Franchising's Movers and Shakers Feeling Optimistic for First Time in Years

Allow me to channel Ronald Reagan for a moment: It's "morning in America." Now. Today. We're finally seeing evidence of that.

No, I'm not delusional. I realize we're likely not even at "good" on the "good, better, best scale." But on Wednesday the New York Times revealed the Federal Reserve projects a sunnier economic outlook for 2011, even though the unemployment rate will likely linger around the 9 percent mark. The Fed predicts we could see growth as high as 3.9 percent this year.

My optimism was underscored earlier this week while attending the 51st annual International Franchise Association (IFA) Convention. Attendance was up. The floor at the exhibit hall was abuzz. Of course, where there's buzz, there's buzz kill. The primary challenge is the still tight credit market, which hinders both new franchisee recruitment and existing store expansion.

Despite that, franchising is in for a good year. According to the 2011 Franchise Business Economic Outlook, nearly everything is heading in the right direction:

• Franchising is creating jobs, 194,000 of them to be precise. Slightly more than 7.8 million Americans will be directly employed by the franchise industry, up 2.5 percent from last year. Only the business services industry is expected to see a slight decline in employment.
• The number of franchise establishments is also expected to grow by 2.5 percent to a total of 784,802, a jump of 19,079 new franchises. Business service franchises are the only category expected to lose units this year.
• The big growth looks like it will come from "economic output" (essentially, revenues) which is projected to grow 4.7 percent to $739.9 billion. Setting the pace in economic output will be auto sales, commercial and residential services, and personal services.

Perhaps that anticipated surge in personal services (and a 9 percent increase in same store sales from 2009 to 2010) is the reason Gordon Logan, founder and CEO of Sports Clips, a men's hair-cutting franchise, says he's feeling "very optimistic." Logan's positives: consumers are willing to spend on "small indulgences" and real estate prices remain a great bargain, creating opportunity for growth and expansion.

IFA president and CEO Steve Caldeira has big plans this year. In addition to tackling the business credit crunch, Caldeira is focused on showing "how franchising can drive the economic recovery," and emphasizing the impact franchising has within the small business community and the overall economy. Franchising, says Caldeira, "creates more jobs, and creates them faster" than non-franchised businesses. And it's important that consumers (and Congress) understand that franchisees are "individual businesses operating in a local economy, creating jobs, doing charitable work, and building local revenues."

A year ago, Caldeira's predecessor Ken Walker told me he was "cautiously optimistic" about the coming year. Caldeira seems a bit more positive than that, but cautions that while "we have turned the corner, we're not out of the woods yet."

Incoming IFA chair Jack Earle, a multi-unit McDonald's franchisee, agrees that "access to credit" is a big issue, especially for smaller franchise systems. Of all people, Earle would know; before he bought his first franchise Earle was a banker financing (among others) McDonald's franchisees, until he realized "it looked better on the other side of the desk."

Some people think franchising is not an entrepreneurial endeavor. Nothing could be further from the truth. Truly successful franchise systems rely on the innovativeness of their franchisees. Earle points out that many of McDonald's iconic products, like the Filet-O-Fish and Big Mac, were franchisee generated.

Achieving success in the franchise industry is no different than being successful as an independent business owner. At the end of the day, you need to take responsibility for your actions, and understand the impact they have in your neighborhood, and the nation.

Is there a formula for success? Kathleen Gilmartin, CEO of Interim Healthcare, says "business ownership is not for the faint of heart. And you have to see the vision before you can build the future." Lynette McKee, senior vice president at Checkers Drive-In Restaurants and who started her career as a second-grade teacher, says success comes from "keeping your eyes open and fighting for what you believe in." Or, as Jack Earle puts it, "If you're not at the table, you're on the menu."

In case you couldn't make it to Vegas yourself, check out our full slideshow of speakers and guests from this week's IFA convention.