Middle Tiers of Franchise Systems Revved up Their Expansion Plans the Most in 2023
By: Michael Alston for Franchise Insights
February 21, 2024 – Despite sagging consumer confidence, tighter credit and labor, and a volatile year in the financial markets, most franchise systems either stuck to their growth plans and ad budgets for 2023 according to a December survey by FranchiseInsights.com. But the adjustments to expansion plans varied significantly by the size or maturity of the franchise system.
The middle-maturity segments of the franchise market increased their expansion plans the most in 2023.
Franchise systems with 11-500 U.S. units actually raised their goals and budgets as t he year unfolded. Twenty-five percent of franchise development teams representing systems with 201-500 units raised their goals during the year, while the remaining 75% stuck to their original plans. About 20% of the 76-200 unit tier reported growth beyond their plans, but another 24% of that tier reduced their expansion plans either “some” or “significantly.”
The 11-75 unit segment reported the greatest reductions in expansion plans, at over 31%, yet another 22% increased their plans.
The newly-emerging franchise segment (1-10 units) mostly stuck with its plans, though 14% reduced their plans and budgets accordingly.
Franchise systems are famous for leaning into the headwinds. Inflation, tight labor markets, and regulatory uncertainty did not keep business conditions have caused franchises to change their growth plans
Overall, exactly 50% of survey respondents across all segments did not change their plans at all, Another 9.1% say they cut back some, and 4.5% cut back significantly as the year unfolded.
In aggregate, 8.3% reported increasing their plans, which means that over 58.3% of franchise systems saying that their expansion plans and growth budgets were the same or greater than planned.
As a footnote, the survey represented a cross-section of franchise development teams, from emerging systems to well-established franchises with thousands of units.
FranchiseInsights.com surveys franchisors periodically to get a pulse on the industry, provide benchmarking and identify franchise development best practices. This survey was conducted in December 2023.
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Published on Wednesday, February 21st, 2024.