Monthly Archives: February 2013

At a Glance: Franchise and Small Business Situation in America

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First, the election. Then, the Fiscal Cliff. Now, as the nation faces the repercussions of the proposed sequestration, franchise and small business owners prepare themselves for what may or may not happen next. Here’s a look at the good, the bad and the undecided for franchise and small business owners across the U.S.

 

THE COULD GO EITHER WAY:

 

Several industry experts feel the sequestration could severely hit small business owners, which includes franchisees, harder than other businesses because of their dependence on the local economy and, in some cases, government spending.

 

Why is this a concern? Well, for the most part small businesses are specialists– they’re not the Proctor & Gambles of their communities. You would be hard pressed to find an accountant who also happens to share his office with the dry cleaning franchise he owns. Also, small businesses are often hired on a contractual basis for government projects. If and when government spending is significantly reduced small businesses contracts could be among the first to go. In turn, small businesses often have a harder time securing lines of credit. As we saw during the Great Recession, that becomes even harder when economic times are tough.

 

If the sequestration does happen, that could result in $35 billion in payroll costs and $50 billion in procurement expenses. Those added expenses could result in 1.4 million lost jobs for the private sector, half of which would come from small business and franchise owners.

 

Groups supportive to small businesses, like the Small Business Administration, would have to scale back programs turning away an estimated 33,000 small business owners looking for help and guidance.

 

On the other hand, members of the National Federation of Independent Business (NFIB), feel it is impossible to predict what will actually happen and that, most importantly, a large percentage of small businesses do not work in for or in concert for the government.

 

THE GOOD:

 

The Franchise Business Index (FBI), which indicates the health of the franchise industry, increased 0.7 percent in January, a 2.1 percent rise from January of last year. Nearly all components (listed below) improved.

 

In a statement released by the IFA, association President & CEO Steve Caldeira commented that, “The uptick in January is reflective of pent-up demand for growth felt by many franchisors and franchisees who held back on investments in the second half of 2012 because of the uncertainty surrounding the Fiscal Cliff.”

 

The IFA expects to add over 10,000 new establishments and 162,000 new jobs this year.

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MORE GOOD:

 

Finding adequate sources of capital has plagued the franchise industry and other hopeful small business owners. Now, thanks to the dramatic increase in deposits, banks are more liquid and desperate for growth. (Aren’t we all?) Commercial and industrial loans were up 4.4 percent in the fourth quarter and up 16 percent overall in 2012. Competition amongst banks has made the loan environment more palatable for small business owners as bank loan rates decrease.

 

 

IFA Convention 2013 in Review

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The buzz of Las Vegas was louder than normal last week as 3,500 people swarmed the MGM Grand to attend the International Franchise Association’s annual convention, making it a record-breaking show for the association.

Matthew Haller, a spokesman for the International Franchise Association said, “We always have higher attendance when we’re in Vegas.”

Those in attendance weren’t just franchise executives. New franchise concepts, franchisees, franchise suppliers (like Franchise Buy) and famous speakers also made the pilgrimage to Las Vegas for the IFA convention.

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During the convention a central theme emerged: growth. Dr. Condoleeza Rice, a keynote speaker, spoke of the importance of galvanizing the American dream through a strengthened economy and that an economic resurgence lied in the hands of the private sector, of which franchising is a major player.

CKE Restaurants CEO Andrew Puzder delivered a speech along the same notes, citing that at the core of his “unconventional” business strategy was a desire to keep his franchisees successful.

“When our franchisees make money, we make money,” he said. Puzder’s strategy has kept Carl’s Jr. and Hardee’s growing for ten consecutive years.

In recent years the tumultuous economy and recession resulted in loss for the franchise community in 2008, 2009 and 2010. The tables turned in 2012; it was a year of recovery and most predict 2013 to follow suit. By the end of this year, 757,055 new franchise establishments are expected to be in operation, a 1.4 percent increase from 2012.

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Franchise Buy COO Guy Norcott mingles with guests at the IFA Convention.

In addition to celebrating the return of growth to the industry, the IFA convention also shone a light on those who support the franchise industry through various products and services.  McDonald’s would be lost without fryers, frozen yogurt franchises would melt without freezers and franchise expansion would shudder to a much slower pace without the efforts of lead generation experts like Franchise Buy, who provide franchise concepts with a steady stream of entrepreneurs looking to become franchisees. IFA Suppliers showcased their businesses over the course of two days in the exhibitor hall, which included various law firms, accounting firms, telecommunications concepts, human resources software companies and Google.

