Atlanta - 31 December, 2004 -

Raymond J. Margiano, Founder and CEO, Foot Solutions/Heel Quik: Franchising does very well when the economy is in upheaval or things are changing. And certainly the last several years have been very gracious years for franchising. The previous 10 years, it's been pretty tough for a lot of franchisers out there. When the economy is solid and people have jobs, there's not a lot of people out there looking to escape. So franchising really comes into its own when people are struggling, people are frustrated, they're having trouble in work, there's downsizes going on, corporations are shutting down. People want to take control of their life ... The last several years, all of a sudden there is a resurgence of franchise shows; attendance is up. So right now a lot of good things are happening for franchising. Roy Flora, Senior vice president of franchise operations, U.S. Franchise Systems Inc.: What I see in the hotel industry, especially, is with the economy turning and recovering somewhat, then funding for new development has increased tremendously. So we're seeing a greater influx now of applications for franchises, back to the pre-2001 level. It was a major drop-off after 9/11. Now there's a great resurgence that's back to the level that's almost surpassing 2000 in terms of number of applications received. The unique thing about that is that the quality of the deals are much better today than they were three, four years ago as well. The deals are much further along. The franchisees are coming to you with better qualifications. They're much stronger financially. Their project is much further along before they'll ever commit to you to go forward with the franchise ... We're also seeing a diversity in who our franchise prospects are, not just from a traditional perspective of hotel franchise people who have been involved in other hotel companies. ... We're now going beyond that and we're seeing a lot of food and beverage franchisees. McDonald's, Huddle House, Burger King, Ponderosa Steakhouse, those type of franchisees, familiar with franchising, very well-versed in what to do, but novices in the hotel industry, will basically come to you and say, "This is what I want to do; I've got land I want to develop; if you'll walk me through this and hold my hand, we can make this together." Hala Moddelmog, Former president, Church's Chicken: About 10 years ago, even five years ago, our competitors in franchising Church's were other traditional QSR (quick- service restaurants). But as that industry has matured so significantly, we have found our competitors to be hotels or places like Heel Quik, different types of franchising. And those are frankly sometimes the people that we want to go to because there are no other opportunities in traditional QSR. And the other trend that we've seen, and certainly seems to be something that if I were starting a franchise today I'd make sure I had the opportunity, is the international piece, because it's so phenomenally profitable, the margins are great, and usually the sophistication level of the franchise partners is really pretty superb. Karen Spencer, President, Fran-Systems: I'm seeing something completely different here from Roy and Hala from potential franchisees. I see a big trend. Couple of things -- one: Lower level of initial investment getting into franchising ... You do see franchisees saying, "I want the lower-level investment, the fast-casual, in other words, versus the fast-food corner. I want the fast-casual in the end line that may be $250,000, $300,000." I also see the baby boomers ... getting the buyout money from, you know, the corporate world and they're going toward health care; they're going toward food, but lower-level investment end line; and they're going toward -- you know, med spas are very hot right now. So I'm seeing lower-level investments, service industry, baby-boomer interests going on.

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