2 0 1 0 A n n u A l R e p o R t - International Franchise Association

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Both of the economic reports were critical to IFA’s ability to get changes in the SBA lending program to free up capital for more franchise businesses. a slow recovery with marginal increases in the number of jobs, economic output and the number of establishments, but the continuing credit crunch would limit the amount of growth that franchise businesses have seen relative to prior recoveries. Specifically, the estimated number of establishments was predicted to increase by 2 percent by approximately 18,000 establishments. Franchise business employment was predicted to increase by only 0.4 percent, adding approximately 36,000 jobs after shedding more than 400,000 jobs in 2009; and economic output to increase by 2.8 percent, for a net gain of $23.6 billion. The updated Small Business Lending Matrix and Analysis, compiled in cooperation with FRANdata Corp., was released in December 2009 and served as a key component of the economic data released in 2010 as an important body of evidence for briefings with members of Congress and the financial community, to demonstrate the negative impact of the credit crisis on franchise businesses. The lending analysis estimated that banks were expected to lend $6.7 billion to franchises in 2010 versus the $10.1 billion that would meet 100 percent of demand. The shortfall was attributed to banks’ conservative approach to a weak economic outlook and uncertainty in the commercial real estate market. At 100 percent lending, franchise businesses could have created or maintained 305,000 jobs, while generating $32 billion of annual economic output in 2010. Both of the economic reports were critical to IFA’s ability to get changes in the SBA lending program to free up capital for more franchise businesses. The data was also highlighted in IFA earned and paid media initiatives to showcase the economic importance of franchising. franchise Business leader survey Another tool developed by the IFA Educational Foundation was the annual Franchise Business Leader Survey. IFA’s survey revealed that franchise business leaders were cautiously optimistic in their outlook for 2010, with more than half stating that they expected the economy to be better in 2010 than in 2009, and more than 40 percent stating they expected the economy to be about the same in 2010 as in 2009. Nearly two-thirds said they expected their own business to do better in 2010 than in 2009. The report showed that the greatest concern of franchise business leaders continues to be “economic issues,” with nearly half stating that “financing and access to capital” is their greatest concern, and nearly one-quarter stating that “franchise sales and development” is their next greatest concern. Tight credit and uncertainty over health care costs and other government regulations were reasons most often cited for curtailing plans to open more units and add jobs. franchising counts New data in the 2007 Economic Census Franchise Report released in September by the U.S. Census Bureau provided additional information to help determine the economic impact of franchising. The new Census report 18 // IFA 2010 Annual Report 50 Years of Excellence, Advocacy and Education was the result of cooperation between IFA and the U.S. Census Bureau to include questions on franchising in the economic census for select industries. The first-time report includes national-level estimates by industry sector of franchise establishments, employment in franchise businesses, and payroll and sales from franchise businesses. The report includes data from businesses with paid employees in nearly 300 industries. This new report represents the first comprehensive “census of franchising” by the government, and demonstrates that franchise businesses provide many options for entrepreneurs who may be considering starting a franchise business. The Economic Impact of Franchised Businesses, Volume 3 scheduled for release in February 2011, will expand on the 2007 Census report, with additional data from businesses without paid employees. Benchmarking for franchise executives Extensive work began in 2010 on a new benchmarking service to help franchise companies compare their performance with others in the industry and within their category. A benchmarking task force developed OnTrack — Performance Benchmarking for Franchisors, based on a few pilot member companies. The results will be presented during the 2011 IFA Annual Convention.
Franchisor members looking for opportunities to grow in 2010 turned their attention to the international markets to expand their brands. When surveyed last year, over 60 percent of franchise system members currently franchise or have operations in international markets, and 75 percent planned to accelerate or start new franchising programs internationally. Canada, Mexico, United Kingdom and Australia are the most popular countries where franchisors are operating, but many also include Brazil, China, India, Spain, Italy, Russia, France, Ireland, Chile, Egypt and Argentina in their top market lists. The International Department revamped the international section of the IFA Web site www.franchise.org to reflect the evolving market potential for international franchising by adding an additional 20 countries and profiles to the site and updating the others. More than 60 countries are now profiled on the site with economic, demographic and cultural data, plus information on franchise laws. Also available are recent articles related to doing business in the specific countries providing IFA members with a comprehensive research tool for exploring where the opportunities are for international franchising. As part of its mission, the International Committee and department assembled content for a number of programs throughout the year to educate IFA members on the best practices for international growth and development. At the 2010 IFA Annual Convention, attendees experienced an International Summit packed with International Development international content to help franchisors go global. In October, the International Symposium was held in Singapore with more than 70 international delegates in attendance. In 2010, IFA worked with the U.S. Commercial Service of the Department of Commerce and its network of offices across the United States and more than 80 countries to assist U.S. franchise companies in growing their brands overseas. The two organizations work together, bringing more than 40 delegations of foreign investors to the United States to visit exhibitors at the International Franchise Expo, promoted the gold key services offered by the Commercial Service, and coordinated local advice and guidance in specific countries by the Commercial officers around the world. World Franchise Council panelists from the Brazilian Franchise Association include International Analyst Rodrigo Faria, Legal Director Luiz Henrique do Amaral and Executive Director Ricardo Camargo. IFA hosted the members of the World Franchise Council for their semiannual meeting in San Antonio in conjunction with the IFA convention. IFA is a proud founding member of the World Franchise Council, and maintains close working relationships with the 41 member franchise associations. IFA staff and volunteers attended the Fall meeting of the WFC in Seoul, Korea to further advance the global interests of franchising. IFA’s Chairman Kenneth D. Walker, CFE, traveled to China for the China Franchise Expo 2010 at the China World Trade Center in Beijing in May. In an effort to deliver more quality international leads to IFA members, IFA and MFV Expos, IFA’s partner for the International Franchise Expo, West Coast Franchise Expo, and the Franchise Expo South, collaborated on a number of U.S. Pavilions in major international franchise trade shows around the world in 2010 including Mexico City, Mexico; Sao Paulo, Brazil; and Singapore. IFA 2010 Annual Report // 50 Years of Excellence, Advocacy and Education Page 19 19
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