Franchising expected to improve in 2012
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The franchising industry is looking up in 2012 after several rough post-recession years of tight credit and weak consumer spending.
Franchisees -– entrepreneurs who own and operate branches of chain businesses such as McDonald’s, Hampton Inns and Suites and H&R Block -– support 12% of the country’s private sector, according to the International Franchise Assn. The group anticipates improvement in franchised industries including retail, real estate and personal services.
Although the expected rate of growth is still below what it was before the recession, jobs at franchised location are expected to grow 2.1% in 2012 to 8.1 million positions. About half of those workers will be employed at restaurant franchises.
The number of establishments will rise 1.9% to 749,500 units and revenue will boom 5% to $782 billion. Franchise businesses account for 3% of the country’s gross domestic product, according to the association.
But there are still plenty of hang-ups. Franchisees and franchisers -– the chain companies that recruit the entrepreneurs –- say they’re frustrated with the slow economic recovery, a lukewarm welcome for small businesses in Washington and rising prices for commodities.
Access to credit hasn’t improved, according to two-thirds of franchisers and nearly half of franchisees. Eight in 10 franchisers and more than half of franchisees say stingy lenders have limited their ability to expand.
Still, 85% of franchisers say they’ll increase the number of locations anyway, and more than three-quarters anticipate an increase in consumer sales. Franchisees, though, are a little less optimistic.
-- Tiffany Hsu