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Lauren Melton, Justin Gardy and Miranda Milburn, members of Franchise Buy’s sales and accounting teams, pose in the exhibition hall at the 2013 IFA Convention.

Franchise Buy Goes to Las Vegas For the IFA Convention

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We’re headed to Las Vegas this weekend to attend the International Franchise Association’s 53rd annual convention. It’s the first time Franchise Buy has attended the annual conference and all of us attending are very excited to visit Las Vegas– for some it’s their first time–  and to meet our franchise clients, old friends and some new faces. If you’ll be attending the conference please stop by our booth, #139, and say hello!

To celebrate our first year at the convention, Franchise Buy is giving away four HUGE prizes: a new laptop, an iPad mini, an iPod nano, and a Wii gaming system. To enter, swing by Franchise Buy’s booth and fill out a slip of paper with your contact information. Two prizes will be awarded daily!

Current Policy Agenda for the International Franchise Association

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In a recent luncheon meeting the IFA’s CEO and President Steve Caldeira announced the International Franchise Association’s policy priorities for 2013: tax reform, health care, labor relations, immigration and activism.

 

TAX REFORM

The franchising industry has been extremely vocal about the fiscal issues facing the U.S. as it pertains to small businesses, like franchises, that operate as pass-through entities. The rise in income tax rates for high income earners will greatly affect franchisees, especially those who own and operate multiple units. Consumers now shoulder a 6.2 percent Social Security payroll tax, which has reduced take-home pay by 2 percent or more.

 

Caldeira was among those small business advocates and representatives present at a meeting with Gene Sperling, director of the National Economic Council, to discuss the tax concerns of small businesses.

 

HEALTH CARE

Many small businesses, particularly franchises, are dreading the 50 employee threshold of the Patient Protection and Affordable Care Act that will become law in 2014. Steve Caldeira is seeking to change the mandate, as it would prove expensive for franchisees who operate establishments with 50 or more full-time employees.

 

LABOR RELATIONS

As a major player in the Coalition for a Democratic Workplace, the IFA has helped to neutralize various election-related legislation. Now, Caldeira’s objective is to protect the franchise industry against the National Labor Relations Board. The IFA’s CEO cited micro-unions, small bargaining units carved out for workers in departments of large institutions, as a specific opponent.

 

IMMIGRATION

The IFA is currently advocating policies that would expedite visas for workers.

Learn the ABC’s of Franchising

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When we were young we all learned our ABCs; each letter became a building block. If you’re just starting out, here are 26 different ways to learn your franchising ABCs.

 

 

A is for Automotive— There are over 250 million registered passenger vehicles in the U.S. As such, it’s no wonder that automotive franchises are such lucrative opportunities. From car washes franchises to mobile detailing businesses, the list of available automotive franchise concepts is long and diverse.

B is for Blue Mau Mau — If you’re looking for the best original and curated content, press releases and articles on franchising, business opportunities and small businesses, Blue Mau Mau is the place to go.

 

C is for Crowdfunding — Funding remains a challenge for all entrepreneurs, not just those who are hoping to open a franchise. New legislation is sure to help crowdfunding’s popularity as a way to raise capital.

 

D is for Discovery Day — One of the most important days for a potential franchisee is discovery day. While each concept’s discovery day is a bit different, it normally includes a visit to the franchise’s headquarters, a sit down with the development team and often a meeting with the franchisor. Often, the franchise discovery day is the last stop before you sign on the dotted line and become a franchisee.

E is for Entrepreneur — Entrepreneur magazine has long celebrated franchising with its “Franchise 500”, their annual ranking of the industry’s top franchise concepts. The magazine also features a franchising section and often covers topics pertaining to the industry on its website.

 

F is for FDD — The franchise disclosure document (FDD) sounds just like what it is: a legal document that discloses the major facts and figures that make up each particular franchise concept to a prospective buyer. The FDD is intended to provide potential franchisees with enough detailed information to make educated decisions about a possible franchise investment.

G is for Growth — Growth despite economic challenges and uncertainty has become a hallmark of the franchise industry. Despite the woes experienced by many during the Great Recession, the franchise industry recovered well. The IFA expects the number of franchise establishments to grow by 1.4 percent in 2013.

 

H is for Healthcare — As the Affordable Care Act became law in 2012, the franchise industry took to the podium to speak out against the potential damages of the healthcare overhaul on small businesses. Many franchisors, including Papa John’s CEO, John Schnatter and Catherine Monson of FASTSIGNS have spoken out against President Obama’s healthcare reforms.

