The depth of the recession is likely to see a deeper interest in franchising both by owners, particularly lenders with REOs on their balance sheet.
The recession appears to be generating interest for franchises amongst former corporate employees as this article in the Wall Street Journal and Franchisedirect.com note. Franchisedirect says that “franchising will be something that we’ll be reading a lot more of in the coming weeks and months” while the Journal article says that “Franchisers contend that franchises are a natural alternative.
They argue that their time-tested, how-to business model offers people a greater likelihood of success than striking out on their own—assuming that the franchisee is willing to play by the company’s rule”. The WSJ article quotes a “franchise expert” on the pitfalls in franchising and details the requisites for successful franchising.
But as any hotel owner and operator will readily attest to, hotel franchising is arguably so unique that the challenges in acquiring and operating a hostelry demands more savvy, rigor and capital than most others. So how are hotel franchises doing under the new economic paradigm? Some public brands have seen their stock downgraded by analysts while others have scaled back on their projections for the next couple of years while still others such as IHG have had a resounding vote of confidence as evidenced by the renewal of long term franchises. Many others are looking east for, hopefully, greener pastures in Asia and the Far-east in the interim.