The Franchise Business Index (FBI), an index of the economic health of the franchise sector, showed a slight gain of 0.3 percent in October, the International Franchise Association announced today. The index increased to 109.0 (Jan 2000=100). This is a 2.1 percent increase compared with October 2011.
"Franchises are growing at a modest rate, although they could be growing more quickly if Congress averts the fiscal cliff by extending all current tax rates," said IFA President & CEO Steve Caldeira. "Every dollar existing and prospective franchisees pay to the government due to higher taxes is one less dollar that would go to new business formation and job creation."
The increase of 0.3 percent was the third monthly increase in a row, after declining slightly in June and July. Continued gains in employment in industries with a high concentration of franchising and in consumer spending in franchise-intensive categories of goods and services led the October increase in the index. An uptick in the small business optimism index also gave a boost to the October index, while the indicator of small business credit conditions fell, reversing much of the improvement it had shown in September.
The September index value was revised downward slightly and now shows a 0.2 percent increase after incorporating revised monthly data for labor market and consumer spending indicators.
Designed to provide more-timely tracking of the growing role of franchise businesses in the U.S. economy, the Franchise Business Index 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 franchise business sector continues to show steady improvement, boosted by gains in franchise employment and consumer spending indicators" said IHS Global Insight Senior Economist James Gillula. "However, the month-to-month contributions to the index of factors such as small business confidence and credit availability remain sporadic, reflecting the lingering uncertainty surrounding the direction of federal tax and spending policy."
