One of the most common mantras we hear in entrepreneurial circles is that small businesses are “the backbone of the U.S. economy.” This truth may be even more evident in rural areas, which are fast becoming an attractive target market for the franchising industry. Is it a smart play? Time will tell, but the facts and evidence certainly make a good case. According to the U.S. Small Business Administration (SBA), small businesses in rural America account for nearly 85% of all establishments and generally employ more than half of the local population. Entrepreneurship isn’t any less popular in rural areas than in urban cores and, as you’ll see, could be fertile ground for franchise growth as the industry closes in on the goal of one million establishments in the U.S.
Before we dig in, let’s review the latest industry prognostications from the recently released Franchise Economic Outlook Report, co-authored by the International Franchise Association (IFA) and FRANdata. Each year, this dynamic duo works in collaboration to apply analytical methodology to predict industry growth across a wide spectrum of industries. In the overall snapshot, franchising is predicted to expand to over 850,000 establishments – an increase of 2.5%. On the jobs front, it’s expected to add over 200,000 new jobs for a growth rate of 2.4% and total franchise output is projected to exceed $936 billion in 2025, a 4.4% year-over-year increase. By any definition, these statistics are indeed a promising start.
An Underdeveloped Market
It’s not that the franchising industry has typically favored urban areas over rural ones, but the 80-20 population advantage for urban areas is undoubtedly a strong draw. The attractive demographic densities that reside the most coveted of urban territories are often too hard to resist. But in rural areas, demographics are also shifting. A large cross section of the rural population is aging out, while at the same time the younger generation is vacating – creating a void where new opportunities are not only possible, but probable. Over the past two decades, rural America was hit hard in quick succession with the Great Recession and pandemic taking their toll. Shops and businesses up and down Main Street USA felt the brunt of the impact. But lately – if you’ve been paying attention – change is afoot. Rural America remains a largely untapped and undeveloped market for franchise growth and expansion.
The Winds of Change Begin to Blow
What’s driving the optimism for franchise expansion in rural America? In a word, investment. And one of the best examples of those leading the charge is the Center on Rural Innovation (CORI), a nonprofit founded in 2017. CORI’s primary mission is to build a future of high tech communities that support scalable entrepreneurship in areas with decidedly smaller demographics. The two most interesting words in that description for franchisors? Scalable entrepreneurship. Thanks to the bipartisan passed 2022 CHIPS and Science Act and the quest to proliferate high-speed internet service, rural areas are poised to gain back much of their lost ground. In a perfect world, these opportunities are designed to help rural communities expand beyond their traditional industries, reduce the brain drain exodus, and restore an equitable foundation capable of supporting entrepreneurial ventures in small town America.
How Franchising Can Fill the Gap(s)
Rural areas bore the brunt of both recent economic downturns, with a loss of many retail, food, and personal service businesses up and down the town square. Left in its wake is a massive void of underserved industries and business sectors. On the flipside, there remains an abundant supply of competitively priced commercial real estate and the opportunity for franchisors to target these rural areas to fill badly needed gaps. Entrepreneurship is equally attractive to rural residents and it’s common knowledge that there are three pathways to becoming your own boss – build, buy, or join. Of these three options, only franchising offers a proven business model, comprehensive training, and close-knit, ongoing support – all of which contribute to stability and a better shot at success. Another plus is the consortium of available resources in the form of consulting assistance, mentoring, stewardship, grants, loan programs, apprenticeships, and other creative funding sources working in concert to kick start and advance rural economic growth. These and other initiatives, such as the popular $5 billion “Investing in America” agenda, have been earmarked to help rural communities usher in a new dawn of prosperity.
People who willingly choose to live, work, and raise families in the rural communities of our great nation do so because they love their small hometowns and are deeply committed to protecting their way of life. To continue thriving, they will need continued access to capital and the chance to pursue entrepreneurial pursuits with the same opportunities afforded to their urban counterparts. To borrow a common rural refrain, that’s not to say this venture will be an “easy row to hoe.” In reality, it could be an uphill battle – much more difficult than simply mining for qualified candidates on LinkedIn. But with a dedicated approach over time, it’s entirely possible for the franchise community to step in, step up, and help Main Street USA flourish once again.
Simply put, we owe it to them to give it our best shot.
About the Author
Blake Martin owns FranNet of The Heartland, a franchise brokerage, sales, and consulting firm that provides coaching and consultation for entrepreneurs and small business owners. During his two decades in the franchising industry, Blake has helped rural communities grow, one locally owned and operated small business at a time. He can be reached at bmartin@frannet.com