20 recession resistant franchise: promising picks to choose from--even in this economy.

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BY THE TIME DONI PITCHFORD TOLD anyone what she had done, it was too late. "The store was already built. There was no turning back," she says. Owner and operator of a Jamaica, New York-based Subway franchise, Pitchford took the leap into franchising back in June 2005. Of course, she had no idea she would soon land smack in the middle of one of most severe economic downturns since the Great Depression.

"Historically franchising has been the business model that has gone up during economic slowdowns," says Miriam Brewer, the International Franchise Association's director of education and diversity, who points to the franchising industry successfully going in and coming out of the technology recession of 2002. "But this particular economic downturn is very different from others that we have seen."

With outside factors such as the credit crunch and housing crisis, businesses of all sizes are struggling to keep their doors open. But it isn't all doom and gloom. In fact, certain industries are faring well in this climate--and in many cases, franchising is the best avenue for tapping into them. BLACK ENTERPRISE, working closely with the IFA (www.franchise.org) as well as the Arlington, Virginia-based franchise research firm FRANdata (www.frandata.com), looked into those industries to uncover 20 recession-resistant franchises that are not only outperforming now, but are poised to generate returns well after the long-awaited economic recovery arrives.

Experts will vouch that no franchise is recession-proof and outcomes aren't guaranteed. But with due diligence and strategic planning, you can embark on an entrepreneurial venture during these challenging times with confidence and be optimistic that when the economy turns, it will be in your favor.

QUICK-SERVICE RESTAURANTS

An avid customer already, Pitchford saw the Subway sandwich chain as the perfect opportunity to be her own boss. "It allowed me an affordable entry point," says the 38-year old. "I didn't know how to build a store, but the system is already there for you and you're able to align yourself with a known brand."

Using $70,000 in savings from her full-time job as a physician assistant and $100,000 in a home equity line of credit) she purchased her franchise. Much of the startup costs went toward training at Subway University; purchasing ovens, chairs, freezers and other equipment; as well as a down payment for the rental and build out of her 1,300-square-foot space. Franchisees have to scout and secure their own store location; Pitchford chose the former location of a travel agency within a complex that includes retail shopping as well as resident apartments and co-ops. "The rent is reasonable and there's a built-in customer base," says Pitchford, whose franchise has four full-time and six part-time employees and 2008 revenues totaling almost $400,000.

"You can never go wrong picking the right food company," says Rieva Lesonsky, a small business and franchising consultant and author of Start Your Own Business (Entrepreneur Press; $24.95). She agrees that quick-service chains are standouts during this recessionary period. Quick-service is the only sector that forecasters at accounting and market research firm PricewaterhouseCoopers anticipate seeing growth in all three areas of establishments, economic output and increased jobs.

Franchisors such as Subway and McDonald's are able to provide franchisees with national marketing and advertising backing. For example, when Subway launched its $5 foot long promotion franchise-wide, owners such as Pitchford (who is required to allocate 4.5% of her sales to national marketing) saw immediate results--sales spiked 52% during the promotion compared with the prior year.

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"Doni has done a good job of maintaining a high level of customer service and keeping her store well staffed and employees friendly; these are keys to success during hard economic times," says Mark Choi, development agent for Subway, Queens County, which is the territory Pitchford's franchise is located within. "When people have less money to spend eating out, you have to give them a very good reason to visit your business."

AUTOMOTIVE-REPAIR

There's no question that the automotive industry has seen better days. But despite the woes of automakers and their dealerships, general auto repair services have been faring well. "Automotive from a demand standpoint has to do with lifestyle," says Darryl Johnson, president of FRANdata, who points out that big ticket items often aren't updated during recessionary times. "[Consumers] are not willing to make those major investments, and being run] willing to make major investments leads to a greater frequency of maintenance."

One standout is the automotive transmission repair and car care service company AAMCO which has shown consecutive franchise unit growth over the last three years. Another is the $1.1 billion auto maintenance and repair chain Midas International Corp. which is currently targeting displaced service customers, dealers, and employees of those automotive dealerships that have closed or are in the process of closing, to consider franchising or service employment with Midas as an alternative. "People who would normally go to their local dealer to get their car serviced may not have that option anymore. So some local franchises are stepping up on all fronts," says Lesonsky.

