This post is part of the On the Margin blog.
Franchises sure have a lot of challenges these days. Labor costs are going up all over the place. Activists are demanding more benefits and even higher pay. And the federal government is attacking the very definition of the franchisor-franchisee relationship, adding further uncertainty to the business climate.
But that doesn’t appear to be slowing down development. Franchises added 22,800 jobs in August, according to the National Franchise Report from the human resources firm ADP.
On a percentage basis, franchise employment increased 0.3 percent. By comparison, overall small business employment increased 0.2 percent, as did total U.S. private employment, according to the monthly survey.
August was the 10th straight month in which franchise employment growth outpaced overall growth, according to the survey. And it’s been 18 months since franchises underperformed the overall economy relative to private employment growth.
Franchise restaurants, which dominate the franchise business model, led all industries in terms of absolute employment growth; they added 8,340 jobs in August, more than a third of total franchise employment growth. Yet that growth rate, 0.2 percent, was consistent with overall employment growth average. Other franchise sectors, like auto parts dealers, gas stations and real estate agents, reported better employment growth rates.
Still, the restaurant industry and franchises have been adding jobs at a rapid clip in recent years, despite rising minimum wages and amid concerns about growing health care costs. The rising employment is further driving up labor costs by forcing companies to pay more for talent.
And there are few signs this growth is stopping. More than two-thirds of restaurant operators told the National Restaurant Association in July, for instance, that they plan to spend money on expansion or new equipment in the next six months. And 72 percent made a capital expenditure in the last three months. Restaurants remain in expansion mode — despite their own worries about the economy.