As Economy Hurts, So Does Franchising

Franchise owners, brokers and leaders chime in on the impact of the credit crunch on business.

From a Saladworks franchisee, Vinod Kapoor, owner of three restaurants:

"I'm not even thinking of expanding," Kapoor said, sitting in his restaurant along Route 23 in Wayne. "I'm just trying to keep my units operational without getting ulcers."

From the same franchisee on how Saladworks' customers are down:

"If people have fewer dollars in their pocket, there's less willingness to spend it on luxuries" such as eating out.

Or, in Kapoor's case, eating in. During the past six weeks, he said, catering services have dropped from more than a quarter of his total revenue to about 5 percent, as local companies cut back on seminars and luncheons.

From a franchise broker Tom Scarda of FranChoice, who sells franchises to prospects:

He said traffic to the group's Web site is down 40 percent over the last year. "I do work with some people who have their own capital, but for the most part we're at a standstill," said Scarda, himself a former franchisee."

From the International Franchise Association, giving the franchisor perspective:

A spokesperson for the International Franchise Association in Washington, D.C., said the group has heard anecdotally that the credit crunch is "significantly slowing down some expansions."

From the perspective of one of the country's largest franchise lenders:

GE Capital Solutions, on the other hand, is taking a closer look at the loans it makes to franchisees. Spokesman Stephen White said the company is deferring rate quotes "until things settle down."

Not all is gloom. From a New Jersey Cartridge World master franchisee, Greg Carafello, who predicts sales of refilled ink cartridges will be great.

He said the state's 35 stores had record year-over-year sales last month. "Our store owners should be doing much better in this climate because people are watching what they're spending," he said.

From a developer's point of view, real estate is cheap:

For owners still seeking a location, the slowdown has offered at least one silver lining: more favorable commercial leases. In southern New Jersey counties, Carafello said, some owners have been able to negotiate down to $25 to $35 a square foot.

via NorthJersey.com