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Financing

Tight lending leads to franchise powwow

The lending needed to open or buy franchised businesses this year will fall about $2 billion short of demand, thwarting the creation of up to 80,000 jobs at restaurants and other enterprises, according to new research from the International Franchise Association.

The trade group said the credit gap could stifle more than $10 billion in economic activity and slow the nation’s recovery.

“Franchising, due to its structure and demonstrable track record of 40% growth over the last decade, offers the most promising vehicle to accelerate widespread job creation,” said IFA CEO Steve Caldeira. “Yet without sufficient financing, franchise businesses will continue to struggle to become a true locomotive for job creation.”

The IFA is pulling together a “lending summit” in Washington, D.C., on April 7 to address the matter. Other supporters of the brainstorming session include the National Restaurant Association, GE Franchise Capital, Dunkin’ Brands and DineEquity, the parent of Applebee’s and IHOP.

Restaurant Business, the print affiliate of restaurantbusiness.com, is the IFA's media partner for the event. 

The group says it has lined up such speakers as Don Graves, head of President Obama’s Jobs Council, and Sen. Mary Landrieu (D-La.), chairman of the Senate Small Business & Entrepreneurship Committee.

Among the issues to be addressed at the Small Business Lending Summit is the interplay between the economy and franchising. Restaurants and other franchised ventures traditionally have been a hotbed for new jobs. Even with the expected capital gap, new or rejuvenated franchises will generate about 251,000 new jobs and $32.5 billion in economic activity.

Depressed real estate values and softer sales have lowered the collateral value of many businesses, making it more difficult for them to borrow the capital they need to grow.

The IFA also cites a stricter regulatory environment and continued high unemployment as factors blocking franchisees from the $10.4 billion in capital they’re expected to need in 2011.

The research was conducted for the IFA by FRANdata.

The Lending Summit will be held on April 7 at the Capital Hilton. 

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