Franchise Development 2024 Trends and 2025 Forecast

August 7, 2024
By   Steve Buors
Category   Franchise Marketing
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Interest in franchising has fluctuated over the last few years. Here, we review how franchise-related keywords have increased and decreased in popularity, and what we expect to see in the future.

Franchise development has experienced a significant amount of change over the last few years. Challenging economic conditions have affected the number of people interested in opening their own franchise, while the wealth of information online has empowered potential franchisees to “self-manage” their purchase journey. As a result, most franchise systems have ramped up their internet marketing efforts to attract new franchisees, intensifying the level of online competition targeting a finite pool of candidates.

Interest in Franchising Has Fluctuated 

Similar to using the Dow Jones index to assess the behavior of the stock market, we have created an index of franchise development search terms using Google Trends to assess the level of interest people have in buying a franchise.

As outlined in the accompanying graph, interest in franchising has fluctuated over the last few years. The first quarter of 2022 started off very strong, however, significant economic headwinds dampened interest from May 2022 onward, resulting in a disappointing back-half of 2022.

To provide an indication of economic conditions, we have mapped interest rate increases announced by the Federal Reserve Board against search volume over time. Although interest rates are not the only factor to consider, there is clearly a strong correlation between interest rate increases and dampening interest in franchising.

Strong Start to 2024

Economic conditions stabilized in 2023 and interest in franchising saw a gradual increase in the back-half of the year. We saw a strong first quarter of 2024, which is a key period for franchise development. Through our experience working with hundreds of franchise systems around the world, we saw several very positive franchise digital advertising trends in Q1 of 2024, including:

  • Lower cost of advertising, both in terms of cost-per-thousand (CPM) and cost-per-click (CPC)
  • Increased click-through-rate (CTR) on digital ads – particularly search engine advertising
  • Lower cost-per lead
  • Increased conversion from click to lead, and from lead to completed transaction

Steep Decrease Over the Summer

After a buoyant Q1, expectations were that we would see that positive momentum carry forward through the balance of the year. Instead, we have seen a steep decrease in search volume through the summer. It is very common for franchise development search volume to decrease during the summer as people are on vacation and not necessarily looking to start a franchise. What is concerning is that between May – July of this year, interest in franchising is down 7% compared to the same period in 2023 and 10% compared to 2022.

At the same time, we have seen many of the positive digital trends from Q1 reverse themselves. Most notably, we have seen a major decrease in the percentage of people converting from a click to a lead. This is not necessarily the case across all industries – in fact, some industries are doing extremely well over the summer – but overall, we have observed a degradation in key advertising metrics for most sectors.

We attribute this decrease to a combination of economic and psychographic factors. High inflation, elevated interest rates, and rising household debt are acting as a drag on the economy. In addition, many economists were expecting an interest rate decrease during the summer which did not occur, which reduces access to capital for prospective franchisees.

Despite the negative search volume trend, we are seeing positive results from outbound efforts such as social media advertising and content marketing.  Prospective franchisees are engaging with ads and clicking through to learn more, which indicates there is “passive” interest in the market. However, these people are converting into leads at a lower rate than we saw in Q1 – meaning that they are learning about the opportunity but are not contacting the franchise company to engage in conversations. This indicates people may be in “wait and see” mode as they consider the timing of their franchise purchase.

Expectations for Q3 and Q4

September through November is a key period for franchise development, typically seeing high levels of interest and strong conversion rates. In addition, it is widely expected that the Federal Reserve Board will decrease interest rates up to two times before the end of the year, which will make borrowing more attractive for potential franchisees.

These factors, coupled with the surprisingly low level of activity over the summer, lead us to believe that there is pent up demand which will result in strong interest in franchising over September-November. We are forecasting similar levels to the same period in 2023, which was more than 5% higher than the same period in 2022.

Looking Forward to 2025

The first quarter is consistently the most important time of year for franchise development, with high interest in franchising and strong conversion rates. Assuming a positive Q3/Q4, we expect to see that momentum carry forward into the start of 2025. We are forecasting franchisee leads to be at least at the same level as Q1 of 2024, with a strong likelihood of a moderate increase in the 3%-5% range.

What Franchise Systems Should Do

Franchise companies should be investing in a combination of outbound (social media, email, content) and inbound (search advertising, SEO) marketing over Q3 and Q4. Competition for qualified prospects is expected to be high, so marketing tailored to the needs and expectations of your target franchisees is recommended.

Learnings gained through the back-half of 2024 should be used to fine-tune your marketing approach in Q1 of 2025 to maximize your effectiveness during the most important time of the year. Focus on high-performing keywords and creative to differentiate your company from other franchise opportunities.

About the Author

Reshift Media is an award-winning digital marketing agency that provides support to more than 200 franchise systems in 22 countries. The company was voted the world’s best franchise marketing firm in both 2023 and 2024 by the Global Franchise Awards and is ranked as one of the top franchise marketing firms by Entrepreneur magazine.

TAGS

franchise

WRITTEN BY

Steve Buors

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