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The Franchise Economy

The Franchise Economy

By FranchiseKing, Guest Blogger
Published: September 30, 2010 Updated: August 26, 2016

It sure does;t-fee- like our economy is improving too much. Lots of folks are still taking the wait and see approach.

Small business owners still seem to be pretty hesitant when it comes to expanding their businesses. Of course that translates into continued high unemployment.

If yo're out of work, currently, you know just how tight the job market is. This may be pushing you to'consider other options'

In the franchise industry, when the job market is solid, the amount of new franchise owners entering the franchise world tends to stay flat. When folks that are downsized can find a new job quickly, the 'career pain' threshold is minimal.

But, when folks get downsized, and they ca't secure a new job quickly, their 'career pain' level becomes pretty high, and that usually translates into the franchise industry gaining more new franchise owners.

However, this time around, things are a lot different.

This has been a deep and long recession. It has featured things like;

  • The GM bankruptcy
  • A residential real estate bust
  • The collapse of major banks and investment houses
  • A stock market correction
  • 10% + unemployment
  • The credit crunch

'm going to focus for a moment on the one thing that has stalled franchise sales the past couple of years; the credit crunch.

Now, ther's no shortage of people looking for'opportunities' But, there does seem to be a shortage of money to lend start-up franchises.

The banks seemingly have it, and the SBA, under the leadership of Karen Mills, has certainly stepped up to the plate with loan guarantees for banks.

Hopefully, the banks will start lending again, and folks can start new businesses...lots of businesses.

When the economy went south a few years ago, loans were plentiful for franchise start-ups. I was able to help a lot of folks (who were downsized) find franchises to buy.

The word has been out for over a year now concerning the lack of small business loan availability. Most people I talk to know that it may be tough to get a start-up loan. Some of them make the decision to tap into their retirement funds, to start a franchise business. (I'm actually ok with that idea, as long as there are lots of ducks that are in a row. Lots of ducks.) Read about * using your 401 (k) to buy a franchise.

I wonder if there are prospective franchise owners around who aren't even looking at opportunities, because of the credit crunch.

On the other hand, I know of several franchise brokers who are getting some of their deals funded. That's only recently, though. In general, they too, are a pretty frustrated bunch.

The US economy needs the franchise economy to improve. That's because;

  • If new franchises aren't selling, (or not getting funded) then buildings aren't being purchased and leased.
  • Business checking and savings accounts aren't being opened.
  • Business-oriented retirement and pension plans aren't being started
  • New vehicles aren't being leased or purchased
  • Inventory isn't being purchased
  • Business services aren't being purchased
  • New jobs aren't being created
  • Local communities aren't getting new tax revenue
  • Little League teams aren't getting sponsored

I'm sure that I left out several things, but you get the idea.

The point is this; the US franchise industry (and its growth) really impacts the economy in a big way.

According to the * International Franchise Association;

  • There are 909,253 franchised business establishments in the United States.
  • Franchised businesses provide more than 11 million jobs, or 8.1 percent of the national private-sector workforce.
  • Franchised businesses supply an annual payroll of $278.6 billion, or 5.3 percent of all private-sector payrolls in the United States.
  • Franchised businesses produce goods and services worth $880.9 billion per year, or 4.4 percent of private-sector output in the US.

As you can see, the impact on the US economy is huge.

If you're in a position to get into a franchise business of your own, maybe it's time to start looking around a bit.

Who knows, the banks may actually start to lend money by the time you find that perfect one.

If you decide to start looking around for a franchise, Business.Gov just put together The Ultimate Guide to Franchises. It's a great place to start.

You're going to need a business plan. Check out the resources at Business.Gov.

*Non-government link

About the Author:

Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.