Franchising Seen to Grow this Year

Things are looking up for the franchising business. The International Franchise Association has projected a growth of 1.7% in the number of franchise establishments this 2012. This will be the first increase since the economic recession in 2008. Scott Nishimura in his article featured three couples who found their respective niches in buying franchises. The McGregors initially bought the rights to two Toppers Pizza franchise restaurants in Texas. Their start-up cost was $450,000 per store and they plan to open three more restaurants. Ian Stover who lost his job borrowed $8,500 from his credit card to start Soccer Shots. His wife has since also quit her job to join Ian in their growing soccer company. War veterans Rebecca and Michael McMahon took advantage of discounts off the franchise fee offered by the Grounds Guys landscaping company to veterans.

Franchising is growing again
U.S. franchise businesses, which dropped in number during the economic downturn, are expected to grow again this year, according to industry data.
2007 2008 2009 2010 2011 2012*
Establishments 770,835 774,016 746,646 740,098

736,226 748,680
Sales $675 billion $703 billion $683 billion $707 billion $742 billion $781 billion
*Projected Source: International Franchise Association

Franchising, hurt by crimped consumer spending and the tight lending climate during the downturn, is making a comeback. U.S. franchise establishments are expected to climb 1.7 percent this year to 748,680, their first increase since 2008, according to the International Franchise Association. Their five-year peak: 774,016 in 2008.

Texas franchise establishments, which numbered 22,394 in 2007 and shrank since then, are expected to grow in line with national projections this year to 21,772, the association said.

Some of the segments leading the way: lodging, healthcare and casual dining.

“We were growing at a pretty nice clip prior to the recession,” said Matt Haller, vice president for the franchise association in Washington, D.C. “We’re only starting to see lending loosen a little bit as we move through the year.”

The group is worried about the budget debate in Washington and tax increases, he said.

Lodging franchising, which had a “large drop-off” during the downturn, has picked up with easier credit and more business travel, Haller said. Healthcare franchising, part of the industry’s personal-services segment, is expanding with the aging population. And quick-service dining is growing, as “consumers continue to migrate toward lower- and mid-tier price ranges,” he said.

Franchising also became a potential outlet for people who lost jobs during the downturn.

Military veterans have become a rich pool of prospective franchisees, as the Iraq and Afghanistan drawdowns accelerated and more former service members look for private-sector opportunities. “These folks know how to work hard, they know how to show up on time,” said Ron Madera, president of The Grounds Guys. “That’s a value that’s not easy to find in America today.” …

Photo by positivefranchises

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