State franchise growth outpaces nation

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Last year, business attorney Michele Fagin noticed something: an increasing amount of her practice involved franchise questions, contracts and user agreements.
“I’m spending a lot of time dealing with this,” she said. “It’s interesting. About a year ago, it was just a small part of what I do for a living. But I spent about 80 percent of my time last week with two clients who had franchising contracts. Overall, it covers about 20 percent of my practice.”
Franchising has become big business in Colorado, according to FRANdata, an Internet company that tracks national franchise activity and information.
“We have approximately 40 new concepts now marketing actively to Colorado that had no units in the state in 2002,” spokesman Randall Temple said. “That shows some definite interest in the state and in Colorado Springs.”
Fagin said she has worked on all aspects of franchising.
“I’ve seen it all lately, from clients wanting to move here from other parts of the country to existing clients who want to rework their franchise contracts,” she said. “It’s pretty enormous, and I’m wondering why so much of the business legal side is becoming involved with franchising.”
Her suggestion that franchise activity is growing in Colorado is correct, Temple said. FRANdata tracked 72 franchises headquartered in the state. The popularity of business ownership ranges from Quiznos’ fast foods to Supper Solutions, a kitchen preparation business.
“The popularity of franchises in Colorado is incredible,” Temple said. “We’ve tracked a 17-percent growth between year-end 2002 and year-end 2004. And of the franchisors headquartered in Colorado, almost 40 percent started franchising in the last five years.”
Of those, four are headquartered in Colorado Springs: 3D Memories, the Blind Man of America, LearningRX Training Center and the Miracle Method U.S. Corp.
Franchise operations in Colorado outpaced the nation in recent years, according to the FRANdata database. In 2004, nationwide growth was 3 percent, while the growth in Colorado was 14 percent, Temple said.
“It looks like the trend is fairly recent,” he said. “For example, growth from 2000 to 2003 was 25 percent in Colorado, and only 20 percent in the rest of the nation. From our database, it looks like nationally 23 percent of franchisors are newly formed (within the last five years) compared to 39 percent for Colorado.”
Nationally, franchise operations experienced strong growth in 2005, with some franchises growing 14.2 percent last year. In addition, there were 513 new franchising concepts last year, bringing the total number of franchises to 767,483, according to the International Franchise Association.
Franchises account for nearly 10 million jobs and pump $625 billion into the economy, said Amy Bannon, a spokeswoman for the organization.
Part of the reason for the increasing popularity of franchises is the ease of loan applications and assistance from groups, such as the IFA and FRANdata.
The Small Business Association set up a franchise registry to guide would-be business owners through the franchise acquisition process. Members of the registry are able to take advantage of streamlined eligibility guidelines to reduce costs of procuring loans, Temple said.
Other government programs, nonprofit groups and businesses also encourage franchise purchases. The International Franchise Association assists with all areas of franchise purchases, from help in deciding on the business to offering an online course for potential buyers.
“We’ve definitely seen an increase in activity,” Bannon said. “But that’s been across the nation. Of course, we have several programs that make it easier to buy a franchise – including one that offers incentives to veterans.”
But ease in loan operations and the franchise application process are not the only reason for the increase in activity in Colorado. Temple said that franchise operations are doing well throughout the state, encouraging new businesses to move to the region to take advantage of the large number of people who want to own their own franchise.
“With the number of franchisors choosing to headquarter there (Colorado) in the last five years, you can bet they are trying to be close to a large pool of potential franchise buyers,” he said.