Franchises offer an opportunity for under-employed and reporters

They’re not quite mom-and-pop shops, but they’re not large corporations either. Instead, franchises have attributes of both: Independent ownership with a large support network and a ready-made brand.

An initial Cold Stone Creamery franchise fee is $42,000 with a total investment ranging from $294,250 and $438,850. Credit: Cold Stone

During the economic downturn, the market for franchises has fluctuated.  At the beginning of the recession, the franchise market in most areas received a layoff-related boost. When more people lose their jobs, more people turn to franchises as a way to quickly launch their own business and have some control over their income.

But when the recession continued to deepen, even the interest in franchises couldn’t hold up. Securing the funding needed from banks was tough. And like many businesses, many franchises – restaurants, retailers and roughly 293 other industries, according to the U.S. Census Bureau – were not offering profits to tempt new owners.

Now is a good time for business journalists to take another look at the franchise trends in your area. Which franchises are flourishing, which are failing and why? Has a stagnant market started to rebound?

If you cover business in one of 14 states, you have an advantage to stating your research: you can start with the number of franchise registrations. States that require franchises to register separately are: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and  Wisconsin.

In those states, recent data on franchise trends is fairly easy to acquire, usually through the state’s attorney general office, commerce department or securities division.

If you cover a state that does not require franchise registrations, you can still get some good statistics for a trend piece. Check the Economic Census Bureau for figures released in September that detail franchise statistics for 2007. It’s the first detailed report on this business type. You can see how your state’s market for franchises compared to other state’s markets.

Call a sample of franchises in your area and try to focus on tracking down a variety of business types. Ask the owners how they got started, why they opted to invest in a franchise and if they think the venture has been worthwhile. Will they buy another one?

Check online news and sales sources to see if there are franchises for sale in your area. Call them and learn why they are making a transition out of ownership. Why is their business for sale? Have they had luck finding a buyer?  What are their plans after selling the franchise? And again: Will they buy another one?

Finally, it couldn’t hurt to call a broker who specializes in franchises. For a broker’s perspective, you could start with the Franchise Broker’s Association.

Franchise stories can get complicated. There are rules that vary in each state. Understanding the ownership policies for specific businesses can be difficult. And getting specific financial data on the enterprises can be tricky. But with roughly 10 percent of all businesses being franchises, according the U.S. Census Bureau, it’s a market worth reporting on.