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Ask Vice-President Don Daszkowski: July 2010
Vice-President Don Daszkowski answers a state of the franchise economy question.Consultant Question: How has the economic downturn affected franchising and our ability to get sales financed and closed?
Don Daszkowski's response: The franchise industry and particularly our segment of that industry have historically proven to be remarkably resilient and almost recession proof. Even in the midst of this worst economic climate since the Great Depression we continue to get good news.
From 2001 to 2008, franchising grew by 40 percent, according to the International Franchise Association. A report prepared by PricewaterhouseCoopers for the association showed that with the economy in a tailspin in 2008 and 2009, franchising saw only a slight decline of one-tenth of one percent. The consulting firm expects franchising to start growing again this year at around a 3 percent clip, or an increase of nearly $24 billion over 2009.
As franchise consultants we are even more impervious to the vagaries of the economy because of our unique ability to change and adapt to the current climate. Instead of finding ourselves locked in to a single product with a single price point and financing options, our Franchise Alliance team has over 300 unique franchises with unique price points and financing to offer a client.
When the marketplace changes, we as franchise consultants are able to simply adapt and change with it. A few years ago we might have been referring more clients to high end hotel, restaurant, and other bricks and mortar franchises that required extensive financing. Today we are much more likely to be showcasing the smaller, work from home, low equity franchises. We easily modify our approach to the moving economic target.
According to the International Franchise Association's recently updated Small Business Lending Matrix and Analysis, every incremental $1 billion in lending to franchised businesses can create 40,400 jobs and $4.2 billion in economic output. No wonder the current administration has made SBA fast track loans a priority. Historical data also demonstrates that during previous economic downturns franchising has always led the economy toward recovery.
In addition to our ability to tailor our offerings to meet the needs of the marketplace, we also benefit during a downturn from the added presence of some very talented and entrepreneurial people to our client list. Former employees that have been downsized or forced to take a buyout often feel that the only real security is to own their own business, and we can help!
Now let's get back to the business of leading the economic recovery into the next decade!
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