After being laid off for a third time in 13 years, Don McFee began a duct-cleaning franchise with his two sons, Max, 19, left, and Sam, 20. He runs the business out of his home in Lino Lakes. He couldn’t get recession-shy lenders to provide start-up money, so he used his 401(k) funds. Elizabeth Flores, Star Tribune
Alex Robinson, writes in the Star Tribune that Don McFee had lost his job for the last time.
In November 2007, after he’d been told to clean out his desk for the third time in 13 years, the former construction project manager went home and told his wife, “I don’t know what I’m going to do, but I’m not going to do it for anybody else.”
McFee, like many newly unemployed, decided to go into business for himself and buy a franchise.
The franchise sector usually fattens during recessions; real estate is cheaper, there’s a spike in laid-off workers from corporate America and franchises are usually considered less risky than starting an independent business. But because of the credit crunch, many in the industry are expecting this recession to be different.
The International Franchise Association (IFA) predicts a 1.2 percent decrease in the number of U.S. franchises in 2009. That’s a small dip, but it’s also the first year-over-year decline in more than a decade.
“This really is a big marker for us,” said Alisa Harrison, a spokeswoman for the IFA. “We always see an uptick during a recession.”
The drop is multiplied in Minnesota, which had 1,186 franchises in fiscal 2009, down 8.6 percent from 1,299 in fiscal 2008, according to the Minnesota Department of Commerce. Also, there was a 22 percent decrease in franchise applications in 2009 compared with 2008.
The reason? Many banks, hobbled by the credit crunch and under closer scrutiny from regulators, no longer want to cough up loans for new small businesses, Harrison said. The IFA predicts franchisees in the United States will borrow 27 percent less this year.
Read more at: Star Tribune