HEALTHCARE

The aging U.S. population has turned the healthcare industry into one of the fastest growing parts of the economy, according to the U.S. Department of Labor. Although there are several variations, the category showing the most growth is home healthcare and services. FRANdata reports an average three-year franchise unit growth of 42%--the largest increase of all categories. Coincidentally, the franchises that made the list require a total investment of less than $75,000. Also, the majority of them are active participants in MinorityFran, an extension of the IFA dedicated to increasing the number of minority franchises. One way to lure minorities is through signing incentives. For example, Always Best Care Senior Services offers prospective minority franchisees at least 5% off the franchising fee; 39% of their franchises are minority-owned.

Lesonsky says this is an industry that's only going to increase in customers for the next few years, referring to U.S. Census Bureau data that the first swell of baby boomers turns 65 in 2011. But Johnson points to yet another factor that makes this industry so attractive right now. It's one that you're not willing to compromise on. "The quality triumphs the cost [for consumers]," he says. "They're not going to go to a lower cost for a less supportive health service for an aging parent."

CHILD-RELATED

In certain areas, consumers are likely to make compromises and opt for fewer frills to avoid a big hit to their budget. However, childcare is not one of those areas--and that makes for a recession-resistant franchise. "What you are seeing because of that [reality] is a continued expansion. There are indications in this recession of strength in this sector," says Johnson.

Child tutoring and supplemental education services have ballooned in recent years into a $69 billion industry, according to IBISWorld Research (www.ibisworld.com). "It's one of the fastest growing segments of the kid's market," says Lesonsky, who notes its biggest clients are parents of tweens. "If you have a kid and they're not doing well in school, good economy or bad economy you've got to get them help." The sector saw 11% average unit growth over the past three years and looks to be on a curriculum to score even higher.

Helping the sector get there are its biggest companies: Kumon Math & Reading Centers, Sylvan Learning, and Huntington Learning Center. While the Japanese import Kumon offers subsidized rent to qualifying franchisees, Sylvan goes on record that prospective franchisees in specific markets such as Atlanta, Chicago, and Sacramento, California, can potentially earn $200,000 to $1 million in revenues.

TAX PREPARATION SERVICES

Many of the franchises in this industry capitalize on the simple fact that they provide a service that people either cannot or do not want to do themselves. The two biggest players remain H&R Block and Jackson Hewitt: both showed unit growth during the 2009 tax season. Significantly smaller than its sector leaders, Liberty Tax Service has grown by 20% since 2005. And about 10% of its 2,800 units are black-owned.

But when paired with similar categories such as quick printing, the outlook is slightly negative going into next year says John Reynolds, IFA's vice president of new business development and president of its educational foundation. "One of their main drivers is small businesses and others who use those services, so when those businesses look to cut back then that has a negative impact on the areas."

DISASTER RESTORATION

Not knowing when a natural or man-made disaster will strike doesn't bother Carolyn Irving-Powell, because she and her team are always prepared. The 49-year old wife and mother of two purchased a Servpro disaster restoration and recovery franchise back in December 2005. After relocating in 2001 from Overland Park, Kansas, to Little Rock, Arkansas, with husband Ernest, a locomotive engineer, Powell wanted a fresh start.

"I [worked] part-time; mostly babysat, but I wanted to do something else," says Powell, who worked 12 years in the accounting department of Sprint Nextel headquarters prior to the move. After extensive research, Powell selected Servpro because she liked that they had a "proven method of running a business." Servpro's services include fire and water damage cleanup and restoration; biohazard, crime scene, and vandalism services; as well as mold mitigation and remediation. So with no prior knowledge or interest in the industry she became their newest franchisee.

Her $75,000 startup costs got her a truck mount (for water removal), two computers, proprietary software, and other equipment. Not included were a van and a location. For three weeks, she gained in Gallatin, Tennessee, at the company's headquarters learning hands-on the process of disaster recovery and restoration and what it takes to run the business' back office.

