To assess the state of US franchise systems, we leverage franchise disclosure documents and other industry data sources to look at quantitative and qualitative factors including unit economics, franchisee to franchisee valuation metrics, interest in growth from franchisees, development incentives, category dynamics, investment costs and US franchise closures. Our focus is on US franchise brands, noting company-owned brands have more control over unit growth outlooks.
Unit economics peaked in 2021 across many brands following strong sales growth and modest commodity & wage inflation in the first half of the year, as well as what we perceive as "skeleton crews," that likely enabled some "over earning," on the labor line.
We recognize parts of our assessment do not capture the challenges posed in 2022, though still should provide important takeaways in understanding the state of franchise systems, with easing costs and further pricing to support a reacceleration in unit economics. We view strong/improving unit economics, high/increasing valuation multiples and favorable category dynamics as positives for future growth prospects.
Insights from 25-plus Credit Suisse research teams around the world reveal how the IRA impacts clean energy, utilities, oil & gas, industrials, passenger and commercial transport, metals & mining, buildings, and renewable/battery global supply chain.
Co-living benefits from rapid urbanization. Additionally, a young population (median age of 30) and a millennial population are sustaining an evolving housing demand impacted by weakening affordability.
