Let’s Talk Franchising!

A Bad Economy May Benefit Franchises

Author: Jim Coen
November 25, 2008
Category: Franchising in general

Mark C. Siebert for Entrepreneur.com writes that with all the negativity making headlines these days, it’s difficult sometimes to maintain perspective.

Foreclosures at record highs. Nearly a trillion dollars in bailouts. The Dow with record declines. Mass layoffs and unemployment at five-year highs. Reading Dickens–it was the best of times, it was the worst of timesthe period was so far like the present period–it seems that perhaps he only got it half right.

But for franchisors, truer words were never spoken. Yes, there are some short-term difficulties that will take time to flush through the system. At the same time, however, there are a number of reasons to anticipate that the best of times are right around the corner.

Perhaps the best place to gain this perspective is by understanding what drives franchise sales.

There are, of course, thousands of factors that drive franchise sales at the micro level. A bad day at the office. An overbearing boss. A neighbor’s franchise success story–and perhaps his new Mercedes. A cancelled flight that leads to the missed soccer game.

But at a macro level, there are three predictable factors that can lead to a surge in franchise sales activity–and many of them are pointing to a franchise boom on the horizon.

The first and foremost factor affecting franchise sales is a rising unemployment rate and the fear of losing one’s job. At 6.1 percent, the unemployment rate has increased by 1.4 percent in the last 12 months alone–adding 2.2 million people to the ranks of the unemployed. And some economists are predicting that it will hit 7 percent before it turns around.

While that news is terrible for the economy, and it sounds callous to even mention it, what this means for franchisors is a larger pool of franchise candidates.

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