Franchise Industry Feeling The US Economic Slowdown — Part Of a Cycle


First the good news:

Our economy runs in up and down cycles. Folks, nothing stays the same.

Now the lousy news:

We are experiencing a down-cycle in franchising…..

That is according to The Rosenberg Center Franchise 50 Index (view latest Franchise 50 Index results). Restaurant franchises seem to getting hit pretty hard, as U.S. consumers, wary of a possible recession, slow their discretionary spending down. The index has mostly food service and hospitality type franchises, and according to the latest figures, 43 franchise companies out of the 50 in the index were down in the last quarter of 2007. I am not surprised at all. The economy is in slowdown mode, and it has been for a few months, now.

Just imagine how boring it would be if all of the small businesses in the U.S. were busy and going gangbusters all of the time. Where would the challenge be in that scenario? Besides the fact that highly paid business consultants would be unemployed, where would the fun be? Everyday, cash registers would be ringing like slot machines, employees would be running around like crazy all day long, and credit card transaction fees would be to the moon! Boring!

Speaking of slot machines ringing, I remember when I lived in Las Vegas with my best friend, Phil Madow. I remember the night that I landed at McCarran International Airport. It was in March of 1984. After another highly unpleasant Cleveland winter, greeting the 50 degree Las Vegas evening was euphoric. Phil had his shiny white Olds T-Top coupe waiting for an introductory cruise on the Las Vegas Strip. With the T-tops stashed safely in the trunk, we were out cruising. What a fine life!

By August, I was quite ready for any type of change, related to weather. You see, after almost 5 months of ‘today’s forecast-sunny, with a high of 102 degrees … tonight clear and warm, with a low of 70 degrees,’ things actually did become boring. Really hot, and really boring! A cloudy day would have been a welcome sight ….

The point is this: We must have ups and downs in our economic cycle to balance things out. I am suggesting that we even need up and down economic cycles in our daily lives. It helps all of us become a little more appreciative of what we do have.

EXPECT that we will have up and down economic cycles. Smart business owners learn to operate during good times and not so good times. During down cycles, be contrarian in your business decisions by doing things like increasing your marketing budgets, energizing your sales efforts. Down cycles are also a great time to cut costs in areas that are not adding to your bottom line. Doing a couple of things that others aren’t, will position your business to take advantage of opportunities when the good times return.

The business climate in the US will once again become fertile. Take advantage of slower business times. Catch up with some old friends. Hunt out some stocks to buy, that were always a little out of reach. Take up blogging. Go to a baseball game. Enjoy these times … and slow down. (I am giving myself advice here. It can’t be all about you, you know.)



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.