Franchise Blog

Douglass Crouse wrote a very interesting article for the The Record titled “As economy hurts, so does franchising”. Unlike most articles about franchising that usually tells you how great franchising is, this one paints a very realistic picture of this sector, at least for the time being.

Crouse writes:

Reduced access to capital has some franchisers struggling to maintain their growth and many franchisees wondering how to pay for improvements. Prospective franchisees, meanwhile, face having to raise hundreds of thousands of dollars for start-up costs at a time when banks are reluctant to lend.

So although some franchises are using arguable tactics to attract new franchisees, it seems that banks are not rushing to finance those new franchisees. Everything is not as bad as it seems though:

Jeff Kip, chief financial officer for Panera Bread, said he foresees no “structural change” in how franchisees obtain funding.

“Even in this time, our franchisees are not having any issues accessing the capital they require to run their businesses,” Kip wrote in an e-mail.

That response was supported by Jim Nawn, owner of the Fenwick Group, the franchise holding unit for 36 Panera Bread bakery cafés in northern New Jersey. He said a combination of in-house cash and bank borrowing has funded remodeling work at nine units this year. A store will be opening in Montclair next month.

It also seems that some industries are still doing pretty well in these tough times:

Franchises often fare better than other businesses during slowdowns. Scarda said service-based franchises — particularly what he calls “dull normal businesses” such as plumbing repair — tend to do especially well.

Cartridge World, which refills printer ink cartridges as an alternative to replacing them, has the benefit of offering a low-cost, business-to-business service that reflects the ideals of reuse and recycling, said Greg Carafello, master franchisee for New Jersey.

Read the full article here.

Filed under: Franchise Talk