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Franchising expected to improve in 2012

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The franchising industry is looking up in 2012 after several rough post-recession years of tight credit and weak consumer spending.

Franchisees -– entrepreneurs who own and operate branches of chain businesses such as McDonald’s, Hampton Inns and Suites and H&R Block -– support 12% of the country’s private sector, according to the International Franchise Assn. The group anticipates improvement in franchised industries including retail, real estate and personal services.

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Although the expected rate of growth is still below what it was before the recession, jobs at franchised location are expected to grow 2.1% in 2012 to 8.1 million positions. About half of those workers will be employed at restaurant franchises.

The number of establishments will rise 1.9% to 749,500 units and revenue will boom 5% to $782 billion. Franchise businesses account for 3% of the country’s gross domestic product, according to the association.

But there are still plenty of hang-ups. Franchisees and franchisers -– the chain companies that recruit the entrepreneurs –- say they’re frustrated with the slow economic recovery, a lukewarm welcome for small businesses in Washington and rising prices for commodities.

Access to credit hasn’t improved, according to two-thirds of franchisers and nearly half of franchisees. Eight in 10 franchisers and more than half of franchisees say stingy lenders have limited their ability to expand.

Still, 85% of franchisers say they’ll increase the number of locations anyway, and more than three-quarters anticipate an increase in consumer sales. Franchisees, though, are a little less optimistic.

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