Page 74 - Business Plans that Work A Guide for Small Business

Industry: Zoom Lens on Opportunity • 65

Exhibit 1.8 Franchising Royalty Rate (Percent of Revenue), 2001 13
350

300

250 The franchise fee, roy-
Number of Franchises 200 revenue model. Investors will
alty, and advertising charts
help validate the Lazybones
look for benchmarks and
150
best in class companies to
compare to the Lazybones
plan.
100
50

0
0 0–1 1–2 2–3 3–4 4–5 5–6 6–7 7–8 8–9 9–1010–1111–12 12–13 13–14 14–15 15–1616–1717–1818–1919–20 >20
Franchise Royalty (%)
Macroeconomic Trends Again, Dan brings in
trends that support his story
During down economic times, franchising has historically for franchising.
out performed independent businesses. A major reason is job secu rity. November
2008 alone saw the layoffs of over 91,000 U.S. workers, and it doesn’t take long for
14
unemployed people to seek alternatives. Work ers who lose their jobs are especially
eager for job security, and running one’s own business frequently looks like a more
secure option after one has been laid off. For those who have not run a business
before, franchising is a particularly appealing route.

What’s more indicative of the resilience of the industry is the fact
that the economic output due to franchising grew by more than 40%
[between 2001 and 2005], while all other businesses increased by only
26%. Employment in franchising grew by more than 12% compared to
the 3% of other businesses. These growth rates have proven, beyond
anecdotal evidence, that franchising is counter-cyclical to an underper-
forming economy.

—Matthew Shay, President, International Franchising Association. 15

13 Ibid.
14 Forbes.com layoff tracker.
15 “Franchising Weathers Economic Challenges,” Franchising World, May 2008. Page 8.