Lenders Hesitating To Back New Franchises

Minneapolis Star Tribune:

Don McFee had lost his job for the last time.

In November 2007, after he’d been told to clean out his desk for the third time in 13 years, the former construction project manager went home and told his wife, “I don’t know what I’m going to do, but I’m not going to do it for anybody else.”

McFee, like many newly unemployed, decided to go into business for himself and buy a franchise.

The franchise sector usually fattens during recessions; real estate is cheaper, there’s a spike in laid-off workers from corporate America and franchises are usually considered less risky than starting an independent business. But because of the credit crunch, many in the industry are expecting this recession to be different.

The International Franchise Association (IFA) predicts a 1.2 percent decrease in the number of U.S. franchises in 2009. That’s a small dip, but it’s also the first year-over-year decline in more than a decade. Full story.

Photo: Elizabeth Flores / Star Tribune.

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