This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

3 Things You Should Know About Small Business: September 17

NEW YORK ( TheStreet) -- What's happening in small business today?

1. Restaurants continue to shift towards franchise model. More restaurant chains are seeking to franchise stores as the credit markets open, signing new franchise agreements for brand new locations or acquiring preexisting locations to expand their unit counts, according to Technomic.

"Restaurant companies are shifting towards a franchise growth model by selling company-owned stores to raise money and reduce capital expenditures, focusing more on the brand and less on operations," said Technomic EVP Darren Tristano. "The fast-casual and quick-service segments in particular are seeing higher levels of appeal based on lower costs of entry and strong unit economic models."

The top 400 restaurant franchise companies generated an estimated $34 billion in sales in 2011 and accounted for almost 10% of the total commercial restaurant industry sales of $370 billion, according to Technomic's 2012 Top 400 Restaurant Franchise Company Report.

Eighty-seven percent of McDonald's sales came from franchised stores for a total of $29.7 billion in 2011, whereas Subway's system is 100% franchised, meaning that all $11.4 billion was generated by franchisees, the report says. The next largest chain in terms of total U.S. franchise sales was Burger King at $7.4 billion.

Many chains are taking advantage of national brand strength and resources while reducing their own start-up and operating costs. Plus, with recent closures, more prime locations are available for new restaurants, Technomic says.

2. The SBA and the International Franchise Association are at odds over franchise survival rates. The Small Business Administration said in its monthly newsletter that survival among independent businesses compared to franchises "appears to be similar" as cited by Blue MauMau, a website for news and information related to franchise ownership.

Founder Don Sniegowski writes this is not the first time that the SBA has made this statement, yet it goes against popular sentiment and has largely "failed to catch the attention of sellers and buyers."

According to the SBA, half of all new establishments survive five years or more, while one-third survive 10 years or more.

But the International Franchise Association dismisses the unflattering franchise success rates, claiming that many of the franchises are "misclassified" by the SBA.

"Not all franchise businesses are coded as such and the SBA data does not compare business segments in the franchise sectors to the same segments in the non-franchise sectors," an IFA spokeswoman told Blue MauMau.

Sniegowski says there are two different comparisons going on here -- the SBA is referring to U.S. Census research while the IFA is referring to the SBA's report on the repayment of SBA-backed loans by franchises.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs