In fact, I’m bullish on franchising and believe at the end of 2010 we could be looking back at it as the Year of the Franchise.
From 2001 to 2008, franchising grew by 40 percent, according the International Franchising 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.
From my perspective, there are several factors that could put that growth rate even higher.
First off, the Obama Administration has started talking about freeing up money through the U.S. Small Business Administration for small business. Now is the time to bail out the small businessman, many of them franchisees.
Secondly, there are many baby boomers out there, whether by choice or not, who are no longer looking for a regular corporate job. They realize you can’t depend on one company for a lifetime any longer. Many of them have some money in savings or retirements accounts that combined with their real-world business experience will choose to put it toward franchises.
In addition, the slow commercial real estate market now has many landlords looking to make attractive deals with prospective tenants.
All these forces are lining up now to make franchising a big lure.
So what should you be looking for in a franchise business to ensure as much as possible a return on your investment? After more than 30 years of working with franchise companies, I’ve found four elements that are critical for a franchise, or any business for that matter, to succeed.
They are its product, simplicity, it having sufficient controls in place and corporate support.
The product is crucial. Is it a product whose time is now? Secondly is it a business that is easy to understand so that others can duplicate it. If there is only one person who can run the business, then it won’t succeed as a franchise.
Checks and balances are probably the most important element in today’s business environment. Daily and weekly checks and tracking expenses and income are essential. You should be able to answer this simple question at any time: How much money did your business make at the end of the week?
And finally, assistance from corporate should never be more than 15 to 30 minutes away. Learning from those who have the playbook saves a lot of headaches of an education through trial-and-error.
That franchising playbook has worked again and again in the past. And it’ll continue to for those willing to follow the well-established path in 2010.
Larry Feldman – Feldman started with Subway in 1977 when he was an assistant minority counsel to the House Banking Committee. Through the encouragement of college mate Fred Deluca, founder of Subway, Larry left his calling as an attorney to pursue the sandwich business, opening his first location across from the U.S. Capitol, on First Street SE. He later acquired exclusive Subway rights to the Mid-Atlantic territory through his company, Subway Development Corporation, which is responsible for developing and supporting franchises in his area. To date, Larry’s sandwich empire touts over 1,100 locations and growing. He’s now working as a development agent with Pizza Fusion, the country’s leading organic and eco-conscious restaurant franchise, and The Original Brooklyn Water Bagel, owner of a patented water technology that recreates Brooklyn water, allowing its franchises to produce a distinctive Brooklyn bagel anywhere in the world.