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 user 2009-02-19 at 3:44:01 pm Views: 92
  • #21839
    Chains Offer Link from Layoff to Livelihood
    Interest in franchise ownership, seen as steadier than independent ventures, is on the rise
    A wave of professionals investing buyouts and severance pay in franchises is giving this industry a sense of cautious optimism, according to franchise consultancy FranNet New Jersey. And existing franchisers are looking for ways to better retain customers as consumer spending falls, according to St. Jacques Franchise Brand Marketing in Morristown.

    More franchisees may open up shop this year, according to Jack Armstrong, president of FranNet New Jersey in Metuchen. Armstrong said he has heard from more prospective franchisees in the second half of 2008 than in second half of 2007. During that time, he said his appointments to meet with prospective franchisees increased by 20 percent; Armstrong expects to see his appointments increase by up to 30 percent this quarter.He said the abrupt drop in the stock market drove some professionals to look for new investment strategies. “People weren’t liquid,” Armstrong said, “They were leaving money in [the stock market], hoping it would get better.” Rather than wait for a recovery, he said, some believe a better return on investment may be possible through a franchise.For those who have been laid off, severance packages may be an opportunity to try running a business. “A lot of these people have gone through downsizing before,” Armstrong said. “They don’t want to go through it for a third time.”

    Cartridge World franchisee Peter Donnelly said he left a sales career to open a franchise in Wall.When his father sold the family business — Atlantic Mills, a Lakewood manufacturer of disposable towels — Donnelly used his portion of the sale to fund the franchise, and said he’s found a niche in the struggling economy — his nearly year-old business is perking up as customers look to save by buying the lower-cost, refilled ink cartridges and toner he sells. “The same people who said six months ago they weren’t interested in [the product] are now giving us a try,” he said.Donnelly opened his Cartridge World store last March, when the economy seemed healthy. “There were plenty of investment companies ready to spend money, and venture capitalists were still out there,” he said.

    Franchisers are tapping local marketing firms, such as St. Jacques, to improve their reach with customers, according to Philip St. Jacques, chief marketing officer. St. Jacques Franchise Brand Marketing brought in five more franchiser clients since last August, which he said was strong for the company during the latter half of 2008. “The brands are looking for a change,” he said. “A sports nutrition company said to us that they flat-out lost sight of who their customer is.” St. Jacques works with 15 active franchisers.St. Jacques’ firm helps franchisers create localized marketing campaigns. He said 45 percent of his company’s sales came from new business in 2008; new business represented 12 percent of its sales in 2007.Michael St. Jacques, chief marketing officer and founding partner of the firm, said capitalization plays a crucial role as franchise brands are winnowed out by the harsh economy. “If you are not profitably capitalized to make it through this time, the weak ones are going to fall to the wayside,” he said.

    Last July, for example, the corporate entity behind the Bennigan’s chain went bankrupt, leaving franchisees to regroup on their own.The International Franchising Association, in Washington, D.C., released reports this month that reflect both concern and hope for the industry. The Franchise Business Economic Outlook for 2009, prepared by PricewaterhouseCoopers and released Jan. 7, projected the number of franchise establishments in the country is expected to decline from 865,000 to fewer than 855,000 this year. With fewer venues open for business, some 207,000 jobs are expected to be lost from the franchising sector.

    However, some industry leaders are not deterred by the economy, the IFA said. In a survey of top executives among its membership last November — of some 160 responders, 85 percent expected to see the number of franchise units grow in 2009, while 70 percent expected to increase employment levels this year.While he is concerned about the coming year, Donnelly sees his refilled cartridges as a lower-cost option for businesses. Donnelly said he does a lot of cold calls and is surprised to find the number of shuttered businesses.“It’s amazing how many people have numbers that are no longer in service, or you stop at a business with a ‘for lease’ sign out there,” he said.