchise Trends

A look at the state of franchises in 2024

Each year, Guidant Financial explores the intricate tapestry of American business ownership, capturing the core motivations, hurdles, and industry shifts in our Small Business Trends report. Our latest survey reveals a standout trend: the growing appeal of franchising.

Franchising has been a steadily popular option for business owners, with over 42 percent of respondents choosing to open or acquire franchise units this year.

Many entrepreneurs see franchising as a safer option, thanks to its established business model and support from the corporate side. This makes it particularly attractive during uncertain economic times.

Let’s dive into the latest trends shaping the world of franchising in 2024, exploring franchisees’ economic outlook, challenges, political preferences, and more in our 2024 Franchise Trends study.

Index

What are Small Business Franchises Like in 2024
Recruitment and Retention Trends
Who are Franchise Owners in 2024
Economic Impact
Political Outlook Among Franchising Owners
Resilience and Optimism in Franchising

What are Small Business Franchises Like in 2024?

New or Existing?

A majority of respondents (77%) started a new franchise location, drawn by the allure of building from the ground up and imprinting their vision on a fresh venture. Conversely, 23 percent of participants chose to purchase an existing franchise location. For these entrepreneurs, the appeal lies in stepping into a pre-established business framework, leveraging its existing customer base and operational infrastructure to hit the ground running. This split between new ventures and established entities highlights the versatility inherent in the franchise model.

Top Franchise Industries

Our study unveils a diverse spectrum of franchise industries, each catering to distinct consumer needs and market segments. A significant portion, comprising 21 percent, represents franchises in the Health, Beauty, and Fitness sector, reflecting a growing emphasis on wellness and personal care services. Following closely behind, at 18 percent, are franchises within the Retail industry, showcasing the enduring appeal of brick-and-mortar commerce in an increasingly digital age. Meanwhile, Food and Restaurant franchises make up 11 percent of the market, highlighting the timeless popularity of dining and culinary experiences.

Additionally, Residential and Commercial Services franchises also constitute 11 percent, indicating a robust demand for essential maintenance and property management solutions. Finally, the Education and Training sector commands nine percent, underscoring consumers’ enduring pursuit of knowledge and skill enhancement. Together, these diverse industries paint a rich landscape of franchise opportunities, from personal well-being to professional development and beyond.

Profitability and Growth

Profitability remains a key metric of success within franchise ownership. According to our survey, 57 percent of franchisees report profitability — while 43 were not profitable at the time of the survey. Many of these businesses are newly established. Thirty percent of respondents started their ventures within the last two years, and 20 percent are in their first year of operation. Generally, it takes two to three years for businesses to become profitable, indicating a positive trend toward profitability among most franchises. Furthermore, businesses surveyed that have operated for more than two years boast a profitability rate of 68 percent.

Looking toward the future, franchisees express a range of plans aimed at driving growth and sustainability. Eighty-one percent of respondents intend to grow their current location, service, or website, while 24 percent consider expanding by opening additional locations or services. Conversely, 33 percent plan to maintain their current status quo, focusing strategically on sustaining current performance levels. Additionally, 24 percent of franchisees are contemplating selling their businesses, perhaps indicating a desire for new opportunities or transitions in their entrepreneurial journey.

In terms of strategic initiatives, franchisees are looking to invest in various areas to fuel growth and competitiveness. Thirty percent plan to bolster their workforce by increasing staff. Meanwhile, 21 percent intend to prioritize digital marketing efforts, recognizing the importance of online presence and engagement in today’s digital-centric marketplace.

In addition, 13 percent plan to undertake remodeling or expansion projects to modernize and improve their business premises, while 12 percent aim to invest in traditional marketing channels to reach wider audiences. Nine percent of franchisees are considering investments in accounting and tax services, underscoring the importance of financial management and compliance in sustaining and growing their ventures.

Franchise Financing Trends

Additionally, cash remains a popular choice, with 19 percent of franchisees utilizing personal savings or liquid assets to fund their ventures.

SBA loans also play a significant role, with 14 percent of franchisees securing financing through this government-backed program. SBA loans provide entrepreneurs with access to capital at favorable terms, facilitating business growth and expansion.

A smaller percentage of franchisees, comprising three percent, rely on support from friends and family to finance their ventures.

Furthermore, equipment leasing emerges as another financing avenue, albeit less commonly utilized, with three percent of franchisees opting for this method.

Overall, while ROBS emerges as the primary financing choice for most franchisees within our clientele, the diverse array of funding options showcases entrepreneurs’ adaptability and resourcefulness in navigating the financial landscape of franchise ownership.

