Darrell Johnson of FRANdata presented the 2009 Franchise Economic Forecast at the Franchise Updates September Leadership & Development Conference (download your copy of the FRANdata report here). Darrell reports that the the economic downturn is clearly going to impact many aspects of franchising, none more so than access to capital. The capital markets are effectively shut down right now, forcing banks to put loans on their balance sheets. Even if that changes soon, banks will be slow to open up lending channels in the face of the downturn and after the unprecedented capital losses they have encountered in the mortgage markets.
Planning for next year is becoming more challenging than for any year in this decade, however, there are some trends and patterns to be seen as we head into the 4th quarter of 2008 that give an indication of where things are headed next year for the franchise community.
The exception is SBA lending, which still has a vibrant secondary market and should see a significant increase in activity as banks turn business customers towards their SBA lending units. In general, banks are becoming much more conservative in their lending programs, both with regard to underwriting criteria and with loan terms, assuming they are willing to lend at all.
While capital access is an ongoing issue, franchise development clearly is slowing for other reasons as well. Combined with flat or declining system-wide revenues for many brands, the emphasis in 2009 will naturally turn more to the cost side of the business. We are seeing an increase in interest in bench-marking many areas of franchise activity.
2009 will present some unique challenges to the franchise community. Having reliable information with which to base planning decisions is a primary role of FRANdata. The compensation survey came about as a result of inquires from franchisors. We listen, find ways to fill in the data gaps, convert data to information, and give you a better basis to make critical business decisions. Give me a call with your questions, issues and thoughts.
Download the 2009 Franchise Economic Forecast given at the September 2008 Leadership & Development Conference