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The Franchise Business Index (FBI), an index of the economic health of the U.S. franchising industry, increased by 0.7 percent in January as nearly all components showed improvement. The International Franchise Association's index rose to 109.7. Compared with January 2012, the index was up 2.1 percent.
"The uptick in January is reflective of the pent-up demand for growth felt by many franchisors and franchisees who held back on investments in the second half of 2012 because of the uncertainty surrounding the Fiscal Cliff," said Steve Caldeira, IFA president and CEO. "With permanency in tax rates, albeit higher for some small business owners, and steadily improving credit conditions, combined with low interest rates and less expensive commercial real estate, we expect the franchise industry will add over 10,000 new establishments and 162,000 new jobs this year. Franchising could create even more new businesses and realize additional growth and job creation with pro-growth comprehensive tax reform and spending cuts."
The December 2012 value of the index was also revised upward to show a gain of 0.4 percent, as revised data on employment and consumer spending showed stronger gains.
The FBI was developed by IHS Global Insight on behalf of the IFA Educational Foundation. The FBI combines indicators of growth in the industries where franchising is most prevalent and measures of the general economic environment for franchising.
"The most recent employment report from Bureau of Labor Statistics included upward revisions that gave the report a positive glow," said IHS Global Insight Senior Economist James Gillula. "Consumer spending growth also remained in positive territory in January despite the expiration of the 2 percent payroll tax cut, but this tax increase will create a drag on spending growth going forward."
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