When people chat with Dustin Winkle about the economy's effect on their business, he doesn't say much. He doesn't want to make anybody feel bad. Because the truth is that the economic downturn has been very good for his 11 dry cleaners in the Boise, Idaho, area. "Dry cleaning is pretty recession-proof, so we're doing fine money-wise," Winkle says. "When I bought the company two years ago, the economy was already starting to slide down. Things have been a little slower, but not a lot."
Mergers and acquisitions (M&A) have been an instrumental component in franchising over the past two decades, particularly as a growth vehicle for expanding companies. Historically, most transactions in franchising have concentrated more on the "A" than on the "M." Some of the primary drivers for this have been cultural and business trends deeply entrenched within franchising. However, the current global financial crisis and franchising's own changing dynamics may alter this.
After graduating from the University of Pennsylvania and Loyola Law School in Los Angeles, Danny Sonenshine quickly found himself working as a litigator and transactional attorney at major firms in Orange County. It didn't take long for the Laguna Beach native to realize a few things about himself--realities that led him to leave the practice of law after six years for the very different field of franchising and restaurants.
Kevin Archer has spent 18 years as a multi-unit franchisee with Bojangles' Restaurants in North Carolina. The Charlotte native knows how much Southerners love their chicken and biscuits. So does he: his favorite menu item is the Cajun fillet biscuit. Archer also believes "You are what you eat and drink." As a proponent of a healthy diet and lots of exercise, he sees no conflict between his philosophy and his business. Even in today's increasingly health-conscious culture, he still sees Bojangles' as relevant and popular.
The difficult consumer business environment has made the economics of new unit expansion more challenging. This makes "getting to yes" with bankers more difficult because the economics do not have as healthy a margin for error as they did in more robust times. As a consequence, capital access will continue to be the most constraining factor as we look at the next few years. Financing new units is relatively more challenging in general, and in this economy that is particularly true.
In the few minutes it takes you to read this article, 40 businesses across the nation will fail--and that statistic was [i]before[/i] the economic downturn of the last 24 months. Tragic? Yes. Remarkable? Not at all. The road to business success is littered with the skeletons of companies whose owners--mostly brilliant and skilled individuals--failed to "take care of business" in the financial management of their enterprise.
The most fundamental business strategy calls for black numbers on the bottom line. In simplest terms, it's proof the business is generating more cash than it is spending. All too often, though, entrepreneurs get involved in businesses without employing a proper system to help them keep a watchful eye on what they're earning and what they're spending. Managing day-to-day operations can be so time-consuming that it leaves little room for financial analysis. Or perhaps key individuals lack a basic understanding of how to read and interpret financial statements. Combine these factors with the down economy, and you'll likely wind up with a troubled business.
The way to a man's heart may be through his stomach, but the way to a banker's heart is through strong unit economics.
When Frank Illiano left his native Italy and came to the United States 27 years ago, he didn't plan to stay. He figured he'd get a business, work for a while, make some money, and head home.
In the mid-1990s, when the stock market was on fire and Darrell Lamb spent most of his days on the phone in an unending quest for new investors, he had a chance to invest in an Express Oil Change franchise. Lamb had some great advisers to rely on. His uncle was president of the company and his dad, an Alabama optometrist with a keen interest in growing ventures, was an investor.
Most families have their favorite holiday traditions, with special rituals, decorations, clothes, songs, and foods that make the holidays unique, memorable, and fun.