 

I is for IFA — The International Franchise Association (IFA) is the world’s largest and oldest organization representing franchising worldwide. It acts in the best interest of the franchising industry to promote, protect and enhance the franchise industry through policy, PR, and education.

 

J is for Jobs— No, not Steve Jobs, although we’re sure he’d appreciate the economic fortitude that is the franchising industry. According to the IFA, The franchising community provides nearly 18 million jobs!

K is for King — Joel Libava, aka “The Franchise King”, writes a phenomenal blog on all aspects of the franchising industry. His posts range from evaluations of franchising concepts, helping potential franchisees and issues the industry faces.

 

L is for Las Vegas — This year, the annual IFA Convention will be held in Las Vegas. The IFA’s annual convention allows for all members of the franchising community to congregate and connect. This year, Franchise Buy’s CEO David Schwarz will attend with his key managers as an “Entrepreneur of the Year” award nominee.

 

M is for Military — Military veterans have been welcomed profusely to franchising by franchisors and the IFA alike. The push to hire military veterans has been facilitated by websites like Veterans Franchise.com, VetFran and crowd funding platforms like Boost a Hero.

N is for Nation’s Restaurant News — This magazine delivers breaking news about the $600 billion food industry, including franchises. Since 1967, NRN has been covering trends, operators, suppliers and major figures in all areas of the food service industry.

 

O is for Operations — As a franchisee, a large part of your day deals with the day-to-day operations that make a franchise unit run smoothly. Luckily, those with varying degrees of business experience can count on their franchisor counterparts to lead the way. After all, one of the best parts about franchising is the proven track record and support provided to each franchisee by its franchisor.

 

P is for Portal — As the franchise industry picks up speed, leaving the Great Recession behind, portals have become an invaluable source of leads. Some, like Franchise Clique, Franchise Buy and Veterans Franchise, have begun call-verifying leads as franchise sales and development teams field an increasing number of inquiries.

 

Q is for Quick-Casual — If you didn’t catch our recent post on food costs and the franchising industry, you missed out on a short and sweet explanation of how food franchises continue to grow despite rising food, oil and transportation costs. The real winner in the food franchise category? Quick-casual restaurants, which are predicted to grow 1.7 percent in 2013, the third largest growth percentage according to the IFA. Also, quick-casual restaurant franchises make up two-thirds of all food related franchise establishments.

 

R is for Restaurants — When you think of franchising the golden arches and drive-thrus probably spring to mind first. It’s no wonder, considering food franchise establishments comprise 33 percent of all franchise establishments.

S is for Steve Caldeira — Stephen J. Caldeira is the President & CEO of the International Franchise Association. As the President and CEO, Caldeira works with the IFA’s board to set the course for the organization’s strategic priorities: policy, research, education, PR, and various development programs. Mr. Caldeira has 30 years of government relations, political communications, fundraising and professional development experience. Prior to his current position, Caldeira served as the Executive Vice President of Global Communications & Chief Public Affairs Officer for Dunkin’ Brands, Inc.

 

T is for Trillion — Yes, that’s trillion with a “T”! The franchise community represents $2.1 trillion of economic output just for the U.S. economy.

 

U is for Understanding — Let’s talk it out. No, really. When you’re deciding which franchise to buy, it’s important to do your research, ask questions and find out all you can about the concepts that interest you before taking the next steps. A franchise is a long-term business investment

 

V is for Vision — If the franchising industry were a word it would be “expansion.” Beyond the U.S. and Canada lies opportunity– and the franchise industry knows it. More and more brands are expanding their vision to Africa, Asia, Australia, South America, Europe and the Middle East.

 

W is for Work — Despite the autonomy inherent in becoming a franchisee, there’s also a lot of hard work. Ask any small business owner and they’ll tell you how much they wish there were more than 24 hours in a day.

 

X is for Xenophile — Now that’s an SAT word! As far as we’re concerned, one of the very best things about the franchise industry is its acceptance of other cultures. Whether it’s a franchisee expanding outside of the U.S. or the birth of a new food franchise celebrating a cuisine that’s not quite mainstream yet, the franchise industry makes a point to bring “new” and “different” to the masses.

 

Y is for Yogurt — How many frozen yogurt businesses can you count driving through your city or town? The frozen yogurt craze, which hasn’t cooled yet, has been going strong for years. Though it’s not the oldest type of franchise concept in the industry, it’s certainly one that’s made other consider franchising as a viable means of making a living.

 

Z is for Zany— As of late,new franchise concepts have gotten creative and outright zany! Nail art vending machines, make your own sushi franchises and dog walkers have become incredibly popular. What could be next?