Two years ago, Alex Modica was a jet-setting executive earning six figures in the apparel industry.
The Connecticut resident had spent 23 years in the business, working upper management jobs for companies such as Saks Fifth Avenue and Banana Republic.
Then came the recession. In October of 2008, he was "downsized" from his position as a senior marketing manager at BlueFly.com.
Suddenly, Modica was hustling for a job.
For months, he went on interviews, but to no avail. Over-qualification was his primary problem, or so his interviewers said.
"It makes you stop and think, 'What am I going to do?'" he told HispanicBusiness.com. "I'm not an old guy. I'm only 46 -- I'm not dead."
Modica turned to franchising. In September -- nearly a year after he was let go -- he launched ShelfGenie, a franchise that designs, builds and installs Glide-Out(TM) shelving systems.
Quite a departure from his previous line of work, but Modica said he has no regrets.
"I could not be any happier with my decision," he told HispanicBusiness.com. "God willing, it's been very good. We've had growth every month."
Modica is among many high-skilled unemployed workers across the United States who have turned to franchising amid the downturn in the economy.
For him, the option has been a godsend. But it is far from a cure-all.
2009 A Tough Year for Franchising
Franchisers were not immune from economic misery of 2009. That year, franchise businesses reduced employment by 4.1 percent, shedding 409,000 jobs nationwide. Revenue dropped 0.7 percent, or by $5.7 billion, according to a December report from the International Franchise Association (IFA), the world's oldest and largest organization representing franchising.
However, in prior recessions, the industry has bounced back faster than others. After the recession of 2001, franchise companies added 1.2 million jobs over a five-year period, and expanded at an average of 9 percent a year, according to the IFA.
The IFA expects things to turn around. The organization's December report forecast a slow recovery for this year, predicting the industry will reclaim 36,000 of the 400,000 lost. It also forecast a boost in revenues by 2.8 percent, to $868.3 billion.
Alisa Harrison, the IFA's vice president of communications, told HispanicBusiness.com that the organization doesn't yet have hard figures for 2010, but said discussions with individual CEO's indicate some positive movement.
"Many are certainly optimistic," she said. "Some companies are really seeing franchises fill rapidly. But credit remains an issue."
Jeff Young, a franchise consultant with MatchPoint -- an agency that matches franchisees with franchisers -- acknowledged that much of the movement is the result of the rising unemployment rate over the past year.
"It's cyclical," he told HispanicBusiness.com. "With more people out of work, more, by virtue of sheer numbers, get into starting their own business."
How to Get the Start-Up Money?
To start a franchise, prospective owners need to pay the franchising company a start-up fee. In Modica's case, it amounted to $40,000, and had to be made in one lump sum -- no payments.
Franchisees sometimes obtain the money for their start-up fees through home-equity lines of credit.
But Young said that the option is less common, now that the banks have tightened the rules on lending. Others get the money from their personal or retirement savings, and a select few -- maybe 2 percent -- obtain loans from the franchising company, Young said.
