As CIT Group lurches away from the dreaded ‘B’ word – bankruptcy – it’s a pertinent time to reflect on the importance of franchising to the US economy. Times are pretty tough without essential lenders going under. If franchises weren’t allowed the capital to trade and to profit, it’s heard to figure where the US economy might find the strength to galvanize itself.
As franchising goes, so goes the economy. That’s the title of a very interesting article on Allbusiness.com by journalist and business executive Keith Girard. He quotes an IFA study on the impact of the recession from May that lays out some scary figures for the industry, including the loss of 25,000 jobs and $5.1 in economic output.
Girard writes: “In past recessions, franchises have not only helped spur the pace of economic recovery but have also provided alternatives for individuals who were down-sized or displaced by other businesses or economic sectors, according to the IFA. Without the ability to play that role, the recovery could be delayed, or worse.”
Girard, like IFA President Matthew Shay, calls for more job growth and greater government intervention for the small business sector. Perhaps the government had a duty to save the likes of GM and AIG, but as the CIT scare showed, franchises have to cope with a similarly difficult lending environment and will need greater government intervention if they are to help revitalize the economy.