Franchises, especially in food service, continue speedy recovery

Jessica SarterFranchise Finance

The franchise industry has been cited for strong performances despite the turbulent economic conditions present since the recession, especially regarding food industry franchises. Franchise Business Review recently released a comprehensive report on the best food franchises in the country, which shed further light on the industry as a whole.

Profitability ever-present
Franchise Business Review surveyed 4,000 food franchises to compile the data for its survey, representing more than 22,500 franchised businesses and 84 brands. According to the report, the food franchise industry’s average profitability increased just under 6 percent year-over-year, climbing from $77,511 in 2011 to $82,033 in 2012.

The news provider noted that the finalists of its Top 40 Food Franchisees enjoyed nearly 15 percent higher profitability than the rest of the sector. The food franchise industry outpaced all other types of franchises in profitability growth, as the rest of the sector only experienced 3.2 percent year-over-year growth.

Citing data from the National Restaurant Association, Franchise Business Review asserted that the restaurant industry is experiencing a quicker and healthier rebound in profits and revenues than the rest of the economy. Further, the firm noted that the NRA’s forecast pegged the restaurant industry to see record sales this year.

The source explained that the initial investment costs did not change much, though the range in the Top 40 franchise restaurants is massive, spanning from as little as $30,000 to as much as $4 million, with an average of $386,000. Franchise Business Review further noted that the the actual upfront cash costs are typically between 20 and 40 percent of the investment price.

BoeFly offers good news, guidance
Financing is difficult at the beginning of a small business venture, which is why a service like BoeFly can be the difference between success and failure in the loan application process. The firm uses complex algorithms to connect its thousands of participating lenders to prospective borrowers, all through one loan application.

BoeFly and the International Franchise Association are also very active in the franchise industry, and conducted research that spelled good news for current and prospective franchisees.

According to the latest IFA/BoeFly Franchise Lending Index, franchises enjoyed a more than 3.6 percent increase in lending last month from July’s figures, while August also marked the eighth straight month of year-over-year growth in loan disbursement volumes. The index logged a 6.32 percent increase from August of last year to last month, which was much healthier than the 1.43 percent year-over-year growth in July.

All signs currently point to the franchise restaurant industry as being a smart choice for prospective entrepreneurs. Other sectors seem to be improving gradually as well, but Quick Service Restaurants (QSR) have experienced consistent success throughout the years following the recession.

In BoeFly’s previous report, the firm explained that QSRs experienced 28 percent higher loan disbursement volumes year-over-year in July, while the rest of the franchise sector only saw 1.43 percent growth.