Franchising Seen as Next Big Opportunity

DENVER-Cities such as Denver, with plenty of empty storefronts and declining real estate values, could be a fertile ground for franchises, a number of experts tell GlobeSt.com in exclusive interviews. “Franchising is really a growing area right now,” Andrew L. Pidcock, a retail lawyer with the Denver office of Snell & Wilmer LLP, who counts among his clients Starbucks and Good Times Restaurant, a Denver-based hamburger chain.

“It’s a way for a lot of smart, well-educated people who either have just been laid off or might soon be laid off to control their own destiny,” Pidcock adds.

But there are also risks, he warns. “Just by the sheer volume of increased franchises, there will be more failures.”

Also, people selling franchises need to screen prospects carefully, Pidcock tells GlobeSt.com.

Some franchisers only see dollar signs every time someone walks through their door, he says.

“If you just look at the upfront fees and the royalties, it’s a very short-term benefit if they fail,” Pidcock says.

Terry Hill, spokesman for the International Franchise Association, tells GlobeSt.com that more than 75 industries are franchised today, but no statistics on the success and failure rates exist in the fast-growing industry.

“If you want to know how many franchises start up every year and what is their failure rate, I couldn’t come close to telling you,” Hill tells GlobeSt.com. “Those numbers don’t exist. Believe me, we’ve tried to compile them for years.”

But, he says, his feeling is that on average, franchised restaurants, for example, probably have a better survival rate than non-franchised ones.

With franchises, you’re typically buying a brand with a system in place, Denver restaurant consultant John Imbergamo tells GlobeSt.com.

“If you buy a Jiffy Lube or a Wendy’s franchise, it’s because you know someone else already has done a good job of building the brand,” Imbergamo says. “And, there are usually certain systems in place, so you don’t have to re-invent the wheel.”

The other strategy, he says, is to buy a franchise with a unique concept.

“We all wish we could have bought one of the original McDonald franchises. Of course, we also kick ourselves for not buying Microsoft stock when it first went public, too.