February 25th, 2008

Franchising the economic downturn

They encompass everything from fast food to educational programs.

And some think the litany of franchise operations could be the security net many business owners are looking for as economic conditions worsen nationally.

"Franchising does seem to weather downturns fairly well," said Terry Hill, a spokesman for the International Franchise Association.

He said the number of franchises nationwide boomed in the last economic slump when workers grew tired of fearing for their jobs.

Dubuque appears to be on the radar screen of some franchises looking to expand. At least three franchise operations are planning to open stores in the area in the next year.

HoneyBaked Ham Co. and Cafe plans to move into seven cities in Iowa, including Dubuque. The company expects to launch a store and cafe that will constitute an estimated $350,000 investment.

"It's like a small speciality grocery store," said Jim Squire, director of franchise development.

Although a location hasn't been selected, the company hopes to have the store operational by late fall.
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The company has launched 120 franchise locations in 25 states in recent years with the new combination of store and cafe.

HoneyBaked Ham Co. and Cafe was drawn to Dubuque based on market size.

Batteries Plus also is planning to locate in Dubuque sometime in 2008.

"We targeted about 50 markets for immediate expansion and, of those, (we) selected three of those markets," said Russ Reynolds, chief executive officer.

Reynolds said the company also was attracted to Dubuque's market size, and wanted another store near the Batteries Plus central warehouse in the Milwaukee area.

Wireless Zone, retailer of Verizon Wireless products, is planning a move to Dubuque as part of an "assertive"

approach to enter new markets in an environment the company sees as ripe for franchise advancement, a company

official said.

Still, Hill cautioned against would-be entrepreneurs jumping too soon at franchise opportunities popping up in the area without thoroughly researching the chain they are joining.

Failure rates among new businesses remain high.

In a study in Columbus, Ohio, Professor H.G. Parsa, of Ohio State University, tracked new restaurants from 1996-1999, according to a May 2004 column by Rhonda Abrams in USA Today. Collectively, 59 percent of new restaurants closed those three years. The "failure" rate wasn't very different between franchised restaurants -- 57 percent -- and independent restaurants -- 61 percent.