The sales of quick-service franchise chains will jump by roughly 7.3% this year as consumers spend the additional dollars left in their pockets by federal tax cuts, the International Franchise Association revealed today.
The “output” of full-service franchise chains should jump 7.2%, a marked improvement from 2017's growth rate of about 3%, the group’s Franchise Education & Research Federation Foundation noted in releasing a comprehensive preview of franchising’s prospects.
Sales for franchised quick-service chains rose about 6.6% in 2017, the IFA projected.
For both sectors, revenues are expected to grow at a faster rate than locations, indicating a likely rise in comparable sales. The IFA forecast a 2.1% rise in the number of franchised quick-service restaurants, to just under 195,000 locations, and a 1.8% increase in the headcount of full-service places, to about 32,000 establishments.
Sales growth for all types of franchises will be particularly robust in the Sun Belt because of that area’s particularly low tax rates, said Karen Campbell of IHS Markit, a co-author of the report.
“Differential growth within individual states will be more pronounced during the second half of this year,” said Campbell, suggesting consumers will adjust to their greater spending power. States in the South and West “will become even more competitive because of their lower income rates.”
IFA officials and guests who participated in the release of the organization’s annual forecast were quick to attribute rosier expectations to the tax reform measure that was passed by Congress and signed by President Trump in December.
“There will be more money for spending because less money is deducted from paychecks,” said Sen. John Barrasso (R-Wyo.) “We’ve seen more than 3 million people receive bonuses or pay hikes.”
During the presentation of the forecast, constituent Jim Creel, CEO of Cheyenne, Wyo.-based Taco John’s, revealed that all of the chain’s employees will be getting a one-time bonus because of the rollback in the franchisor’s tax rate as a pass-along firm. He did not reveal particulars such as how much each employee will get, or when.
In addition, “Utility companies are going to be giving rebates, so you’re going to see energy rates come down because of the lower corporate tax rates,” leaving homeowners with more money from that rollback, too, Barrasso explained.
IFA CEO Robert Cresanti added that franchise development is getting a boost because of a change in perception about the business environment. “Most members are attributing these spikes to confidence in Congress and the administration’s pro-business stance,” he said.
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