Cost to Launch

Launching a franchise business entails a range of initial investments, and our survey sheds light on the diverse financial commitments undertaken by franchisees. Among the respondents, 18 percent reported investing between $100,001 and $175,000 to initiate their ventures, representing a significant portion of franchisees with a moderate financial outlay. Close behind, 16 percent of franchisees reported startup costs ranging from $175,001 to $250,000, reflecting a substantial investment required to kickstart their businesses.

In addition, 15 percent of respondents reported startup costs between $50,000 and $100,000, indicating a notable portion of franchisees with relatively lower initial financial requirements. Conversely, 15 percent of franchisees reported higher startup costs falling within the range of $375,001 to $500,000, signaling an increased investment for those pursuing larger-scale franchise opportunities.

Furthermore, 13 percent of franchisees reported even higher startup costs ranging from $500,001 to $1 million, highlighting the varying financial commitment required for specific premium franchise opportunities or multi-unit ventures.

Recruitment and Retention Trends

Hiring Difficulty

Navigating the hiring landscape poses various challenges for small business owners, as revealed by our study’s data. Eleven percent of respondents reported finding hiring “very difficult,” while a larger portion, comprising 24 percent, expressed that it was “somewhat difficult.” Interestingly, 26 percent indicated their hiring experiences were consistent with previous years, while a smaller percentage — totaling 11 percent — found hiring “somewhat easier” compared to previous years.

It’s worth noting that four percent of respondents reported finding hiring “very easy” compared to other years. On the contrary, a significant portion, representing 24 percent of respondents, reported not engaging in any hiring during the surveyed period.

Moreover, it’s significant to highlight that we’ve observed a 54 percent decrease in business owners who report hiring being “very difficult” compared to last year’s study. This suggests a notable shift in the hiring landscape, potentially indicating improvements or adaptations made by small business owners in response to evolving market conditions.

Gaps in Candidates

Our study delves into the challenges faced by franchisees in filling various positions, shedding light on the sectors with the most pronounced gaps in candidates. According to the data, 33 percent of franchisees reported difficulties filling sales and related positions, indicating a prevalent need for more qualified candidates in this critical area.

Additionally, the data reveals challenges in other sectors as well. Ten percent of franchisees reported difficulties in filling positions within the food service sector. Management roles also presented hurdles, with 13 percent of franchisees reporting gaps in candidates for leadership positions.

Furthermore, the construction, maintenance, installation, and production sectors faced challenges, with 14 percent of franchisees encountering gaps in candidates for these roles. Similarly, healthcare, childcare, and service sectors experienced shortages, with 13 percent of franchisees struggling to find suitable candidates to fill positions in these service-oriented fields.

Future Plans for Overcoming Hiring Challenges

Franchisees are proactively strategizing to address the persistent recruitment and retention challenges identified in our survey. Thirty percent of respondents plan to increase compensation, recognizing the importance of offering competitive pay rates to attract and retain top talent in today’s competitive labor market.

Additionally, 18 percent of franchisees are focusing on improving retention efforts, understanding the value of retaining existing employees amidst difficulties in hiring new ones. This highlights a shift toward prioritizing employee satisfaction and engagement to mitigate turnover and talent shortages.

Expanding recruitment advertising efforts emerged as another key strategy, with 12 percent of franchisees intending to invest in broader recruitment advertising campaigns to reach a larger pool of potential candidates.

Moreover, nine percent of respondents plan to increase benefits as part of their future hiring strategy, recognizing the role of comprehensive benefits packages in attracting and retaining skilled employees.

These future plans underscore a proactive approach among franchisees to address hiring challenges, focusing on a combination of competitive compensation, retention initiatives, recruitment advertising, and enhanced benefits to secure a talented workforce and drive business success.

Who are Franchise Owners in 2024?

Motivations

Understanding the diverse motivations behind franchise ownership offers insights into the entrepreneurial mindset. Our study reveals a range of driving forces among franchisees. Twenty-eight percent went into business ownership because they were ready to be their own boss, while 22 percent sought freedom from corporate America.

Additionally, 13 percent were driven by passion, aligning personal interests with professional pursuits. Another 11 percent seized compelling opportunities, emphasizing the role of timing and circumstance. Furthermore, ten percent delayed retirement to remain engaged in meaningful work, while another 10 percent turned job loss into entrepreneurial opportunity.

These varied motivations highlight the unique aspirations driving franchise ownership today.

Generational Differences

Our study explores generational differences among franchisees. Baby Boomers represent 35 percent, Gen Xers comprise 47 percent, and Millennials make up 18 percent of franchisees surveyed. While Gen Xers and Baby Boomers continue to lead the way in franchise ownership, Millennials are on the rise.

There has been a 49 percent increase in millennial business owners since the previous year, reflecting a dynamic shift in the demographic makeup of franchise ownership and the increasing significance of younger entrepreneurs. We’ve also noted an eight percent decrease in Baby Boomers and a six percent decrease in Gen X business owners from last year.

