Pivoting in uncertain times
The findings of the BoeFly Growth Index Survey reveal a fascinating story of challenges within the franchise industry. The fact that we see a drop in confidence from the nation’s C-suite executives is noteworthy – likely driven in part from pressures of inflation and high-interest costs. Despite the difficulties posed by the economy, many sectors have shown remarkable growth and adaptability. The survey results don’t mean that some brands aren’t thriving, but the results should be considered by all as they think about the year in review. These findings, despite showing a healthy skepticism show that even in challenging times, there are ample opportunities for success and growth.
The BoeFly Growth Index Survey for the second, third and fourth quarters of 2023, published by Franchise Times, provides a comprehensive snapshot of the industry but also serves as a compass for franchisors navigating the competitive waters. Let’s delve into the key findings and unravel the narrative that unfolds from the data.
The economy: Inflation, and interest rates a major concern
Over the course of the past year, most C-level franchisors said their confidence in their brand meeting growth goals has dropped, as confirmed by the survey results. Overwhelmingly, those surveyed noted that inflation and interest rate increases are bearing down on executives’ confidence levels in franchise growth. In Q2, bank failures began to affect survey results. All was not bleak though; Q3 saw an improvement in the ability for all to find and hire strong employees.
Despite shaken confidence levels, franchise growth has not stopped completely. Jennifer Durham, Chief Development Officer at Hand & Stone Massage and Facial Spa, said the brand will open at least 50 new locations by the end of 2023, up from the 37 it opened in 2022 but less than forecasted.
“Universally, the cost of construction and real estate are the biggest challenges for anyone sitting in my chair,” she said.* The brand, which has 570 units, is focusing “more intently” on conversions and helping existing franchisees, who account for 78% of the development pipeline, mitigate construction costs.
Interpreting the narrative: A blueprint for success
As we venture into 2024 and reflect on the findings of the BoeFly Growth Index Survey, it’s natural to wonder what the future holds for franchise growth. While we can’t predict the exact outcomes, we can make educated guesses based on the trends and projections highlighted in the survey.
The resilience and adaptability shown by the franchise industry in the face of challenges indicate a promising future. Entrepreneurs can expect continued opportunities for growth and success, particularly in sectors that have shown consistent growth and innovation. By staying informed and leveraging the insights from this survey, entrepreneurs can position themselves for a prosperous future in the franchise industry.
“The data confirms that brand leadership sees real headwinds in the form of interest costs and inflation, although we’ve seen some improvement on inflation. We know that the best brands aren’t putting their head in the sand, rather they are bringing real creativity to support growth in these challenging times. We see brands shrinking their unit size or getting more creative with double drive-thrus to reduce buildout costs.” Mike Rozman, CEO BoeFly
The lessons learned from the past year provide invaluable guidance. It’s a reminder that in the dynamic world of franchising, the ability to adapt, grow, and connect remains the key to unlocking sustained success. You can review the individual BoeFly Growth Index Surveys here: Report Q2, Report Q3, Report Q4.
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