As Most Franchises Struggle, a Handful Set Themselves Apart
Recessions tend to be a boom time for franchising, as the unemployed unleash their entrepreneurial spirit and start their own businesses. But the depth of this recession and a lack of credit has the number of franchised businesses shrinking this year.
Despite the tough climate, some franchises are continuing to make strides. Among them is the Subway sandwich chains, which once again tops Allbusiness.com's franchise rankings.
The sandwich chain's growth is being supported by two trends, according to Rieva Lesonsky, editor-at-large and franchise adviser for AllBusiness.com.
First, Subway has been very supportive of potential new franchisees by helping them find new sources of capital.
Subway also is part of a popular category. As consumers have looked for less expensive options for eating on the run, sandwich shops have boomed, Lesonsky said.
She noted that Subway has been advertising its $5 foot-long sandwiches. "That means you can feed three kids for $5 with one sandwich," she said. "That's a very affordable way to feed people."
Subway is expected to outpace McDonald's as the largest franchise restaurant chain in the world by location, possibly by the end of 2009, according to Allbusiness.com.
Other sandwich chains also are performing well, including Jimmy John's Gourmet Sandwich Shops, which ranked No. 4; Jersey Mike's Subs, which ranked 31; and Firehouse Subs, which ranked No. 39.
Of course, some franchises didn't fare as well. More than 60 franchise brands dropped off the All Star list this year. (According to PriceWaterhouseCoopers, the number of individual franchise businesses is expected to decline by 10,000 in the United States this year.)
According to Lesonsky, the weakest chains appear to be weeding themselves out in these tough economic times, and that might be a good thing for people who are looking to open their own businesses.
Not surprisingly, some of the strongest chains are also the ones that are most likely to help support prospective franchisees get started, by waiving franchise fees or lessening the royalty fee, she said.
"A number of companies are being very creative," she added.
Looking at the leading chains, some trends emerge. For example, the desire for less-expensive consumer options is helping some chains. Businesses such as Liberty Tax Service, Jazzercize, Great Clips and Home Helpers have seen an upswing in their businesses in this environment.
Liberty Tax ranked second and Jazzercise ranked third in the AllBusiness list, while Great Clips and Home Helpers came in 20th and 32nd, respectively.
Another trend is the growth of businesses that cater to the aging population. These franchises include Home Helpers, Home Instead Senior Care, Comfort Keepers and Senior Helpers.
More from Consumer Nation:
- 'Tis the Season for $10 Gifts
- Electronics Fly Off Shelves—but That Might Be Bad News
- Are the Holidays a Litmus Test for Economic Recovery
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