Updates: (i) franchise growth; and (ii) franchisor assistance to franchisees
We wrote a blog entry several months ago about the negative impact the global recession is having on franchise growth. Recent stories appearing across the country continue to confirm this trend. The IFA SmartBrief provides a story from Minnesota confirming continued difficulties in individual franchisees obtaining credit and reiterating the IFA's prediction, mentioned in our May blog, that overall franchise growth would show a negative 1.2% number for this year. As the first buds of economic recovery continue to appear, we will keep track of that number to see if it turns back to a positive growth number any time soon.
Last fall we wrote a blog that commented that franchisors were finding ways to help their franchisees through these difficult times by providing financing or assisting in obtaining financiing, or forgiving past due royalties and other fees, all in the interest of continuing the viability of the system. Recent economic trends may be causing some franchisors to pull back on that generosity. The Wall Street Journal reports that Papa John's is scaling back on its financial support to its franchisees, which had included a reduction in royalties and fees. With the recent decline in cheese costs, the franchisor and franchisees are seeing an increase in profits, enabling the system to move forward in a more conventional manner. Some writers have cautioned that recent economic good news could be illusory and to the extent that Papa John's move is based on a change in commodity prices, that could change again tomorrow. But others see this story as further evidence of an overall stabilizing in the marketplace.
