Franchises Faring Better in Recession

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Recessions are no fun for businesses of any kind, and the current downturn has exacted a heavy toll among small businesses in particular. Recession or no recession, however, franchises seem to do better than non-franchise businesses, according to recent data from several sources, so if you're thinking of launching yourself as an entrepreneur, give the industry a good look.
 
For one thing, you stand a better chance of getting bank financing as a franchisee than you might running a non-franchise business, according to FRANdata, a research firm under contract to administer the U.S. Small Business Administration's Franchise Registry.
 
This is true because lenders see strength in such factors as a franchise's brand and bargaining power with suppliers. To be sure, banks remain wary of business lending in general, but franchisees stand a better chance of getting financing than non-franchisees, according to FRANdata.

The proof: One in every five loan dollars that the SBA guarantees this year will go to franchise businesses, according to FRANdata.

For another, a new study by the International Franchise Association shows that franchise businesses are likely to see 2.8 percent growth this year, despite the recession. If that happens, it will represent a big turnaround from last year, when overall economic output of franchise businesses fell nearly 1 percent. Fast-food restaurants, business services firms, and personal services companies will contribute the lion's share of any gains, according to the IFA study.
 
Last but not least, franchise businesses wield a good deal of clout in the economy as a whole. They employ more than 8 percent of the workforce, contribute more than 5 percent of total U.S. payroll, and generate nearly4.5 percent of the nation's economic output, according to the IFA study.
 
In short, franchising limits the risks facing any business launch and contributes strongly to the U.S. economy even in hard times, making it a choice worth considering for those bent on becoming entrepreneurs.