Interest rates continue to decline, unemployment remains low, inflation is manageable, stock markets remain high, and a new presidential administration is set to be sworn in come January.
It’s a very different economic atmosphere than a year ago.
By all economic appearances, 2025 is set to begin with loftier expectations than its predecessor. As 2023 came to a close, economic outlooks were tepid at best for 2024, as economists and business owners fretted over a recession and runaway inflation. But that recession never materialized, and inflation is cooling.
2025 now shows a promise of franchise growth. Franchisors recently shared their optimism in a survey of how they are structuring their franchise development plans. So, what does that look like? Let’s take a look.
Budget Increases Forecasted
Franchise Update Media surveyed 128 franchisors for its 2025 Annual Franchise Development Report, and 59% responded their recruitment budget was going to increase in the coming year. Only 5% indicated they were lowering their budget.
So, how does that break down? For those in the survey, 41% said the additional funds were being budgeted to digital advertising while 16% was to be used by brokers, 11% for fran dev websites and 9% for PR.
The breakdown indicates how much franchisors plan to lean into the digital space to recruit new franchisees and how few companies are reining in spending for the coming year.
Quality vs. Quantity – Fran Dev Focus
Prioritizing the quality of the leads a franchisor is receiving compared to the quantity is a shift that will continue in the coming year. In the current year, 46% reported the quality of their leads were up this year compared to 2023.
The outlook for 2025 reflects franchisors’ deeper understanding of targeting prospects who are financially qualified and who align with their brand’s vision, culture and goals.
In past years, the focus of leads has often centered on casting a wide net in order to generate a high volume of candidates that could maximize opportunities for franchise sales. But as the digital space has changed, so, too, have tactics in how to reach the candidates.
Of all the leads franchisors received, 52% came from digital advertising, according to the Franchise Update Media survey. Only 15% came from brokers.
The importance of first-person data and lead nurturing have made it easier to target specific demographics and increase the quality of your sales funnel. As technology improves, so will the ability to generate quality franchise leads.
Effective digital marketing in 2024 led to an average cost per sale of $13,757. For brokers, that cost was more significant at $48,903. The cost difference underscores the importance of quality data and quality leads.
Embracing AI – It’s Here to Stay
AI’s popularity surged in the digital scene in late 2023 and gained popularity throughout 2024 as companies harnessed its power.
Since that time, a cottage industry has emerged to leverage AI for automating media buying, customer segmentation, content creation, social media management and data analysis. AI use has been particularly widespread in the last year as online retailers attempt to capture the attention of shoppers and quick serve restaurants (QSRs) seek to streamline lower-level services, like placing orders.
AI’s use in marketing has become more integrated as the models have evolved, and that use is expected to become more widespread in the coming year.
Stepping Up SEO
Expect search engine optimization to play a greater role in 2025.
Of the digital deals in the last year, 54% of the franchisors in the survey indicated they had closed deals using SEO. That’s more than pay-per-click (53%) and social media advertising (41%).
SEO’s appearance on the list shows the growing importance of organic visibility of websites. This tactic, when properly implemented, works because it aligns with how people discover and research the franchises they are interested in online.
With a well-thought-out strategy, SEO specialists are able to target specific, high-intent keywords that offer valuable content. That engagement with the lead can convert them into franchisees, typically at a lower cost than paid advertising.
Real Estate Matters
The commercial real estate market in 2024 was marked by high interest rates, low vacancy rates, slow growth and frustrated tenants looking for affordable space.
While the economy is improving and interest rates are easing, there will be no immediate fix in 2025. Although some easing of the market is expected as rates dip, the commercial real estate market will likely remain challenging for both tenants and landlords in 2025. Tenants may continue to struggle with affordability, especially in high-demand areas where prime commercial space is at a premium.
