There was a lot of optimism this month at the International Franchise Association’s 50th annual convention in San Antonio, Texas. Incoming IFA chairman, Ken Walker, who runs the Driven Brands group (Meinike, Maaco, and others) told me, as a “glass half full” kind of person, he was feeling positive about the future of franchising and the economy. Walker is hoping franchisors can help lead the job creation juggernaut that’s needed to turn the economy around. Outgoing chairman Dina Dwyer-Owens, who leads The Dwyer Group of franchises, has already seen “signs of recovery” in her system in December and January.
Although the 2010 Franchise Business Economic Outlook, prepared by PricewaterhouseCoopers for the IFA, forecasts a “slow recovery” with “marginal increases in the number of [franchised] establishments, employment and economic output,” Matt Shay IFA President and CEO, is “cautiously optimistic” for 2010. However, Shay predicts a much more robust 2011, believing there’ll be “a surge in growth” and a franchise boom much like the one the industry saw in 2005 to 2007. Leading up to this surge, however, Shay says the “credit market needs to function properly.”
In fact, Shay believes the “growth opportunities” for franchising are “limitless.” Shay explains there are two approaches that franchisors take when creating businesses. “There are the franchises that do old things in a new way, like [burger franchisor] Five Guys and there are franchisors that do new things, like BrightStar,” [a health-care staffing business], whose co-founder Shelly Sun was honored as the “Entrepreneur of the Year” at the convention.
Shay believes franchising is vital to the future economic health of America, particularly as the nation continues to shift to “an experiential economy” and away from a manufacturing base. “Franchising,” Shay says, “is the most effective means of investing capital for the distribution of goods and services.”
One of the shifts in the past decade for franchising has been in the number of private-equity firms that have invested in franchise concepts and the increasing interest of Fortune 500 firms that are buying existing franchise operations or launching new concepts. Shay cites the 2006 acquisition of carpet-cleaning company Chem-Dry by Home Depot and the more recent launch of Mr. Clean Car Wash by Procter &Gamble.
While you’d expect the trade association for franchising to have a positive outlook, this optimism is backed up by the numbers reported by PWC. In its 2010 Economic Outlook, PWC sees increases (albeit small ones) across the board, with the number of establishments predicted to grow 2 percent to over 900,000 units, employment to slightly increase to over 9.5 million and output (the gross value of the goods and services a business produces) to grow a more robust 2.8 percent to more than $868 billion.
After successfully launching a program to attract military veterans to franchising, Shay says the industry is now reaching out to ethnic minorities and boomers.
Rieva Lesonsky is founder and president of GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses. Follow Rieva at Twitter.com/Rieva. Visit SmallBizDaily.com to read more of Rieva’s insights. Visit StartupNation to buy her newest e-book, 23 Hot Businesses to Start Right Now!