Current Conditions, Outlook Dim for Franchises

America’s franchises are singing the blues, suggests a study released Thursday by the International Franchise Association.

Business is currently lackluster and unlikely to improve much going forward, according to an August survey of 134 executives representing both U.S. franchisers and franchisees. What’s more, they say conditions today are significantly worse than they were just a few months ago.

Slightly more than a third of respondents said business conditions were “somewhat poor,” up from about 20% who said the same in a March survey that polled 370 franchiser and franchisee executives, the IFA reports. Roughly 25% said conditions were “somewhat good” in August, down from 31% in March.

Franchise leaders noted that limited access to credit remains a major problem. Nearly two-thirds of those polled in August – 64% — reported “no improvement” in this area in recent months, up from 62% who said so in March. Looking forward, just 27% said they expect to see “moderate improvement” in credit access over the next 12 months, compared with 49% who said this in March.

Another matter of grave concern to franchises is health reform. Four out of five respondents to the August survey – or 81% – said they have a “negative” or “very negative” view of the health-care law implemented last year, while nearly four out of five – 79% – said they expect business costs to “significantly” or “very significantly” increase because of it. Less than 5% of those polled had a “positive view” and less than 1% had a “very positive view” of the legislation. Roughly 11% said they were “neutral” and about 5% expect business costs to “decrease” or “significantly decrease.”