The good news is that franchisee associations will see an uptick in 2011. Franchisee attorney Andy Selden, who is a leader in forming independent franchisee associations and national cooperatives, told me that he is seeing an increase in the creation of these organizations.
Feel that sunbeam?
In 2011 the media will probe deeper when covering franchise systems and interviewing CEOs of franchising firms, introducing yet more light.
2011, a buyer's market. Transactional franchisee attorneys tell me that they've never seen an environment like this, where so many fees and agreements are up for negotiation. That is because franchising firms as a whole are cutting back on their budgets to sell franchises. Franchisees tell me that conventional loans are mighty hard to come by. They expect it to remain difficult in 2011.
Franchisees who have the money, an increasingly uncommon situation in today's economy, should remind themselves that they are in the driver's seat. If the franchise contract and its fees aren't exactly right, walk away. There are 3,500 other franchising firms to choose from. The franchise contract is laid with hidden mines. The trick is to find an attorney who knows what a franchisee-friendly contract looks like. Family lawyers will be clueless.
There are organizations that can help. For example, the AAFD has access to an arsenal of trained and ready-to-go franchisee attorneys to help identify clauses that are particularly egregious and to bend the agreement in your direction.
AAFD chair Bob Purvinsays, “We have a cache of ‘franchisee-friendly agreements’ and we have services to 1) review offerings, 2) assist with negotiations, and 3) make referrals to qualified counsel.” Purvin has a simple rule of thumb for investors: don’t get involved with chains that have no independent franchisee association.
Other experts agree, adding that advisory councils, which are franchisee boards that simply provide advice to the franchisor, are not enough.
Automobile sales will see an uptick, according to franchise owners via their independent franchisee association. Paul Taylor, chief economist of the National Automobile Dealers Association, says, “Several economic factors, such as an aging U.S. fleet, strong trade-in values and an improving stock market, are helping to sustain new vehicle sales.” Franchisees say that the average American car and truck is now over 10 years old. “Many consumers simply will feel the need to buy a new car or truck as the mileage on their current vehicles moves beyond the 120,000-mile mark,” Taylor says. The run-up in used vehicle prices is also pushing shoppers into the new vehicle market.
Gourmet burgers will continue to see growth. 2010 saw a host of better burgers introduced into the market. Five Guys Burgersand Fries saw explosive growth. Giant chains like McDonald's and Burger King joined the fray. That favorable wind to gourmet burgers will continue to blow in 2011. In June of this year, a report from food researcher Technomic stated, “I think we will see a shakeout in the years to come as some of the fast casual brands go head to head regionally, but for the next few years, there seems to be ample opportunity to grow.”
Man-in-the-van food franchises are moving into the suburbs. Franchisees can expect corporate to cautiously extend the brands. That is to say, expect more franchisors like Pizza Hut to offer WingStreet-like extensions to give their franchisees opportunity to grow. Also, expect more franchised restaurants to reveal their food supply sources. For example, Five Guys now shows customers who their peanut and fries farmers and suppliers are. Non-franchised chain Chipotle actually highlights farmers as quasi-celebrities. That trend will grow in 2011.
2011 will actually see a bounceback in hotel revenues, even though many hotel franchise owners have hunkered down and budgeted for rougher times. “The U.S. lodging industry has clearly passed through the trough of the lodging cycle and begun its ascent up the recovery curve,” writes Robert Mandelbaum, director of research information services for Colliers PKF Consulting. He argues that hotel owners are now a bit too conservative in their budgets for 2011, thinking that 2011 will be another 2009 or 2010.
Behind the Counter: The Untold Story of Franchising premieres Wednesday, Dec. 15 at 9pm ET.