Key Trends Affecting The Outlook For Franchising In The U.S. For 1999 And The New Millennium
By Andrew J. Sherman, Esq.

The Dow is at 9500+ -- the highest level of all time -- creating wealth and confidence for more people than ever who may be considering self-employment via franchising.

1998 was a record year for layoffs of middle managers due to highest level of M&A activity (over 2 trillion in deals) and downsizing ever recorded -- leading to a large pod of candidates interested in self-employment.

Technology and the growth of the Internet has truly created a global village which make people more comfortable with global franchising (you are just an e-mail away...) and facilitates communication channels for both domestic and overseas franchising.

The growing sophistication of franchisees levels the playing field &endash; therefore, franchisors should be prepared for negotiations with Peers not Pawns.

In the new millennium, people are looking for something really new &endash; ground floor opportunities &endash; either within a totally new niche or with a new face &endash; this helps the early-stage domestic foreign franchisor which is just entering the U.S. market and launching their franchising program.

Brand and systems are now key to all types of businesses (Internet &endash; AOL/AMAZON.COM, etc.) &endash; a concept that franchisors have understood for years &endash; but now the secret is out and everyone is focused on intangible assets &endash; your brand and systems must be ready to compete!

High profile franchisee advocacy groups have been organized in the U.S. &endash; further leveling the playing field &endash; franchisees want to be treated more like strategic market development partners and not soldiers on the front line taking orders from a franchisor commander sitting in an ivory tower who is never in the trenches -- you need to keep one step ahead and show that you are not afraid to get your hands dirty.

We have seen an onslaught of the Lay's syndrome (can't eat just one) where franchisees are pursuing multi-unit developments deals, multiple franchise concepts and demanding co-branding opportunities to level out revenue streams &endash; changing your expectations on non-compete clauses.

The Clinton impeachment trial has put trust and integrity at a premium &endash; people are more distrustful of the leaders than ever before &endash; as leaders of your franchise systems, you must stand on high moral ground and expect to be judged by high standards.

An investment group just paid nearly $800 million for the Washington Redskins &endash; the highest ever paid for a North American sports franchise. You may say, well, it's the NFL &endash; but it is STILL a franchised business where you need to follow the rules of the league and must use the brand and operating systems as prescribed (and this is for a team that hasn't had a winning season since they won the Super Bowl seven years ago &endash; trust me &endash; I have suffered through many of their games).

The cross-cultural exchanges that the U.S. and Canada enjoy in sports and music (Canadian teams in NHL, MLB and NBA and let's not forget Celine Dion) make it easier for Canadian franchisors to enter the U.S. market. There is under recognition and acceptance of our great neighbor to the north in places beyond Buffalo or Detroit or Seattle. You know that when the NHL establishes a foothold in places like Phoenix, Miami and now Nashville that more and more average Americans will hear of Toronto, Montreal, Calgary and Vancouver.

And finally, there seems to be a renewed emphasis on quality of life with demand for flexible work hours, telecommuting and opportunities which combine income potential and genuine fun. Franchise opportunities which offer this type of flexibility and enjoyment will do especially well in the next few years, particularly those aimed at the early/semi-retired or stay at home mom who wants to have a business, but where the underlying business is linked to an activity/product/service that they truly enjoy.

For more information, feel free to contact the author, Andrew J. Sherman, Chairman of the Franchising, Licensing and Distribution Department at Katten Muchin & Zavis and author of seven books on business growth and franchising at asherman@kmz.com (email), (202) 625-3790 (phone), or (202) 298-7570 (fax).