Franchise executives are an optimistic lot and project that franchising will achieve 6% growth in net new unit development in 2005.

That projection of significant system expansion is the forecast of 100 top U.S. franchise executives surveyed for the 14th Annual Franchise Business Development Forecast and Industry Trends Analysis by Franchise Recruiters Ltd..

The international executive search firm asked franchise executives a series of questions about current business concerns and strategic initiatives they foresee in 2005. The responses review branded system forecasts and opinions for chains, nationally and internationally.

Net unit growth is the result of subtracting real unit closures from new unit sales. This figure provides the accurate annual new unit growth for systems in 2005. Ignoring the extremes, top management projects a consistent opinion for development and expansion within the business of franchising.

This commanding economic engine continues to produce sustained mutual success for franchisors and franchisees along main street America and around the globe.

Franchise executives spoke of "softness" in overall revenue growth for units through 2005. Despite solid new unit expansion, sales numbers are flat or predicted to be less than same-store sales in 2004.

However, the executives are still pleased with new unit construction growth figures for 2005. Furthermore, they point out that the foreseeable, formidable challenges include slower overall economic retail expansion, relatively high energy prices, real estate tribulations and rising interest rates.

Pricing, however emerges as their greatest worry, and it is within this area that they feel the impact of competition, as consumers lose the lubrication that new tax cuts and incentives brought to business in 2004.

Franchise chains will also be hit with shipping cost surcharges, outlays that will add to bottom-line erosion in 2005, according to the survey.

U.S. gross domestic product growth is projected to slow to 3.3% in 2005, well behind that of 2004, according to government statistics. Consequently, an increase in same-store sales will be difficult to achieve for many brands.

Shoppers, regardless of income or where and how they live, demand that they not overpay for anything, and price points will be particularly significant as a result.

Throughout 2005 the field of major brand ownership will be thinned as more national chains acquire competitors. An overcrowded market, especially in the food and hotel venues, means brutal competition to win consumers.

Franchisors articulate that they intend to save substantially through improved purchasing scale in both merchandising and non-merchandising areas, a more efficient supply chain and more effective administrative and operational systems. This commitment to savings will force suppliers to yield to franchisors' buying power, lest they go elsewhere.

Retail franchises are selling products at the counter that in the past might have seemed out of place. It's part of an effort to spark increased impulse purchases by consumers at the point of sale, while they have their wallets open.

The survey responses indicate that a number of chains will no longer stick just to staples when it comes to stocking out their merchandise mix. Mixes are becoming broader, and almost anything goes when it comes to pleasing the customer, as merchandisers blur the lines of retailing to squeeze out more sales.

New revenue channels will be urbanized to meet the changing needs of consumers by stocking products not usually found in the branded store. Franchisors are buying limited amounts of special goods to sell through the chain.

Channels are fusing; franchisors can now say they are getting into new businesses and effectively selling to enhance bottom-line efficiency for their franchisees. Examples include Ace Hardware selling products such as ice cream and fresh flowers, coffee franchises offering top-selling music CDs, and video rental brands with electronic stores sharing the retail floor to hawk cell phones and accessories.

Franchise decision-makers report that in an increasingly self-service economy, computer kiosks are moving well beyond common financial tasks. Franchisors are turning to kiosk technology to allow customers to send branded goods across the country.

As they become central to franchise operations, kiosks will become ubiquitous for retailing products, packaged food, hotel reservations and franchisor-branded gift cash cards.

The consumer is moving to more of a self-service strategy, and kiosks are becoming an integral part of the sales strategy for chains. Time-starved consumers will use them in many places.

Revamping, rehabilitating and regenerating older branded systems will engender new customer loyalty in 2005. Franchisors that have not executed new restructuring plans for consumer contentment face loss of market share.

The "doom loop" cycle has shocked a number of national and international franchisors into reality. We have seen it in the Goliath brands around the planet in recent years. Once a company is in the loop, a turnaround becomes much harder to achieve.

As franchisors keep cutting expenses, morale suffers and product and service erode. The net result is to distance the brand from the customer. Too often, franchisors devote too much time and resources to protecting their turf rather than moving forward with new products and services.

This year executives touted a number of franchising trends. One of particular interest to all sales and development department heads is the high level of interest in franchising from uniquely qualified prospects. These prospects are better capitalized, have more management experience and better education, and are increasingly diverse investors.

Franchise concepts continue to evolve to meet changing U.S. demographics. Age, convenience and the massive economic impact of the omnipresent baby boomers are driving forces behind specialty services franchises.

Interest in this focused area generates more cost-effective and efficient solutions in adult day care, health care, home care, beauty, skin and anti-aging treatments, spas, lifestyle and entertainment.

Franchisors predict that health care insurance companies will be entering the market through franchising business plans in order to achieve the costs savings necessary to improve health care delivery.

Senior care franchising systems more than tripled in units between 2000 and 2004, up to almost 2,000 from just 434 during that period-an annual growth rate of 40%.

Seniors are a thriving part of franchising today, and their presence will explode in coming years as a record-setting number of retirements take place. However, for many Americans retirement is not a viable option. Many are postponing the gold watch party and going back into the work force as franchisees or franchise employees.

According to the U.S. Bureau of Labor Statistics, the number of workers age 55 and older rose to nearly 24 million in 2004, up from 22 million in 2003 and 20.7 million in 2002. At the same time, the government is forecasting a significant labor shortage beginning around the end of the current decade. Franchisors tell us they want and need seniors as a reliable work force for years to come.

Finally, training-the cradle-to-grave mainstay of franchising-is taking on a new appearance through "learning by doing" principles. Operations manuals and videos are still superlative in the training mode. However, franchisors have learned that people retain more through doing something with team members.