Friday, October 28, 2011

Franchising back in Fashion

I was compelled to share this recent article from the Chicago Daily Herald on my blog as I felt it captured the state of franchising and how it is impacting lives, jobs, and the economy in general in the US marketplace.

While virtually every sector of the economy remains stagnant in the recession, the franchised business sector is growing — and those new businesses are boosting the local economy.

The International Franchise Association projects 1,900 new U.S. franchise businesses for 2011, creating 194,000 jobs and adding $33 billion more to the economy. The average new franchise business creates 10 jobs, according to FRANdata, an independent organization that analyzes the franchising sector.

This year, one of every 10 businesses in the United States is a franchise business, and 27,000 franchisees own and operate two or more franchise units. Experts say the franchising model works because of its tested, proven approach and streamlined operational characteristics. Add to that equation a popular product or service and you have a business model rich with potential.

“With the disappearance of corporate loyalty and the instability brought on by downsizing and buyouts, the greatest appeal to new franchise owners is not money, but control and independence,” said John McLellan, president of FranNet of Chicago, a franchise consulting firm. “People want control of their future. They want to and are willing to invest in themselves rather than the stock market or with banks. Franchises give people the opportunity to ‘ be in business for themselves, but not by themselves.’”

“The overall economic impact of new franchise businesses opening this year is big, but at a local level, these numbers mean real jobs for real people,” said McLellan. “If even 10 new franchises open in our area, that’s 100 jobs — and that’s huge,” McLellan said.

But one of the biggest obstacles to franchise is the choice itself, he added. “Not everybody is cut out to a franchise owner. You need to do the proper due diligence and be financially and emotionally prepared to be an entrepreneur".

Each new franchise adds substantially to the economy. A business service franchise, for example, creates an average of seven jobs; commercial and residential service franchises create an average of six, according to FRANdata. “We are seeing great franchise candidates from many age groups and industries, and many of them want to be part of the economic recovery,” McLellan said. “Franchising is attractive because it works.”

In fact, franchising creates jobs at a faster clip in down markets than the overall marketplace, the IFA says. After the 2001-05 recession, jobs in franchised businesses grew 40 percent compared to 26 percent in other sectors, said IFA spokesman Matthew Heller.

But like any business model, some are successful while others are faltering. According to McLellan, high-performing franchise opportunities are available in food, retail, and service businesses. Some are new names while others are longtime franchise players. “Franchises which provide a ‘need’ versus a ‘want’ are certainly performing better in this economy,” he said.