The U.S. business outlook for 2012 may remain cloudy, but franchise-acquisition consultant and author Joel Libava claims there are five good reasons to consider opening a franchise in the coming year. One reason is that signs indicate there will be more credit available as uncertainty regarding tax reform and other major policy issues are resolved in the election year. Another reason is that more commercial space is becoming available and at better rates, which will significantly lower start-up costs. Add this to a market where there is plenty of talent for hire and Libava and others say it is a recipe for success. For more on this continue reading the following article from TheStreet.
Even with predictions the economy in 2012 is expected to be as fickle as 2011’s, many companies are still setting their sights on growth, so why shouldn’t you?
One of the easiest and more predictable ways to do that is to look for those companies aiming to grow and buy a franchise.
Franchising means you run a business of your own, but with a proven method of success as well as support and marketing assistance from the franchisor.
Joel Libava, a franchise-acquisition consultant and author of Become a Franchise Owner! says franchising means building equity in a business, controlling the circumstances to reach your career goals and dreams and creating an opportunity for your children to join you.
Here are some reasons 2012 is a particularly good time to own a franchise:
1. Credit is loosening.
In 2009, the franchising industry lost 400,000 jobs. Last year, the industry grew at just 0.03%, basically flat, according to Steve Caldeira, CEO of the International Franchising Association.
This year, the industry was projected to grow jobs by 2.5% and economic output by 5%. The number of jobs added will likely come in a little below expectations, but that’s better than a decline, Caldeira notes.
"The big issue has been a lack of credit to meet the demand for [franchisors’ and franchisees’] growth." Caldeira says. "We’ve been working really hard with the banking and lending community regarding that issue, and while credit is starting to loosen up a bit, we still have a long way to go."
Additionally, there is still "trepidation" on the part of franchisors and franchisees to expand due to uncertainty and costs regarding changes in health care and what tax reform will look like in 2012 and beyond, he says.
"That being said, franchising is doing better than most industries because it a proven business model with 40% growth over the past decade [across 300 business lines], while also offering aspiring and existing entrepreneurs an opportunity to control their own destiny in a still challenging job market," Caldeira says. "That’s why we’re seeing a return to growth this year and why we are cautiously optimistic [as an industry] that the growth will continue to steadily improve in 2012 and beyond," both in iconic and emerging franchise brands.
Caldeira noted that franchises in industries such as health care, automotive, business services and personal services are seeing particular growth.
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2. More ways to finance a franchise.
Besides bank loans, other avenues to get financing are being created, including borrowing against equity in your home at all-time lows and rolling over 401(k) investments into a business without penalty.
Next year "probably has one of the bleakest outlooks in terms of improved levels of employment," especially since midlevel manager and C-level jobs are few and far between, says Shelly Sun, CEO of BrightStar Care. "If you’re going to be able to find a job, isn’t it better to bet on yourself in uncertain times than hope for the best?"
But there is another trend industry participants are picking up on: Downsized co-workers are looking to partner with each other to buy and operate a franchise.
"We’re starting to see a normalized set of new buyers," Sun says. "They know their chemistry, know [each other’s] work ethic and work values."
Franchise partnering is also happening between strangers. Darwin Ramon launched Shareafranchise.com in June to help franchisees find partners. He calls the site a dating site for potential franchisees.
3. Commercial space is available.
Given low interest rates and market space available, it’s a buyer’s market not only on residential homes but commercial leases as well.
"Leasing commercial space is easier and cheaper now, so when starting a franchise that requires a commercial space, the possibilities of getting a good deal at a great location are better now than when the economy is in full steam," Ramon says.
According to the most recent economic outlook by the National Association of Realtors, vacancy rates in the commercial real estate markets are in the double digits. While they are expected to improve somewhat in 2012, of the four major sectors — office, industrial, retail and multifamily — none are projected to improve their vacancy rates more than 1%.
"Vacancy rates are flat, leasing is soft and concessions continue to make it a tenant’s market," according to a Nov. 28 statement by Lawrence Yun, NAR’s chief economist. "However, with modest economic growth and job creation, the fundamentals for commercial real estate should gradually improve in the coming year."
4. Franchisors are helping with initial and ongoing expenses.
These days, with credit so tight, franchisors are making it more affordable and offering more support to own a franchise.
Pet waste removal company DoodyCalls is offering new franchise owners partial reimbursement of their advertising expenses — $12,500 in their first year, so long as the money was spent according to the company’s approved marketing and promotion plans.
"It’s just really important to advertise your business to grow," says DoodyCalls founder and CEO Jacob D’Aniello. "We wanted to put money where our mouth was in how much we truly believe in this."
DoodyCalls has three primary lines of business. The company removes pet waste from residential yards, has a kitty litter swap service and works with communities and homeowner’s associations to service pet waste bags and receptacles.
The company also recently launched an e-commerce component to sell pet waste equipment, products and services to commercial properties, a major growth market for DoodyCalls. It plans to expand DoodyCalls Direct with additional pet products for homes.
D’Aniello says while the company has been around for 10 years, it’s only recently that pet owners are realizing that this type of service is available. That’s why DoodyCalls emphasizes local marketing when a franchisee takes over a territory.
"Pet waste is bad for the environment, and increasingly with the green movement people are more aware they need to be picking up after their pet on a regular basis," D’Aniello says. "Communities are becoming increasingly aware that they need to keep their communities clean and neat, and they are willing to pay for the service."
DoodyCalls has 55 locations and is aiming to reach 250 over the next 10 years.
"For our business specifically, the greatest hindrance is still that people don’t know that they can call somebody to do this service," he says. "There is a huge opportunity to win people who are not currently in the market."
5. Plenty of talent to hire
Given the state of unemployment, it’s a great time to hire talent. Franchisees can pick up some well-qualified workers who may not have been available otherwise.
Some franchisors also feel it’s their responsibility to provide jobs. "Being an entrepreneur means you are creating jobs and helping to rebuild the economy. Simply put: it’s the American thing to do," D’Aniello says.
This article was republished with permission from TheStreet.