Franchisees May Shut 10,000 Sites in 2009, Group Says

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Published at: www.bloomberg.com

Recessions are positive times for franchise systems that have creative development departments. Bishop Franchise Consulting LLC, Jim Bishop, President

January 23, 2009

Analysis by: GLG Expert Contributor

Downturns in the economy are when strong franchise systems excel. They take advantage of the fact that there are so many people looking for their next vocation.  Good systems use this time to reevaluate the strength of their franchisees and the viability of each of their units. They make their strong franchise stronger and their weak franchisee they help with exit strategies. Some units may go away because of age, change in demographics or poor operations for too long. But they never loose units that make sense to keep open. The IFA article states some interesting numbers but what is normal. 10% of all units in healthy systems are in the mist of changes at any given time. Failure rates are watched by the SBA by category, region and by brand. When the rate exceeds 3% in any of those groups it sets off warnings, over 5% and a brand could loose the ability to finance projects with SBA backed loans. The first department to go in bad times is development but they are the ones you need now.

Underperforming stores may benefit from Landlord negotiations

January 22, 2009

Analysis by: GLG Expert Contributor

- The pruning of poor performing locations is critical to the overall success of the venture. -  Some underperformers simply need time to improve performance and demonstrate long-term viability. -  Operators may be able to lower lease payments as developers and owners feel the pinch of the poor economy and credit crunch.  This not only applies to locations that are underperformers, but all locations that are currently leased.

Hard Times for Retail Franchisees

January 22, 2009

Analysis by: GLG Expert Contributor

The franchise ode of being in business for yourself but not by yourself is being tested in today's economy. With an estimated 10,000 franchise locations closing in 2009, it's more than the loss of business for the franchise owners it is a family tragedy. Many franchise owners leveraged their 401K plan, used a home equity loan, or otherwise bet a large portion of their net worth on buying a franchise in the last decade and their estate value, in many cases, has been drained. The franchise industry has made many claims of success, but few franchisers have the infrastructure to assist their failing franchisees.

Restaurant Development Will Slow in 2009

January 15, 2009

Analysis by: GLG Expert Contributor

Driven by the recession and tighter credit terms, restaurant new unit development will slow in 2009.   Some weaker operators will have unit contraction, for the first time in decades, particularly those franchisees that feature single unit operators (mom and pops). The chief opportunity for future development will be outside of the US.