Franchising Rides the Cheap Oil Whitewater
On the continuum of good to bad, I’m strongly of the mindset that cheap oil is good for the franchise economy. Even as some economists sound their warning bells as further oil price drops coincide with significant stock market free falls, more money in the pocket of everyday consumers will undoubtedly flow to service-oriented businesses in the coming months.
This rosy prediction, however, is not the consensus among economists. Consumer spending habits have been difficult to translate these days, with home and car sales up, but retail sales soft.
American shoppers spent a little less this holiday season, but the drop was marginal. As more Christmas-related shopping keeps transitioning to the likes of Amazon, it’s reasonable to expect that retailers peddling electronics, clothes and home goods will continue struggling to post significant gains.
Dining out, spending money on pets, and treating ourselves with things like frozen desserts, gym/spa/massage memberships and other daily niceties will not suffer the same, sluggish fate as traditional retailers. This long-term trend favors franchising, and is providing fuel to the continued growth of QSR and fast-casual restaurant brands.
Gas prices have dipped below a dollar in a few places in the country—certainly not the norm, but it’s happening—and petroleum forecasters suggest $20/barrel oil is within reach as Iran rejoins the world economy and finds new markets for its vast reserves.
China and Europe’s lackluster (at best) growth also suggests that oil prices aren’t heading north, regardless of how many North Dakota and Oklahoma fracking operations are priced out of existence.
As some economists and politicians argue that the American economy is bad and getting worse (have you checked out these debates?!), that argument seems overblown when geopolitical threats are relatively minimal and America’s economy still leads the world.
While dirt-cheap oil is a ticking time bomb to some economy watchers, those in the franchise space profiting off nonessential pleasures should find an extra reason to smile when filling up at the pump.
These good times won’t last forever, but once the stock markets calm down, 2016 could be an excellent year—and we might owe much of the profit gains to big oil and Iran. Imagine that.