Is Now the Right Time to Buy a Staffing Franchise?

Like most sectors of the economy, the staffing industry has taken a hit recently. Staffing covers a wide range of services, including permanent job placement, executive recruiting and search, and temporary employees, as well as niches such as office workers, professionals, health-care employees, industrial workers, and more.

In the fourth quarter of 2009, staffing employment actually rose 2.2 percent from the previous quarter, says the American Staffing Association. However, for the entire year, average daily employment was down 24.6 percent from 2008.

Has the industry hit bottom? It’s hard to say, but some industry experts are cautiously optimistic. The American Staffing Association reports that in February 2010, staffing employment shot up 10 percent compared to the same time last year. In particular, health industry staffing services are expected to flourish. Says the Bureau of Labor Statistics, “Suppliers of medical personnel to hospitals and other medical facilities should continue to perform well, as demand for temporary healthcare staffing grows to meet the needs of aging baby boomers and to supplement demand for more healthcare services throughout the country.”

The staffing industry is what’s called a lagging economic indicator, because people don’t get laid off until the economy has gone downhill, and don’t get rehired until the economy has improved. So even after an economic uptick, it takes a while before companies that have let workers go are confident enough to rehire.

Today, staffing companies are dealing with huge numbers of job seekers, but a shortage of jobs in which to place them. Barry Cohen, managing director of Rockwood Search Associates, a New York recruiting firm, has been in the industry for nearly 30 years. Cohen says that with so many online job sites to choose from and so many unemployed workers, “companies are trying to hire on their own” rather than use staffing services. The jobs he is being asked to fill are for very hard-to-find candidates.

But while staffing may be going through a downturn now, the industry has been consistently strong for the past several decades. It’s not a question of whether staffing will pick up again, but when. Cohen says the industry is coming back slowly, and he doesn’t expect to see a significant uptick until September this year -- at the earliest.

The temporary help industry in particular was hit hard in 2009, down 15.2 percent in the fourth quarter of 2009 compared to the same period the previous year. Yet some temporary-help agencies are reporting growth in 2010. Others remain skeptical. Cohen says that while temp jobs are usually the first to bounce back, that’s not the case this time around. “Permanent and temp [jobs] seem to be coming back at the same slow pace,” he notes.

Jonathan Thom, vice president of professional staffing at Express Employment Professionals, a full service staffing franchisor, reports that he’s seen a partial rebound in contract staffing. “The growth has been strongest in accounting and finance, as well as information technology,” he says. “Additionally, we are experiencing growth in legal placements, engineering, creative, marketing, and advertising.”

Manufacturing jobs could also be on the rise, as in February the Institute for Supply Management said that economic activity in the sector had increased for the seventh month in a row.

To succeed now, companies must offer a diverse range of services rather than focusing on just one sector or industry niche. Buying into a franchise system gives you an edge because you have a franchisor keeping up with the niches that are poised for growth. A system with locations throughout a region or nationwide will have its finger on the pulse of trends across the country in a way that one independent can’t.

Because you have to cover the employees’ payroll before you receive payment from the companies that hire them, staffing is a notoriously high-cost business to launch. A staffing franchisor will finance this cost for you -- a huge advantage at a time when financing for independent startups is still tough.

What do you need to succeed as a staffing franchisee? At Express Employment Professionals, Jennifer Anderson, vice president of marketing and communications, says good candidates have at least five years of staffing experience or strong sales and business management experience, success in team building and delegating, and an outgoing, “people” personality. “Additionally,” says Anderson, “they must demonstrate a willingness to follow the franchisor’s systems and programs.”

For a complete list of staffing franchises, visit the Staffing Agencies section of the AllBusiness.com Franchise Directory.

Karen Axelton is chief content officer at GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses.