Focus...Franchise Growth Picks Up

During a weakening economy, franchise growth is notable for its sheer size The overall number of domestic franchise units in the 18 key sectors analyzed for this report has grown 12.6% over the three-year period between 1999 and 2001.

The accompanying table shows domestic franchise units and percentage growth for 1999, 2000 and 2001 for 18 franchise sectors. It also shows the number of franchise concepts represented in each sector. The data are based on Uniform Franchise Offering Circulars (UFOC) filed with state agencies in 2002.

In the 18 key sectors analyzed for this report, 31,933 domestically franchised businesses were added. Of that total, 19,275 came from the business-related and fast food restaurant sectors. On a percentage basis, this growth varied widely among industry sectors. For example, in the same three-year period, the sports and recreation sector contracted by 5.2% while business-related franchises expanded a whopping 50.4% and frozen desserts businesses were anything but cold, growing by an extraordinary 44.7%. Some sectors remained flat, such as the retail food sector, which only increased by 0.2%. Overall, 15 franchise sectors expanded during the three-year period while only three sectors declined.

This growth was not consistent and appeared to be impacted, though less significantly, by the factors the affected the direction of general U.S. economic activity. Between 1999 and 2000 the 18 franchise sectors expanded by 9.1% in contrast to the 3.9% growth between 2000 and 2001. In fact, only four sectors (general services, health and fitness, personnel services, and retail stores) realized continued increasing growth during the three-year period. In the case of the frozen desserts sector, between 1999 and 2000, the industry grew 49.9%, but realized a decrease in the number of businesses by 10.4% in 2001. The opposite trend occurred in the computer products and services sector. This sector contracted by 6.3% in 2000 versus 1999, and then expanded by 19.5% in 2001.

Disclaimer

FRANdata compiled these growth statistics for domestically franchised store units based on the list of outlets provided in Item 20 of UFOCs. FRANdata believes that the following table is statistically representational of the franchise industry. However, FRANdata realizes that the table does not depict the entire state of franchising since it does not include concepts not currently offering franchises or those franchising in non-registration states, concepts in sectors not analyzed for this report, and concepts whose 2002 UFOCs FRANdata has yet to attain.

FRANdata prepares this quarterly report on franchise growth exclusively for Franchise UPDATE. FRANdata is the nation's leading source of information and analysis on all aspects of the U.S. franchise industry, and can be found www.frandata.com.