SmartCompany.com.au:
It’s not going to be a rosy year for any business model, but franchising’s crystal ball is especially foggy. We delve into the likely scenarios to get a better view.
Even the most optimistic franchisor has to accept that 2009 is likely to be a tough year for the $161 billion sector.
In the past three years, revenue for the 1000 franchise chains and nearly 70,000 outlets has increased by more than 16% or $27 billion, according to research company IBISWorld.
But that was before the global financial crisis hit.
In 2009, growth will be harder to come by. Disputes will rise as profitability becomes a problem and more franchised businesses will follow Midas, Kleins and EzyDVD into failure.
On top of this, the sector could be facing more federal regulation in response to the last Parliamentary inquiry into franchising.
But there will be some bright spots. Recruitment of new franchisees could get easier, and for those with franchise systems with strong balance sheets there are likely to be opportunities to expand.
Smart franchises with the right strategies will survive.