Diversity in Franchising

Our study delves into diversity within the franchising sector, revealing insights into the representation of various demographic groups among franchisees.

In terms of gender diversity, our data shows that 70 percent of franchisees are male, while 30 percent are female. Interestingly, women are more likely to go into franchising.

In fact, the share of women in franchises is notably higher, with female representation 17 percent greater than observed in the main study — indicating a promising trend toward greater gender inclusivity within the franchise industry.

Furthermore, our study sheds light on the racial and ethnic composition of franchise ownership. The majority of franchisees, comprising 80 percent, identify as White or Caucasian.

Additionally, Black or African-American individuals represent nine percent of franchisees, followed by Hispanic, Latino, or Spanish Origin individuals at six percent, and Asian or Asian-American individuals at three percent. While these numbers highlight some level of diversity within franchise ownership, there remains room for improvement in fostering greater representation and inclusivity across a wider spectrum of racial and ethnic backgrounds. Understanding and addressing these demographic dynamics is essential for promoting diversity and equity within the franchise industry, ensuring that opportunities for business ownership are accessible to individuals from all backgrounds.

Education Levels

Among our respondents, 41 percent hold a Bachelor’s degree, while 33 percent have attained a Master’s degree. Twelve percent possess a High School Diploma or GED, 10 percent have completed an Associate’s degree, and four percent hold a Doctorate.

In total, 78 percent of franchisees hold post-secondary degrees. This illustrates the importance of education among franchisees, with the majority possessing higher education qualifications. This emphasis on education reflects the value of knowledge, critical thinking, and problem-solving skills in the entrepreneurial landscape. It also suggests that individuals with advanced educational backgrounds may be drawn to franchising due to its opportunities to apply their skills and expertise in business ownership.

Measuring Happiness Levels

How happy are franchise business owners? According to our data, 31 percent of franchisees reported feeling “very happy,” while 39 percent expressed being “somewhat happy.” Additionally, 14 percent reported feeling neutral, 10 percent felt “somewhat unhappy,” and five percent reported feeling “very unhappy.”

Notably, we observed a positive trend in happiness levels among franchise owners, with a significant 38 percent shift in respondents feeling “somewhat unhappy” to “very unhappy” compared to last year’s study. This shift indicates an overall improvement in happiness levels among franchise owners, suggesting a positive trajectory toward greater satisfaction and well-being within the franchising community.

Top Franchising States

By exploring franchise ownership distribution across various states, we unveil the geographical landscape of franchising within the U.S.

Texas emerges as the leading state for franchising, with 12 percent of franchisees surveyed hailing from the Lone Star State. Florida and California are closely behind, each accounting for eight percent of franchise ownership.

Additionally, Georgia boasts a five percent share of franchisees, while North Carolina, Ohio, and Pennsylvania each represent four percent of franchise ownership.

Economic Impact

Economic Outlook

Seventy-five percent of franchisees express confidence in their ability to weather the current economic conditions, demonstrating resilience and adaptability in the face of challenges. Conversely, only five percent anticipate not surviving through the current economy, indicating a relatively small proportion of franchise owners who hold pessimistic views. Twenty percent of franchisees remain uncertain about their business’s survival prospects, reflecting ongoing uncertainties and fluctuations in the economic environment.

Our study also reveals a significant 39 percent decrease in the number of business owners who feel their business won’t survive compared to last year. This reduction demonstrates a shift in sentiment toward greater optimism and confidence in business sustainability amidst economic uncertainties. These findings highlight the resilience and determination of franchise owners to navigate economic challenges and emerge stronger.

Economic Confidence

Through our study, we delve into franchise owners’ economic confidence levels — providing valuable insights into their views on the economy’s state.

Thirty percent of franchisees express feeling somewhat confident about the economy, while five percent report feeling very confident. Nineteen percent indicate a neutral stance regarding economic confidence. On the other hand, 34 percent of franchisees express feeling somewhat unconfident, with 13 percent indicating a very unconfident outlook.

These findings highlight diverse attitudes and perceptions regarding economic confidence within the franchise community. While a notable portion of franchise owners express varying degrees of confidence in the economy, a significant proportion also harbor uncertainties or pessimistic views.

Impact Factors

The economic climate has significantly influenced franchise operations, with various factors impacting franchisees’ financial dynamics.

According to our study, 29 percent of franchisees have increased prices as a direct consequence of the prevailing economic conditions. Additionally, 16 percent report a loss of revenue, reflecting the challenges posed by economic downturns on business profitability. Moreover, 14 percent of franchisees have encountered the need to raise wages in response to economic pressures, reflecting the broader labor market dynamics and the imperative to attract and retain talent. Furthermore, eight percent of franchisees have resorted to cutting their own wages as a measure to navigate economic uncertainties and sustain their businesses.