"The first month, I made $52.30," says Powell, who found things more difficult than anticipated. "The next two months, I made zero. I felt I wasn't going to make it." But the fourth month was the charm; she did $28,000 in sales and she hasn't doubted her decision since. Last year, Powell's operations finished with a little more than $600,000 in gross volume; a 42% increase compared with last year. And for 2009, they project $800,000. Today, Powell has 12 full-time employees, which during the summer also includes her 17-year old son, Tyler, and works out of a 3,000-square-foot facility that includes an office and storage spaces for clients when needed.

"In any part of the country, there's the potential for a disaster," says Lesonsky. And a disaster doesn't necessarily have to be a big one; it could be a fire in your strip center. Or your records blow up. So the growth in the industry is not a new need; it's the awareness of the need for the service."

Powell says she is optimistic about both the economy and her future as a franchisee, saying it will likely bring her and her husband into retirement. "I'm not nervous at all [about the economy]," she says. "I'll continue to do this as long as I can."

PHOTOGRAPH BY CINDY MOMCHILOV

--Additional reporting by Bridget N. Armstrong

We identified six franchising industries: automotive repair, business-related services, child-related services, healthcare, quick-service restaurants, and maintenance services that boast performance-value and sustainable categories. Standout franchises offer one or more of the following attributes:

* Positive average annual unit growth over the last three years

* Leaders within their industry/sector

* Special incentives or concessions to minority franchisees

* Increased system-wide sales from 2008 to 2009

* Strategies unique to combating the current economy.

WEATHERING THE STORM

These franchise sectors show promise during this economic downturn.

* Automotive (Repair) Most people can't afford to buy a new car right now, so they're spending money on maintenance and repairs.

* Business-Related Services (Tax Prep) The IRS doesn't take IOUs. People will always have to file their taxes.

* Child-Related Services Seen as an investment in the future, educational services are not likely to be sacrificed.

* Disaster Restoration These products and services are a necessary expense when an emergency arises.

* Healthcare The U.S. population is growing older, faster.

* Quick-Service Restaurants People still have to eat.

Fast food, quick service restaurants allow them to save time and money.

BE YOUR OWN BOSS

FIVE things you need to know if you're thinking about franchising your small business

1 Is this a good idea? Is your product or service marketable across the country? Across the globe? What makes your company distinguishable? Is what you do teachable?

2 Law and order. Connect with a franchise attorney through the International Franchise Association (IFA). An attorney will help you ensure that your business is structured to transition into a franchise.

3 Play-by-play. If you haven't already done so, create an operations manual. A consistent protocol is a must. It takes ample time and capital to become a franchiser. Hake sure you have both.

4 Are you ready? Will you need a loan? Do you have the funds to hire a franchise development staff?

5 No overnight success. You should have at least five years of experience running your business before you try to become a franchiser. It takes time to generate substantial revenue and measurable growth to use as leverage.

FIVE things you need to do if you're looking to leap into franchising

1 Research. Complaints are public record. See if franchisees or clients have filed any.

2 Measuring the worth of your investment. Will the product or service you're interested in ensure longevity or is it a fad?

3 Know what you're getting into. Before you sign a Franchise Disclosure Document (FDD) review it carefully with a franchise attorney to make sure you fully understand the terms and conditions.

4 Get to know franchise veterans. Call current franchisees and ask them about the pros and cons. Ask them, "If you had to do it all over again, would you?"

5 Ask and you shall receive. Don't hesitate to negotiate--on everything. Many franchisers, especially now, are eager to take on new franchisees so they may offer concessions. (i.e. waive or defer fees).

--Lauren Lea

20 Recession Resistant FRANCHISES

FRANCHISE               TYPE OF BUSINESS              CONTACT

AAMCO                      Automotive              1-800-GO-AAMCO
                      transmission repair
                          and car care
                            services

MAACO Franchising     Automotive paint and         1-866-763-2579
Inc.                    body repair shop           www.maaco.com

Midas International        Automotive              1-800-365-0007
Corp.                   maintenance and            www.midas.com
                        repair services

H&R Block Tax           Tax preparation            1-800-869-9220
Services Inc.               services              www.hrblock.com

Jackson Hewitt          Tax preparation        www.jacksonhewitt.com
Tax Service                 services

Liberty Tax             Tax preparation          www.libertytax.com
                            services

