Franchise Outlook 2012: A Better Year in Store?
2011 wasn’t exactly a jolly year for the franchising industry. The number of franchises in the U.S. fell for the third year in a row, according to a new study by the International Franchise Association (IFA). The good news is that the decline of 0.6 percent was much smaller than previous years, which suggests that the industry has weathered the worst of the economic downturn.
Overall, though, it was a very disappointing year, especially since the IFA had forecasted that the franchise industry would grow 2.5 percent in 2011. Ever bullish, the IFA says better times are ahead. It projects that the number of franchised businesses will grow a modest but noteworthy 1.9 percent in 2012.
The types of franchise operations expected to grow the most in 2012 include hotels/motels, business services, and personal services. Fast-food restaurants will remain the most popular type of franchised business. In all, 21 percent of franchises in operation next year will be quick-service restaurants, according to the IFA study.
But let’s not get too excited yet. One economist interviewed by The Wall Street Journal believes the IFA study is “overly optimistic.” Darn, just what we didn’t want this holiday season: a cold dose of reality.
McDonald’s rules the world. The healthiest town in America is having a coronary now that the very first McDonald’s franchise is moving in.
The citizens of Loma Linda, California typically live well past 80, and the town itself has one of the highest rates of longevity in the entire world. But some fear the worst now that Loma Linda’s city council has approved its first McDonald’s restaurant
“We know from research that if a school is near a fast-food restaurant, the kids there are more likely to be obese,” one resident told The New York Times. “I am going to drive by that intersection every day, and it’s fairly likely (my kids) will say ‘Oh Daddy, can we stop there’ more often. Why do we need to encourage that?”
But it’s possible the city had no choice. “About 10 years ago, when the city denied plans for another fast-food restaurant, the developer responded with a lawsuit and the city eventually capitulated,” says the newspaper. In other words, it’s Ronald’s world. We just live in it.
Northern exposure. Looking for new opportunity? A fresh start? Forget about heading west. Head north instead. The Great White North, to be exact.
Despite the cold temperatures, Canada is one of the hottest markets for franchises looking to expand.
“Canada is certainly one of our growth markets,” an executive at the U.S.-based Popeyes chain recently told The Globe and Mail. “Our business is very healthy up there. Compared with the U.S., (the Canadian) economy has weathered the recession much better.”
The push north is being driven by slower growth back home, as well as a healthier economic climate in Canada, where consumers have more disposable income to spend on fast food, and banks are more willing to extend credit to franchisees.
But, as this article suggests, there are a few pitfalls and U.S. franchises would be wise to look before they leap into Canada.
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