These findings show the multifaceted impact of economic conditions on franchise operations, with rising prices, revenue challenges, wage pressures, and personal financial adjustments among the key consequences faced by franchisees.

Top Challenges in Franchising

Franchise owners grappled with a myriad of challenges in 2024, reflecting the dynamic economic and business landscape. At the forefront, 21 percent of franchisees cited inflation and price increases as a significant hurdle, highlighting the strain rising costs put on operational expenses and profit margins. Additionally, 17 percent identified a lack of capital and cash flow as a pressing concern.

Recruiting and retention also emerge as another prominent challenge, with 20 percent of franchisees facing difficulties attracting and retaining talent amidst competitive labor market conditions.

Moreover, 11 percent of franchisees struggle with marketing and advertising, emphasizing the need for effective promotional strategies to enhance brand visibility and customer engagement. Furthermore, nine percent cite administrative tasks such as bookkeeping and payroll as burdensome, diverting time and resources away from core business activities.

In a positive development, our study reveals a significant 19 percent decrease in franchisees encountering challenges with recruitment and retention compared to last year. This trend signals an improvement in recruitment and retention efforts among franchise business owners, reflecting proactive strategies and initiatives to address labor market challenges and foster a supportive work environment.

As franchisees continue to navigate these top challenges, forward-thinking solutions and adaptability will be essential in overcoming obstacles and driving sustainable growth in the franchising sector.

Political Outlook Among Franchise Owners

Political Affiliation

Within the franchise community, our study unveils a range of political affiliations. A majority of franchisees identify as Republican (45%), while 21 percent align with the Democratic Party.

Thirty percent of franchisees report being unaffiliated with any political party, reflecting a significant portion of franchise owners who choose to remain independent of partisan ties. In addition, four percent of franchisees identify with the Libertarian Party, representing a smaller segment within the franchise community.

These findings highlight the varied political affiliations among franchisees, showcasing the diversity of perspectives and viewpoints within the franchise industry.

Political Confidence and Preferences

Our study further explores the political confidence levels and preferences among franchise owners, offering valuable insights into their sentiments and attitudes toward government support and administration responses.

Thirty-one percent of franchisees express feeling somewhat confident in the political landscape, while four percent report feeling very confident. Additionally, 20 percent indicate a neutral stance regarding political confidence — while 32 percent feel somewhat unconfident, and 13 percent feel very unconfident.

In terms of government support for small businesses, a significant 73 percent of franchisees believe that the government should put more effort into supporting small businesses, highlighting the importance of policy measures and initiatives to bolster the small business sector. Conversely, 11 percent feel that the government shouldn’t prioritize support for small businesses, while 16 percent remain unsure about their stance.

Regarding the Biden Administration’s response, opinions among franchisees are varied. Approximately 36 percent strongly disliked the Biden Administration’s response, with an additional 22 percent expressing dislike alone. On the other hand, 12 percent liked the administration’s response, while only two percent strongly liked it. A significant 27 percent of franchisees report feeling neutral about the Biden Administration’s response.

These findings illustrate the range of political confidence levels and preferences among franchise owners, reflecting the complexity of political attitudes within the franchise community.

The Franchise Small Business Vote

This survey, conducted in December 2023, provides insights into the political preferences of franchise small business owners. Among the respondents, 36 percent expressed support for Donald Trump, while 23 percent favored Joe Biden. Additionally, 19 percent of franchise small business owners indicated support for Nikki Haley, with 17 percent backing Ron DeSantis. Notably, six percent of respondents expressed support for Robert F. Kennedy Jr.

It’s important to acknowledge that both Nikki Haley and Ron DeSantis are no longer in the running. However, highlighting their initial inclusion in the survey reveals various opinions and sentiments within the franchise small business community. This diversity reflects the multifaceted nature of political preferences and the nuanced considerations influencing franchise small business owners’ voting decisions this Election Year.

Resilience and Optimism in Franchising

In summary, our comprehensive study on franchise trends has provided invaluable insights into various aspects of franchising. We’ve explored top franchise industries, recruitment and retention trends, demographics of franchisees, economic impacts on franchise small businesses, the political outlook among franchise owners, and more.

Despite facing numerous challenges, our findings indicate that franchisees are predominantly happy and are actively embracing economic challenges head-on.

Our study also revealed a diverse range of political affiliations among franchise owners, with differing sentiments toward government support and administration responses. While the majority of franchisees believe that the government should put more effort into supporting small businesses, opinions regarding political leadership vary — reflecting the nuanced perspectives within the franchise community.

Overall, the 2024 Franchise Trends survey showcases the dynamic nature of the franchise industry and the proactive approach franchisees adopt in overcoming obstacles and driving growth. It highlights franchisees’ resilience and adaptability amidst economic adversity and political uncertainty.