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CLEVELAND -- A recent report by Small Business Trends takes a look at how the present economy is affecting the franchise industry and what trends will pop up in 2011. One of the main factors is the lack of traditional small business startup funding -- leading some prospective franchise owners to find alternative lending. Second, unemployment remains high and franchisors always look at net worth statements as a major qualifier of potential owners; real estate is usually a major part of a franchise candidate's net worth statement, and now that's a problem, Small Business Trends stated.
The report stated while there's still going to be a good amount of downsized workers looking into franchise ownership, fewer will be qualified by franchisors and banks.
The main trend the report points out is "conversion franchise" -- an independent business pays a franchise fee to become part of a franchise system, i.e. 7-Eleven -- and both parties can benefit. The store owner gets instant brand recognition and buying power while the franchisor gets an instant royalty stream.
Small Business Trends also reported another trend is food-related franchises, as they predict 2011 will see continued growth of mobile restaurant franchises -- an inexpensive way for owners to get into business versus say, opening a 5,000-square-foot restaurant.
Another prediction in franchise trends will be the concept of businesses "going green," as existing franchisees will start turning its products and services environmentally friendly, according to the report. The Subway franchise for example, has begun serving salads in partially recycled salad bowls and has also set up redistribution centers, which bundle all the things that franchisees use more efficiently so that full truckloads can deliver those products, the report stated.
The biggest challenge for franchisors, Small Business Trends points out, is quality lead gathering -- the sheer number of "leads" that franchise sales executives have to contact vs. how many end up buying their franchises, is too wide of a gap. Although, the report points out that new social media initiatives that franchisors are using should make the lead gathering technique a little easier and that 2011 should see a wider adoption of social media marketing.