Will there be a Decline in Franchises in 2009?

I have been doing some thinking about this question. Because, in essence, the franchise market has only but had an upward trend year on year. My belief is that what goes up, must come down. Mustn’t it?

The answer is…franchising is like the rest of business…dependant on market forces. Two things that separate franchising from the ‘corporate world’ is that it hinges on the strength of small business and an increasing demand for a particular product/service.

In the economic climate we find ourselves in now, there are some identifiable areas where I would think you would see franchising slow down:

– Residential property (estate agents, managing agents, letting agents)

– Builders

– Property contractors

– Finance brokers (particularly morgage services)

But these are slightly obvious ones! Where there has been an extraordinary squeeze on an industry, and it ultimately affects the consumer reaction to that industry pretty significantly…you will see a slow down in that franchise market. The squeeze will be two-fold:

(a) the demand for the product/service on which the model is built will drop (so is no longer an attractive franchise option)

(b) the existing franchisees will find it hard to continue to operate unless the franchisor looks to dramatically alter the model to ensure the survival of the network

So where does that put franchising in 2009? I think it will be exciting to be honest. As we all know, in the UK, there are a lot of franchises that really shouldn’t be franchising and their models will be severely tested in this climate.

What is also great news for franchisors, is that there is an influx of highly skilled people into the pool of prospective franchisees – which, up until 2006 ,was diminishing …fast. Yes, it is unfortunate that they have lost their jobs, but it has also opened doors for them and given them the prospect of owning their own businesses and not going back into employment.

I do worry about the existing franchisees out there more than the franchisors because they are not in a position to make the enormous change to the model to make the difference. My hope is that the worthy franchisors out there are doing the work to keep their franchisees successful, motivated and enhancing the model as times change.

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