In 2009, Restaurants Will Be the Bright Spot in Franchising. Sort of.
According to an International Franchise Association Educational Foundation report released Wednesday, restaurants are one of few franchised businesses expected to expand, even if only slightly, during the economic downturn.
An article on the study in Nations Restaurant News reported:
The franchise industry this year is expecting a decline as a whole — by the number of establishments, jobs and economic output — but a 1.5 percent increase in the number of quick-service restaurants and a 1.3 percent increase in the number of table, or full-service, restaurants is expected in 2009. The IFA report, The Franchise Business Economic Outlook for 2009, was prepared by PricewaterhouseCoopers LLP.
The report foretells of tough times to come. Across the board, the number of franchise establishments is expected to decline by 1.2 percent in 2009, from nearly 865,000 to less than 855,000, according to the report. Industry research firm FRANdata predicts that borrowing by franchises will fall by about 27 percent in 2009 compared with the previous year.
Jobs in franchise businesses are expected to fall by 2.1 percent, for a loss of 207,000 jobs. The overall economic output of the goods and services produced by franchise businesses is predicted to decline by 0.5 percent, or a loss of $4.2 billion, in 2009.
Franchise industry leaders, however, are maintaining their optimism:
“Franchising industry veterans know that the current conditions, although extremely challenging, are temporary,” said Matthew Shay, IFA president and chief executive. “Our survey shows that franchise business leaders have confidence in the entrepreneurial spirit of their franchisees and the fundamentals of the franchise business model as factors that will help them weather the economic storm.”
According to the IFA’s report, the worst franchising sectors to to be hit by the recession are predicted to be the automotive, retail food and retail products/ services sectors, with employment in those areas expected to drop by more than 5 percent. Sectors that are projected to see the largest percentage reduction in economic output are lodging (3.2 percent), business services, (2.8 percent) and real estate (2.1 percent).
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