If you’re wondering who’s going to do well in this economy, look no further than companies that sell franchises. In a very insightful article on MSNBC.com, Mark Siebert notes that the increase in the unemployment rate of 1.4 percentage points over last year adds 2.2 million people to the jobless pool. And “every 0.1 percent increase in the unemployment rate adds another 150,000 prospective franchise buyers to the marketplace.” Add to those who are being pushed overboard the folks who are going to jump before they are pushed–Siebert calls them the “near layoffs”–and the pool grows larger still.
So lots of workless people are sloshing around. Franchisors are salivating, and that's true whether you're in the retail market, the fast food industry or even the managed services market.
Lots of folks have already sold out of the market and are sitting on cash earning no return. These people are looking for ways to put their money to work. While there may be fewer people willing to plunk down a million bucks for a Dunkin‘ franchise, those same people may fork over $500,000 for something else, and there are plenty of franchises available for that amount or less.
Mr. Siebert has a consulting firm that helps companies franchise their businesses, so he has a particular point of view supporting franchising. I come from the opposite angle. I don’t support franchising. I am neutral. As a franchisee and business coach, I know the pluses and minuses of owning a franchised business and the dangers faced by someone who’s going into a franchise for the wrong reason.
Still, I think Siebert’s article is incredibly valuable for people who want to understand the economics at work that favor franchise sales in the coming year. There was never a time for buyers to beware more than now. If you want to find out more about the risks of franchising and how to cope with them, drop me a line.
MSPmentor contributing blogger Mitch York coaches executives who are evolving into entrepreneurs. He is a veteran of high-tech media and an entrepreneur himself. Find York — and his personal blog — at www.e2ecoaching.com. MSPmentor is updated multiple times daily. Don’t miss a single post. Subscribe to our Enewsletter, RSS and Twitter feeds.