Franchise Lawyer Blog

More Recession Thoughts

A quick follow up:

Demonstrating that we know a trend when we see one, the most recent IFA Smartbrief received today refers to more articles concerning the ebb and flow in franchising caused by this economic climate. The flow is caused by the human tide of employees and business developers that have been jettisoned by the conventional economy. The ebb is caused by the increasingly constrained credit markets, which are making it difficult for businesses to get the financing needed to start-up or survive.

Our last entry discussed these topics. Today’s IFA Smartbrief refers to an article in the Orlando Sentinel that examines the local economy in Florida and finds that many people who have been left unemployed by corporate downsizing are looking to make new careers through franchising. As we noted in our last blog, this need for immediate employment is creating a trend towards business-format franchises and other low cost to entry franchises that will provide immediate returns.

The Smartbrief also refers to an article in The Boston Globe that reports on developments in Massachusetts with similar observations: people forging ahead with business development in the franchising space, concentrating their efforts on the grassroots level, finding local trends that are cost conscious in a way that appeals to local wallets.

However, both articles make reference to the credit crunch. The Orlando Sentinel notes that FRANdata reports a 27% decline in franchise borrowing over the past few months, undoubtedly because of the lack of available credit. This trend could make it impossible for even the most savvy, driven business visionary to get her idea off the ground.

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