Huntington Learning        Tutor and         www.huntingtonlearning.com
Center Inc.               supplemental             1-800-653-8400
                       education services

Kumon Math &               Tutor and                866-633-0740
Reading Centers           supplemental             www.kumon.com
                       education services

Sylvan Learning            Tutor and               1-800-284-8214
                          supplemental          www.tutoring.sylvan-
                       education services           learning.com

Church's Chicken          Fast Food &              1-800-639-3495
                         Quick-Service            www.churchs.com
                           Restaurant

Dunkin' Donuts            Fast Food &
                         Quick-Service          www.dunkindonuts.com
                           Restaurant

McDonald's                Fast Food &
                         Quick-Service           www.mcdonalds.com
                           Restaurant

Subway                    Fast Food &
                         Quick-Service             www.subway.com
                           Restaurant

Always Best Care          In-Home Care        1-888-430-CARE Ext. 9106
Senior Services          (non-medical)         www.alwaysbestcare.com

Comfort Keepers           In-Home Care             1-800-387-2415
                           (medical &          www.comfortkeepers.com
                          non-medical)

Home Helpers              In-Home Care             1-800-216-4196
                         (non-medical)           www.homehelpers.cc

Homekeepers               In-Home Care              507-252-8117
International            (non-medical)            www.homekeepers-
                                                 international.com

ServiceMaster Clean      Commercial and            1-800-255-9687
Inc.                  residential disaster   www.servicemasterclean.com
                      restoration services

Servpro Industries       Commercial and          www.servpronet.com
Inc.                  residential disaster
                      restoration services

Steamatic Inc.           Commercial and             800-527-1295
                      residential disaster       www.steamatic.com
                      restoration services

FRANCHISE                  TOTAL COST                STRENGTHS

AAMCO                  $200,000-$260,000     * Three-year consecutive
                                               unit growth

MAACO Franchising      $250,000-$300,000     * Services more than
Inc.                                           12,000 vehicles a week,
                                               600,000 a year

Midas International    $262,000-$351,000     * $1.1 billion in
Corp.                                          system-wide sales

H&R Block Tax           $25,000-$70,000      * 5% average unit growth
Services Inc.

Jackson Hewitt          $29,000-$67,000      * Exclusive provider of
Tax Service                 (kiosk)            income tax prep services
                        $50,000-$96,000        at Walmart stores
                          (storefront)

Liberty Tax             $56,800-$70,000      * 20% annual average
                                               growth *

Huntington Learning    $146,100-$295,300     * Offers retail or
Center Inc.               (Home-based)         home-based franchise
                       $220,700-$377,500       solutions
                            (Retail)

Kumon Math &            $33,000-$131,000     * Partial rental subsidy
Reading Centers                                for 12 months to
                                               qualifying franchisees

Sylvan Learning        $179,000-$305,000     * Largest provider of
                                               in-center, in-home, and
                                               online tutoring

Church's Chicken       $154,000-$833,000     * 7.2% franchise growth
                                               for 2009

Dunkin' Donuts        $240,000-$1 million+   * World's largest coffee
                                               and baked goods chain

McDonald's            $500,000-$1 million+   * 1st quarter operating
                                               income increase of
                                               nearly 7%

Subway                  $84,300-$200,000     * Nearly 23,000 franchised
                                               units in the U.S. (as of
                                               July 2009)

Always Best Care        $38,200-$67,600      * 5% off to minorities,
Senior Services                                additional $5,000 off
                                               until November

Comfort Keepers         $50,000-$74,000      * 4% average annual unit
                                               growth *

Home Helpers            $33,900-$64,000      * 8% average annual unit
                                               growth *

Homekeepers             $40,000-$50,000      * Discounts available to
International                                  qualifying minorities

ServiceMaster Clean     $41,500-$105,000     * 15% off initial
Inc.                                           franchise fee for
                                               janitorial license to
                                               ethnic minorities

Servpro Industries      $51,000-$161,000     * Double-digit percentage
Inc.                                           growth for 10
                                               consecutive years

Steamatic Inc.          $42,500-$100,000     * Discount to minorities
                                               who convert businesses
                                               to franchise

* AVERAGE 3-YEAR FRANCHISE UNIT GROWTH (SOURCE: FRANDATA)