President Donald Trump was credited by a major franchise association Monday with the sector expecting to outperform the overall economy at an even greater pace.
The franchise model has been able to directly support millions of jobs – while indirectly boosting employment in industries like manufacturing and agriculture. It has also able to weather the sluggish economy over the last decade better than other sectors. Now franchise businesses expect even greater growth now that the economy is picking up pace.
The International Franchise Association (IFA) highlighted its economic forecast for the next year during a teleconference call Monday. Republican Sen. John Barrasso, industry experts, and a franchise owner discussed the findings during the call – crediting the president and congressional leaders for the expected increase in growth.
“Franchising has grown steadily, and given families and communities across the country much-needed stability,” IFA President Robert Cresanti said during the call. “Franchise business will continue to grow faster than the rest of the economy, only this year forecasts show this will be at an even more rapid pace.”
President Trump has looked towards regulatory and tax reform in his efforts to stimulate economic growth. Former President Barack Obama was seen by the business community as going too far with his efforts to implement new federal rules and regulations. The change in direction has come as welcome news to the business community.
“Most of our members are attributing this spike in confidence to Congress and the president’s pro-business policies,” Cresanti said. “High tax rates have been one of the biggest challenges to business growth for decades. Since the Tax Cuts and Jobs Act was signed into law, our members are incredibly optimistic about the economy, which is clearly reflected in this data.”
Sen. Barrasso believes franchise businesses will be helped by these efforts in two ways. They’ll immediately benefit from the lower business tax rates and decreased regulatory burden. The expected increase in jobs and wages generally might also be beneficial to franchise businesses – with customers feeling more confident and having more money to spend.
“There is this sense of confidence and optimism that you see all across the country,” Barrasso said during the call. “So from the standpoint of franchisees, this is going to be additional good news in the year ahead.”
The franchise model has been deployed by businesses in industries across the economy. It allows large companies to contract their brand name and products to smaller employers. Some franchises include thousands of companies contracting under the same corporation – like in the case of McDonald’s.
Cresanti notes that the franchise business model has created jobs twice as fast as non-franchise businesses since 2001. That growth, according to the forecast, is expected to be even bigger over the next year. The forecast predicts overall franchise economic output will increase 6.1 percent to $451 billion. Employment is expected to grow by 3.7 percent.
Trump and his administration have made notable cuts to regulations and other federal rules over the past year. The Competitive Enterprise Institute found in a report Oct. 1 that the administration had reduced the federal register by 32 percent. The American Action Forum found that those reductions have saved $560 million annually.
The IFA expressed particular concern when the previous administration updated what is known as the joint-employer standard – a rule that determines whether an employer is legally responsible for the employees of a company it contracts with. The business community denounced the new standard as being overly vague.
The franchise model was of particular concern since it relies on independently-owned businesses contracting with a larger company. The new administration has already started to upend the updated standard while lawmakers have been considering a bill intended to clarify that law was never meant to go that far.
Those opposed to the rollback of regulations warn it would leave employees without critical workplace protections. The Center for American Progress (CAP) has found in its research that the deregulatory and tax reform push has generally benefited the wealthy over middle and working class people.