Friday, February 5, 2010

Kiplinger Article on Franchises

Franchises Getting Upper Hand Over Independents

Kiplinger, Jan. 2010 by Jonathan N. Crawford

Franchises are making gain on independents, especially restaurants. By 2012, franchise eateries including fast foods, family sit-down places will outnumber all others. From 2000 to 2008, the number of franchise restaurants grew by 20%, while non-franchises fell by 4% (according to NPD Group marketing research company). Deflated customer spending and crimped credit cards could even accelerate this trend.

“Franchises have been far from insulated from the recession, but overall they have performed better,” says Jonathan Maze, editor at Franchise Times trade magazine.

On the whole, franchises will outgrow their non-franchise rivals this year. They are typically better positioned than a mom and pop shop and they benefit from brand presence, corporate marketing an advice from the franchisor.

Moreover, lenders may be less tightfisted with franchise owners than non-franchise owners, according to Darrell Johnson, president and CEO of FRANdata, and independent research firm. In fact 60 new franchise brands were added last quarter 2009.

The overall economic output for franchises is expected to rise 2.8% this year. The biggest gains will be in personal services, quick service restaurants and business services, according to Pricewaterhouse Coopers.