Volatile Economy is a Mixed Bag For Franchises

A downturn in the economy freezes some individuals so that they postpone any new purchases while others view it as an opportunity or challenge. Many corporate refugees use severances or retirement packages as a source of credit for a franchise business. With so many different industries making up the economy, not all businesses flail around when the economy does not fare well in general. Indeed, unemployment sometimes spurs those to go where they would not otherwise have gone.

Interest in entrepreneurship tends to increase when people face unemployment and have no other options. Many people consider starting small businesses and franchises. Indeed, some sectors of the economy do not see a difference in a downturn or may even see increased consumer demand. Many people find that these areas coincide with personal interests as people start franchises involving handyman services, fitness, pet care or elder care with require relatively less capital than other types of businesses.

Buying From an Existing Franchisee-Pros and Cons

Unfortunately, many franchise lawyers only hear from franchisees when there are problems and the franchise does not work out as planned. One such instance is when a franchisee has not bought a franchise direct from the franchisor, but has taken the franchise over from an existing franchisee. This is not always a dire circumstance, but it does require a prospective franchisee to do some due diligence as the franchisee should when buying direct from the franchisor. Indeed, there are certain advantages. Assuming that the franchise is already in operation, there may be little left to mystery and the new franchisee doesn't have to start from the ground up. For example, there is already information on the location, the real estate is in place and if the new franchisee is very fortunate, the current employees of the franchise are also in place saving the new franchisee the hassle of hiring new employees and going through an interview process. Also, hopefully, there's an existing customer base with all of its goodwill attached. But try to think of the purchase as also having the downsides of buying a used car or someone's home. As with such cases, the prospective franchisee should try to ascertain why the original franchisee is leaving. It may be for family reasons or the need for change, but you do not want it to be because there is a poor relationship with the franchisor which you may inherit. The financial history may show that the business did well, but are there changes in the market place or local demographics that suggest a trend in the opposite direction? A new franchisee should also check out the terms of the Franchise Agreement very carefully to make sure they can be in compliance for future operations and that there aren't unpleasant surprises triggered by any franchisee transfer.

Impact of The Financial Rescue Plan on Franchised Businesses

Members of the International Franchise Association, (IFA) the world's largest organization representing franchising with a growing membership of more than 1,300 franchise systems, 10,000-plus franchisees and more than 500 firms, made fervant efforts to the House of Representatives to pass the financial market rescue plan. According to this article, IFA President & CEO Matthew Shay felt that: "Passage of the bill in the House will send a positive signal to the financial markets and hopefully free up much needed credit for franchised business to expand. We cannot stress enough the importance of this vote." Shay said that "the 900,000 franchised businesses in the U.S. provide for 20 million jobs and contribute $2.3 trillion to the private sector economy."

New Menu Label Law May Help Food Franchises

According to this article, " California this week became the first state to require restaurants with at least 20 locations to list their calorie counts on menus and menu boards." The advantage for consumers may be obvious, but there was some concern that restaurant operators and food franchises might view the menu labeling requirement a consideration of time and expense. However, proponents feel that the requirement will help consumers combat health problems and some California franchisees do not consider the laws a problem. "Dick Shalhoub, who owns 21 Inland McDonald's restaurants, said McDonald's has already begun listing calorie and other nutritional information at its restaurants nationwide. The California measure should not prove a hardship for his franchise company. "There's going to be the matter of printing and putting up more signs, but that's minor compared to the benefit to consumers." Shalhoub said.

West Coast Franchise Expo in Los Angeles November 7th-9th, 2008

According to this article, the West Coast Franchise Expo has become the first franchising event of the west coast. Prospective franchisees or exisiting franchisees may find a wealth of information at the event. Last year "more than 10.000 qualified candidates visited the West Coast Franchise Expo last year and had the opportunity to meet 200 brands seeking to develop, with almost 50% either serious or nearing a decision on which franchise concept to buy." The franchise expo will be held at the LA Convention Center at 1201 South Figueroa Street.

