The US Economy VS. The Franchise Industry

                                       

                                                       

The President of The International Franchise Association has some pretty darn positive things to say about how well the franchise industry has weathered the economy, in the past. He talks about those great 2001-2005 Franchise growth charts. Matthew Shay is supposed to say positive things about franchising, no matter what is happening. If I was the President of The IFA, I would probably do the same thing. Or, would I?

Keep reading, please.......

In a letter from the IFA's Franchising World magazine posted on the Franchise.org website, it says:

"The state of the economy in recent months may have caused a case of the jitters among the general population, but judging by the overwhelmingly-optimistic comments shared among those who attended IFA’s 48th Annual Convention, there are more opportunities than there are challenges."

A case of the jitters? Jitters? Matthew! Today it was reported that the US auto industry just took a huge hit. The major automakers were down over 20% each. 20%! {Even the stellar Toyota brand!}

Matthew, you are welcome to say that Joel Libava is just being negative, but I feel in my heart, in my gut, and in my wallet that we are in a perfect storm.

Here is what we have, Matthew:

• $4.00 a gallon gasoline- This of course affects all franchisees and franchise companies that use gasoline.
• Inflation- We have not seen inflation like this in a decade, or more. Of course, inflation affects franchisees, who have to purchase products to run their businesses, and franchisors who have to make all types of purchases to keep their infrastructure going. Of course franchisors have to invest in marketing for branding purposes, and to sell more franchises. Their costs are going up, big time.
• An election year- Everybody knows that if the Democrats win the White House, taxes are going up. If the Republicans win, things might just stay the same. Ugly. 

{Of course we are all kind of guessing that taxes will go up if the Dems win. We are also sort of guessing that things will stay lousy if the Republicans win.}            

• The war in Iraq. Without getting into a political debate on this small business/franchise blog, if we just stick to the facts, the war is costing taxpayers $Billions of dollars a month. That is draining our already struggling economy, big time.

• The Mortgage/Banking Crisis- A little tougher to get a franchise loan, huh?
• Stock market losses-Nest eggs of potential franchise owners is shrinking.

I joined forces with the consulting end of the franchise industry in 2001. If you remember Matthew, 2001-2003 was ugly. Our country was attacked. Millions of jobs were lost, but franchising gained some wonderful ex-executives and managers from the corporate world. Lot's of them. I was very busy, and was personally able to help dozens of folks get into franchised businesses of their own. That was then. This is now. The difference now is that we have all the other stuff going on that I outlined above. There is a lot of fear, uncertainty, and paranoia in the air. My little consulting business is feeling it. I have very few folks that I am working with currently that are actively exploring franchise opportunities. I am not alone. You know that our industry as a whole is being impacted, big time. The franchisors that I talk with are all saying that the amount of people inquiring about their franchise opportunities has dropped dramatically.

I will not spin, Matthew. It is pretty ugly economically in our country, and things may not get better for awhile. I still believe in this country, and in the franchise industry as a whole. We will bounce back. I prefer to be upfront with the folks that I talk with, and the way I conduct business. I just cannot stand outside my office building today and shout "This is a wonderful time to get into a business of your own!" It is an ok time. An ok time is ok. Sometimes, when one takes the plunge into business ownership, the timing is not that good. Timing is really not everything, though. Doing great due diligence is one way to weather the storm. Another way is to stay away from franchise fads.

Matthew, the franchise industry is hurting just like every other industry, currently. It will get better. You are right about one thing: Franchising always does bounce back....

Your Blog/Website Will Stand Out. With This.

Happy July 4th!

Independence!

Independence!

Comments

[Joel Libava]

This comment was emailed to me over the weekend.
{From a friend of mine}
There's something to be said about marketing to the affluent. They usually are not subject to price objections. Cash is King and in "bad" (what the media brainwashes the public with) economy things go on sale, even businesses to buy, possibly franchises as well. I would say this is a great time to start a business because when the economy picks up again you'll be positioned right where you want to be.

[david]

Its all very complicated and you point out lots of moving parts but I still see a lot of high paying jobs posted on employment sites. Some of the sites listed in About.com's top 10 job sites:

http://www.realmatch.com
http://www.indeed.com
http://www.simplyhired.com

I still think if one wants to find a job, they can