October 30, 2014

Will The Franchise Industry Need A Bailout?

Like most industries, the U.S. franchise industry is experiencing a downturn. Does this downturn warrant a bailout from Congress?

The economic impact of the franchise industry certainly cannot be disputed. Just like the automobile sector, the franchise industry is responsible for millions of jobs.

I am thinking that it may be time for me to brush up on my congressional lobbying skills, and take a trip to Washington DC.  :)   

I would be happy to join any other franchise industry executives who feel that our industry needs some financial help. (I would be happy to carpool with them to DC. Arriving in a corporate jet probably would not be the wisest thing to do in these tough financial times.)

Billions of taxpayer dollars are floating around, waiting for good homes. I think the franchise industry deserves a piece of the pie. Just look at all the products and services our industry provides:

  • Food and drink. There are thousands of food related franchises all over our country. These franchises serve everything from burritos, to chicken wings, to juicy steaks. There are also some newer sports bar type franchise opportunities, as well as the usual mix of ice cream and donut franchises.
  • Technology related franchises are becoming more prevalent, as our society continues to transition to the electronic age. Do you need your computer repaired? How about the design and installation of a state of the art security system?
  • Automobile related franchises. Cars and trucks still need to be maintained, and franchises in this sector provide oil changes, tune-ups, collision repair, and auto parts stores. Need to customize your ride? That can be handled, also.

There are many more products and services that the franchise industry provides. On your way to work you may have dropped off your dry cleaning at a franchised dry cleaning store, picked up the copies you had done at a franchised copy store, and stopped in for your weekly 20-minute tanning session at a franchised salon.

Many of these franchises are going through some tough times, as consumers become nervous and more cost conscious. If this continues, some franchises will have to close up shop. These former franchise owners may be entering the already listless job market.

A franchise industry bailout probably sounds appealing to the struggling franchise owner, or franchise company executive. But, who is really going to be paying for it? The person paying for it is the same person who is currently purchasing a cup of coffee, or a dozen bagels from their local franchise, on their way to work. That person could be you.

No one seems to have all of the answers right now. Patience may be a virtue that all of us need to perfect. Things will get better.

* * * * *

Joel Libava on 2008 franchise trends About the Author: Joel Libava is President and Life Changer of Franchise Selection Specialists. He blogs at The Franchise King Blog.

17 Comments ▼

Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

17 Reactions

  1. Almost every business is feeling some kind of “pain” in one way or another. It’s silly to think that we can bailout everyone. I think it comes down to just buckling in and enjoying the ride, it’s gotta end sometime.

  2. Love the tongue-in-cheek element to this one, Joel!

    But I fear everyone already must be traveling “over the river and through the woods” to grandma’s house for Thanksgiving dinner and hasn’t seen this one yet ….

    — Anita

  3. Does the last taxpayer funding the bailouts get to turn out the lights as well?

  4. Amanda. It will end.
    Susan. Lights can stay on as long as we need them.
    {But let’s think Green!}
    Anita, I am gald you posted my article today, as opposed to Black Friday!
    Tongue in cheek? What do you mean? I am serious here…..
    Joel Libava
    The Franchise {Bailout} King!

  5. Not beeing an american i’m simply amazed at what i thought America was and what it stands for. I’m disturbed to hear the word bailout on a small business blog. I think the US is marching forward to socialism at a rushed pace and the people due to real and imaginary fears don’t react at all. The most capitalist country in the world is turning socialist?
    Future tax payer money that’s beeing borrowed or printed is used to save corrupt and underperforming businesses to do what?
    Governments are the worst managers of resources and money in any domain imaginable. Everything that i read in the news lately makes the US look like communist Russia and no one seems to care.
    I think businesses owners need to wake up and get back to the core values that made america great: freedom, capitalism, deregulation and small government.
    I just don’t get it how all the values are turned upside down because some fake experts think they know better than the market. How can you fix debt with more debt?

  6. Yes Amanda. It will surely end!

  7. Sorry – we should NOT offer a bailout to the Franchise Industry…..Just like we (I am referring to the US Government here) should not bailout any private entity UNLESS you can convince me that not doing so will PERMANENTLY alter the US Economy and bring on a depression. Hey, all business owners took a risk when they undertook their business venture and they knew upfront the ultimate downside. I want support from my government and a level playing field…………but not a handout of free cash because I screwed up somehow and my business went South. That is what Democracy is about – the freedom to step out and start your own venture for better or for worse. You study the franchise model and you make a choice either to back it and invest or walk away. Sucess is taking the right risk and basking in rewards if you guessed right.

