After 22 years of working for corporate icons such as MasterCard Worldwide, JPMorgan Chase and Sony Music, Howard Cutler of Westport took a severance package last winter.
He then withdrew thousands of dollars tax-free from his 401(k) plan and reinvested that and some severance money in a Rapid Repro printing franchise in Danbury, all for the privilege of working 14-hour days and supervising 14 people.
“I always wanted to own my own business,” said Cutler, 46, who has worked in marketing, product development and creative services. “I wanted to control my fate. It is going to do great. I bought a company that has been around for more than 30 years.”
Cutler’s shop is one of 900,000 franchise businesses in the United States, according to the International Franchise Association in Washington, D.C. They include hotels, fast-food restaurants, pet care, fitness clubs and cleaning services. Franchises provide 20 million jobs and $2.3 billion in revenue to the private sector economy, according to the association.
Starting an independent-brand company or a regional or national franchise has been a refuge from corporate layoffs and restructuring.
But it is too early to gauge whether the volatile economic climate is pushing greater numbers of people toward franchise ownership than would occur in a healthy economy, said Alisa Harrison, spokeswoman for the franchise association.
A new roadblock devalues that refuge. Tighter sources of the credit needed to start a business might discourage many would-be entrepreneurs, Harrison said.
“We are waiting to see what Congress is going to do with the bailout package,” she said.
Michael Seid, who co-wrote “Franchising for Dummies” with Wendy’s restaurant founder Dave Thomas, foresees a franchise slump and possible consolidation.“Credit is the fuel of our economy and certainly the lifeblood of franchise system growth and modernization,” Seid said in a report published last week by Franchise Update Media Group in San Jose, Calif. “The credit market is going to be tight through most of 2009 and franchise sales for many franchisors will slow down dramatically.”
Franchisees might be fighting for smaller revenue this year and next. Operators who responded to a survey the franchise group released last week said 2008 sales were 78 percent below expectations.
In a typical franchise… read on.
Photo: Paul Desmarais.