Franchising is Key to Global Economic Recovery
March 2009 Franchising World
The President's Column By Matthew Shay
The World Bank in late January confirmed what most business people have known for a while—the financial crisis is global, affecting virtually every country whether developing or high-income. Unlike the 2009 Outlook for Franchise Businesses report, which in January forecast the economic outlook for the franchising industry in the United States, there is no data forecasting how the financial crisis will affect franchise growth around the world. Despite this lack of data, two things are certain: Franchisebusiness growth overseas will feel the impact, and as the United States recovers, so will the rest of the world.
Like the United States, franchise businesses around the world have seen steady growth in the past decade, particularly in Brazil, China and Mexico. More often, International Franchise Association members are eyeing overseas expansion as an important way to diversify their portfolios. For instance, a survey of IFA members last summer revealed that 61 percent of respondents currently franchise or operate in international locations, and 16 percent generate between 25 percent and 30 percent of revenue from international activities. Almost threefourths of respondents said they plan to start or accelerate international ventures.
To keep this momentum going, IFA is working on several fronts to provide programs, services and support to help members expand overseas, beginning with efforts to get the United States back on the road to economic recovery. IFA is working with the new administration and the new Congress to ensure that any new U.S. stimulus programs address the needs of franchise businesses, including programs to get credit flowing again to small businesses by strengthening secondary markets and making changes to SBA loan programs.
We are urging President Obama to support free trade agreements with countries such as Colombia, Panama and Thailand to provide certainty in business laws to help facilitate expansion of franchise businesses.
We will also reach out to the new Secretary of Commerce and other key cabinet leaders to ensure they understand the importance of keeping franchise businesses strong, both here and abroad. A strong U.S. Commercial Service, an important unit within the International Trade Administration that helps promote U.S. businesses overseas, should be a top priority for the incoming Commerce secretary. Franchise businesses represent some of the world’s best-known brands and the more we can leverage U.S. government expertise and personnel resources around the globe, the better the industry will be able to expand into new markets.
To help members learn the fundamentals of franchise laws in foreign markets, the market potential of particular countries, and the actions needed to expand overseas or improve existing markets, IFA hosts several educational events throughout the year, including a variety of seminars during the our annual convention.
This month, the International Franchise Expo will be conducted in Washington, D.C. and is expected to draw a large contingent of international participants from many countries. In turn, to promote franchising as a proven method of economic development and to help countries implement sound, transparent rules and laws, IFA participates in many franchise expositions and meetings in countries including the United Arab Emirates, China, Brazil and Canada.
As in the United States, small businesses are critical to the economic health of the nation. This is true around the world as well. In a January speech before the U. S. Institute for Peace, World Bank President Robert Zoellick acknowledged that “private sector development and the creation of small businesses spur investment, jobs, opportunity, and hope. It empowers the market to meet local needs, whether for food, basic goods, or services.”
As IFA representatives travel around the world, we offer one key message: The franchising industry can create jobs and increase the quality of goods and services to improve the quality of life on a faster schedule. International expansion of business-format franchising is not only important for the continued growth of the franchising industry, it is an important component of economic recovery around the world.