  8. Hi Earl, I think lots of people agree with you. And I think Joel was being half facetious in this article, too. :)

    Anita

  9. Anita, although i’m not a native speaker i did get the facetious aspect of the article, however the statement “No one seems to have all of the answers right now” says that it might be a possibility that bailing out is maybe a good thing? :) think not.

  10. Earl,
    I actually agree with you, 100%. If one wants to invest in a franchise, or any other type of business, one does have to assume the risk. Heck, the banks assumed some risk when they allowed folks with marginal credit to purchase homes. I guess one could also say that the “Big Three” took some risk when they decided to forego basic accounting principles, and say to themselves, “We know that hundreds of thousands of our workers will be retiring someday, and will need the benefits that were promised. We’ll just have to figure things out when they actually do retire.”

    My point was that if the banks and the domestic automakers can get a bailout for their blunders, why can’t the franchise industry get some cash, too?

    Joel Libava

  11. Earl, you’ve got your point because if we do this — franchisees wont bother that much in succeeding their franchise venture because they can actually get a bailout later.

  12. Hi Jan, well, I think Joel is torn between being funny and being serious. :)

    That’s why the post reads both ways, as you rightly point out.

    The thing is, with “Billions of taxpayer dollars … floating around, waiting for good homes” everybody wants a hand out these days. And that brings up a good point about the nature of the entire bailout. It just seems to keep expanding, and it encourages every other industry to step up and ask for money.

    However, there just isn’t enough money to go around. We’ll all end up working just to pay taxes so someone else can be given a handout, instead of promoting responsibility for being smart business people ourselves.

    It’s aggravating when some of these industries that have not been run well beg for money. I don’t get money from anyone. If I don’t make a profit, I’m out of luck. And so are my staff. And the same goes for every small business.

    I was in support of the initial bailout because I thought we needed our entire financial system to be protected due to the unique role of the financial system as the foundation for our economy.

    But now with the auto industry and some other industries making noise about needing money, it’s getting ridiculous. I hope at least that if Congress passes some bill to help out the auto industry, they put strict requirements on that industry to pare down expenses and make wiser decisions going forward. And the unions need to step up to the plate, too, and address things like the Job Bank that pays people to not work.

    We’re all in this together, so everyone needs to sacrifice if we are going to solve the problems. I sure don’t want to be the pawn that has to foot the bill for everyone else’s poor management and “gimme gimme” attitude.

    Best,
    Anita

  13. Anita,
    Thanx for that. If the Gov’t tries to bailout every industry that is hurting, then we will all eventually have to pay for it. It can easily get out of hand!
    Joel Libava

  14. Anita / Joel, i can see the temptation in thinking if the money is out there why not get a piece of it. From my economic understanding, the people who actually get the money first should benefit from this a lot, because they can use it while prices are not affected by the inflation that all this new “injected” money will cause once it enters the real economy. Your FED can keep printing dollars forever if they want and hand it out to everyone, but at some point there will be so many dollars on the market that they will keep loosing their value (this ofcourse this scheme will work as long the rest of the world will require $, bad news beeing that eventually the world might be dumping them because they are not backed by anything).

    I live in Romania, a country that did the same thing in the 90’s, where we had huge inflation and we kept printing money to support huge industrial structures that were not profitable, structures that had millions of employees. The huge frustration comes from the productive part of the economy that has to support all these other unproductive folks :). All this while the US through their ambasadors and the IMF were highly critical of these socialist (almost communist) actions taken by our government at that time (romania was a communist country until 1989). We fast forward 10-15 years and now we see the same kind of attitude accros the ocean. A total inversion of atitude in such a short span of time is simply unbelivable to me, someone who thought what the americans preaching in the ’90s was correct.

  15. I’d like to add this: http://www.youtube.com/watch?v=mBVC3H8Pgc4 – Jim Rogers Bloomberg 24 October 2008. I think it’s worth to have a look.

  16. Jan: More power to you! I am glad to see that you could find other Americans in spirit. Check out the cartoon, Rescue Me, by Cox & Forkum: http://adjix.com/i3by
    I recommend you to read the book, Capitalism: The Unknown Ideal.

    Best Premises,

    Martin Lindeskog – American in Spirit.
    Gothenburg, Sweden.

    P.S. I will sign up for a Paymo account. I could use it for my freelance and consulting work.

    P.S. II. For a philosophic answer to the financial crisis, read my post, Time to Go on Strike? (Click on “Martin Lindeskog” Says:)

  17. Martin, i’ll check it out. Thanks!

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