US STUDY SHOWS VALUE OF FRANCHISING
2004 - The first study to measure the economic impact of franchising in the US has relevance for NZ
A recent study in the US has come up with some fascinating data on the major role that franchising plays as an engine of growth there. The study, conducted by PricewaterhouseCoopers for the International Franchise Association Education Foundation, is the first to attempt to measure the overall impact of franchising on the US economy.
The figures show that franchised businesses generate jobs for more than 18 million Americans - one out of every seven jobs in the US private sector workforce - with 10 million of those being directly employed by franchised businesses. That equates to 8% which means, perhaps surprisingly, that in percentage terms New Zealand is not far behind - the figure here is thought to be around 5%. Given that New Zealand is a relative newcomer to franchising and already has the highest number of franchise systems per capita in the world, we can expect that percentage to increase further over the next few years.
An interesting comparison is that franchising in the US directly employs almost as many people as the construction and information sectors combined, including the much-vaunted 'knowledge economy' areas of software and print publishing, movies and videos, radio and television broadcasting, and telecommunications carriers and resellers.
In terms of value, the US figures are stunning. The study finds that in 2001 more than 760,000 franchised businesses generated a total economic output of more than US$1.53 trillion, or nearly 10% of the US private sector economy (a trillion is defined as 10 followed by 12 zeroes). Franchises provided $506 billion in payroll, or more than 11% of the nation's private sector payroll.
The study differentiated between business format franchises (such as fast food or home services type franchises) and product distribution franchises (such as automotive dealerships, service stations and beverage bottling). New Zealand surveys have only covered the business format side of franchising, which makes the US statistics even more interesting. The product distribution franchises accounted for 19% of franchised establishments and 26% of the total economic output, suggesting that were the same figures to be added to the NZ statistics then the total worth of the sector might be increased significantly over the NZ$10 billion-plus which is generally accepted.
In geographic terms, franchising has an impact nationwide with jobs created because of franchised businesses accounting for at least 10% of the private sector workforce in all but four states and the District of Columbia. In Nevada, franchising accounts for 20% of its private sector workforce.
The US survey demonstrates two things. First, it shows that franchising is a huge contributor to the most powerful economy in the world. Second, it suggests that New Zealand should recognise the impact of franchising on our economy at home and its potential not just to help people into business but to employ and upskill New Zealanders nationwide.
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