Implications: Downturns in the economy are when strong franchise systems excel. They take advantage of the fact that there are so many people looking for their next vocation. Good systems use this time to reevaluate the strength of their franchisees and the viability of each of their units. They make their strong franchise stronger and their weak franchisee they help with exit strategies. Some units may go away because of age, change in demographics or poor operations for too long. But they never loose units that make sense to keep open. The IFA article states some interesting numbers but what is normal. 10% of all units in healthy systems are in the mist of changes at any given time.
Failure rates are watched by the SBA by category, region and by brand. When the rate exceeds 3% in any of those groups it sets off warnings, over 5% and a brand could loose the ability to finance projects with SBA backed loans. The first department to go in bad times is development but they are the ones you need now.
Analysis… read on.