If you've ever wanted to own a franchise or expand your current franchise portfolio, now may be the time to do so. Despite a continued lending gap, franchise interest and opportunities will continue to grow in 2012, according to data from the Small Business Lending Matrix developed by FRANdata and the IFA.
The report found that there remains high demand for unit transactions and transfers, an increased lending ability from banks and a steadily recovering economy, continuing a trend that began in 2010.
While banks will hit their highest willingness to lend since the start of the recession this year, they will still come up short compared to franchisee demand. Franchises will require an estimated $11.7 billion in new lending capital to fulfill the forecasted demand for new units, however, banks are only projected to lend $9.5 billion.
The lending gap has been gradually closing since 2010, when it hit 22.8 percent, compared to the projected 18.6 percent in 2012. With the projected $9.5 billion in lending available, 35,997 franchise units will be financed, creating 425,187 jobs and generating $56.7 billion of economic output annually, according to the report. “Education is now working and lending is freeing up giving franchising the ability to continue to spur job creation," said Jon Luther, IFA chairman.
The lending gap will account for the loss of 8,230 units, over 97,000 jobs and nearly $13 billion in annual output.
The report points out that as unemployment rises, interest in franchises increases. Historically, franchising opportunities have shown resilience during past economic downturns, including 6 percent growth early in the new millennium and a 5 percent jump after the tech bubble. While interest in franchising remains steady, the struggle to obtain capital from banks has hampered growth and ultimately slowed the pace of economic recovery.