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Whether You’re Selling or Buying a Franchise You Need to Consider an Important Fact

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Franchisors planning their franchise sales strategy for the short term need to recognize the impact that unemployment rates have on purchasing power. Those individuals looking to purchase a franchise would be well served to know the employment situation in a territory they are considering.

In areas with higher than normal unemployment rates there is an impact on spending. This change on how and where people spend their money affects everything from durable goods to restaurants. In the case of necessary purchases the impact may be diminished. However, when people have less money to spend, it will have a negative effect on businesses and services. Since most economic experts predict that the U.S. economy won’t see a sustained recovery until the end of 2011, franchisors and prospective franchisors should be aware of unemployment data for particular States and markets.

Following is a snapshot of unemployment data sorted by State and Metropolitan Statistical Areas from the Bureau of Labor Statistics.

High Unemployment States:

State Unemployment September, 2010

Nevada

14.4%

Michigan

13.0%

California

12.4%

Florida

11.9%

Rhode Island

11.5%

South Carolina

11.0%

Oregon

10.6%

Kentucky

10.1%

Indiana

10.1%

Georgia

10.0%

Arizona

9.7%

States with Lower Unemployment:

Nebraska

4.6%

New Hampshire

5.5%

Kansas

6.6%

Virginia

6.8%

Minnesota

7.0%

Maryland

7.5%

Utah

7.5%

Wisconsin

7.8%

Texas

8.1%

New York

8.3%

Lets zero in on a smaller area:

A Metropolitan Statistical Area is a geographic entity defined by the U.S. Office of Management and Budget (OMB) for use by Federal statistical agencies in collecting, tabulating, and publishing Federal statistics. A metro area contains a core urban area of 50,000 or more population, and a micro area contains an urban core of at least 10,000 (but less than 50,000) population. Each metro consists of one or more counties and includes the counties containing the core urban area, as well as any adjacent counties that have a high degree of social and economic integration (as measured by commuting to work) with the urban core. There are 372 MSAs.

The following table shows the unemployment rates for some large and more recognizable MSA’s:

MSA U/E Rate

Washington-Alexandria-DC-VA-MD-WV

5.9%

Albany-Schenectady- Troy NY

6.6%

Minneapolis-St. Paul-Bloomington, MN-WI

6.7%

Austin-Round Rock-San Marcos, Texas

6.8%

Boston-Cambridge-Quincy, Mass

7.3%

Dallas-Ft.Worth-Arlington, Texas

7.9%

Columbus, Ohio

8.2%

New York-Northern NJ- Long Island, NY-NJ-PA

8.5%

Phoenix-Mesa-Glendale, AZ

8.9%

LA-Long Beach-Santa Ana, CA

11.8%

For a complete list of all areas visit http://www.bls.gov/web/metro/laummtrk.htm

You can use to data to help make decisions regarding franchise sales, future growth or in the case you’re considering to franchise in a specific area.

© 2010 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

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