Franchise Sales Pull Back During The Recession

Wall Street Journal:

Discouraged by economic conditions, some franchisers are cutting back on efforts to sell franchises.

Annual applications from franchisers who want to do business in Maryland are down significantly so far this year, says Dale Cantone, an assistant attorney general for the state. First-quarter franchise-registration applications in Maryland fell 16% from a year earlier to 367.

Other states report similar falloffs. For instance, California’s filings from Jan. 1 through its April 20 deadline fell nearly 20% from a year earlier to 769. New York’s first-quarter registrations dropped 22% to 348 — the lowest number in five years.
Attorneys who process state registrations confirm the pattern.

“Historically, [franchisers] have said ‘Register me everywhere,’ but in the current environment they’re being more selective” about what states to register in, says Bret Lowell, a partner who handles franchising matters at DLA Piper LLP, a Reston, Va., law firm.

The pullback comes after several years of increased filings as franchisers of everything from pizza parlors to pet groomers aggressively sought applicants to expand their chains.

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