Of course, franchise organizations must continue to expand their footprint, and consistently selling franchises does just that.
A growing franchise chain helps all of its franchisees, because their product costs will go down because of the group's purchasing power, and their brand will become more recognized, which could bring their marketing and advertising costs down.
If a franchisor is able to keep the sales pipeline full, the other issue that needs to be tackled is the financing issue. Some franchisors are even starting to get their feet wet as franchise lending institutions. That is because the banking industry is feeling rather risk adverse, currently. Even the Small Business Administration, which helps banks lower their risk by guaranteeing a major portion of the loan amount, is feeling the credit crunch. There is a downward trend in SBA loan applications.
"SBA volume is significantly down," says Chris Reilly, president of CIT Small Business Lending Corp. of Livingston, N.J., which ranks among the top SBA lenders nationwide. See this article.
Some franchisors are just now starting to aggressively tout their in-house financing arrangements, while some like ServiceMaster, have been providing financing options for the past 20 years.
Is this recession going to permanently change the way franchise companies market and finance their offerings? Or is this just temporary? Only time will tell.
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