Mar 24

Franchise and Business Opportunity Expectations for 2011-2012

It’s fun to dust off the proverbial crystal ball and predict what the coming times may hold in store for the franchise world. But first, a quick review of the upheaval that the franchise industry has endured in the recent years is in order.

There has seen a huge increase in unemployment, the worst recession since the the beginning of time and the near disappearance of the credit market for startup loans. These conditions are now being referred to as the “new normal.” It might be some time, if ever, before the economy and franchising return to the real growth days that were the norm for most of the past decade.

Though starting a franchise has become more easier in cash-flow terms than it was just a few years ago. I see some compelling signals that the industry may be turning a corner; and turning it fast!

My crystal ball tells me that three trends may make franchise ownership easier and more rewarding in 2011 than it has been in the recent past. These changes are coming in the following key areas:

Financing. Over the past two maybe three years, the credit market has been all but shut down for new business startup finance. It’s in reaction to the problems resulting from years of undisciplined and imprudent lending. But I’ve recently seen a number of small startup loans (less than £20,000) approved by small-business financing. I’ve even seen a few conventional loans approved local and regional banks and traditional sources. These small steps are an encouraging sign that the market may be on its way back to a middle-of-the-road position for making lending available on a sensible and prudent basis to people who can show that they are a good credit risk. That change may put franchise ownership back into the possibility column for those who have been frozen out due to lack of financing.

Opportunities. Lenders weren’t the only ones who were sometimes operating poorly. A number of franchise operations sprang into existence and expanded rapidly without the foundations to produce long-term success for investors. The marketplace has got wise to this. Many franchisors have now changed and worked to lower investment requirements, increase operating margins, attract and retain more customers, and help their franchisees produce more earnings faster. The best systems are seeking to communicate the results of these efforts to prospective franchisees. Many companies are exposing their financial information on their franchise prospectus, and some are trying to make their opportunities even better, a positive development for the franchise marketplace.

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