Phoenix-based Honeywell Aerospace Sees Strong Demand for Private Jets

It's nice to know that despite the economic outlook, some businesses still see strong consumer demand which is hopeful for other businesses including franchises that may have related or supporting goods or services. According to this article, "Despite the global downturn, soaring demand for business jets is projected to generate more than $300 billion in sales over the next decade, which could support thousands of jobs at aerospace companies in Arizona and around the world. Phoenix-based Honeywell Aerospace's annual business aviation outlook forecasts delivery of 17,000 new business aircraft from 2008 through 2018."

Franchisee Financing

As fears of credit freezes abound, according to this article, one company known for its drive-in restaurants, has said it will have financing sources available for its franchisees. Sonic Corp "said the current state of the U.S. economy was challenging and could become more so, but that Sonic and its franchisees "are positioned for future growth and increased development." Responding to news reports about the impact of tighter credit markets on its franchisees, Sonic said said that "it has not been informed of any cut-back in franchisee financing."

California Franchise Expands Seeking New Franchisees

We are always interested in these times in expanding franchises that are hopeful about the economy and expanding to create new opportunities for aspiring business owners. Of course, it's also a way of trying to track if there are certain trends in various industries that signal future growth possibilities. According to this article, the owner of a national bookkeeping franchise that originated in California "now has more than 150 locations. Based out of the Washington metropolitan area, it has expanded into surrounding states." The franchise is actively looking for interested franchisees. Greg Jones, chief executive officer of Bookkeeping Express, states that his business model "is based on the need among small businesses for a national organization that provides bookkeeping services.... Often, small business owners choose between a higher-priced CPA firm or an independent bookkeeper who may not have the entire skill set that can help grow the business."

How One Franchise Remains Optimistic in Hard Times

Despite the economic climate, one health franchise continues to expand internationally and attributes its success to a well thought out franchise model. According to this article, Curves is the ninth most successful franchise company in the world and they are setting their sights on Australia despite the growth their of copy cat fitness centers. Curves' founder Gavin Heaves states that, "we have a very affordable program. You know they may quit the expensive gyms, but Curves at $59 a month is one dinner out that you don’t do. So, if we as an organisation continue to go out there and say that your health is important and that they can take 30 minutes three times a week and it were actually a very affordable form of recreation, then … we actually do well during tough economic times and personally I’ve been around for 15 years, so I’ve been through a couple of recessions and if you are proactive and remind the business operators … they really have the power to maintain their business." Interestingly, Curves is quite vocal about its selection of franchisees. "we sell Curves one at a time to usually women that have numbers that are passionate about the programme and the other guys tend to sell them to investors or pretty much anybody who will put up the money. So, we’ve been able to create a community of support with 10,000 locations in 65 countries that stood the test of time."

Subway Franchise Tries Out New Café System

According to this article, the Subway submarine sandwich franchise is currently testing out a new concept: "five new outlets located in Washington DC shall not only be offering its customers the standard range of subs, ice-cream, cookies and coffee but shall also have an integrated café area." The chain currently has about 29,000 franchises which has expanded to over 85 different countries since its founder Fred DeLuca opened his first location back in 1965.

Local Phoenix, Arizona Franchisees Consider Fro-Yo Concept for Franchising

If you're a regular trend setter in New York or California, you've probably heard of the new frozen yogurt-calorie conscious new taste developed from a concept imported from South Korea called "fro-yo." It has a more tart taste than the frozen yogurt. Though it has been around for a while, according to this article, metro Phoenix has not seen either chain open here which has "left the field wide open for several local entrepreneurs who think they know a good thing when they taste it. A couple of these new owners of businesses are hopeful their ideas will turn into franchises with national outlets." One set of siblings has seen some success opening its first Ice Tango early this year in north Scottsdale and a second store in Scottsdale's Hilton Village. The sister-and-brother team Susie and David Cha have found franchising the way to go.
"It also took the siblings much more than $300,000 - plus the expense of creating the franchise agreements. Franchise cost, the Chas said, will require less than $300,000, which is relatively low, but, as David Cha said, "The idea is that everyone can make a profit. We're really flattered that people want to franchise. And we should be ready to do that soon." You can find a couple of local Fro-Yo stores at Chill 1250 E. Apache Blvd., Tempe. 480-698-6101 and Wildberri Yogurt 401 E. Bell Road (Seventh Street at Bell Road), Phoenix. 602-298-6331.