Is Now The Right Time to Buy a Staffing Franchise?

Like most sectors of the economy, the staffing industry took a hit last year. Staffing covers a wide range of services, including permanent job placement, executive recruiting and search, and temporary

In the fourth quarter of 2008, staffing industry employment -- which had been decreasing gradually during the first three quarters of 2008 -- dropped dramatically, down 19.5 percent from the same quarter in 2007, according to the American Staffing Association. The temporary help industry in particular was hit hard, losing 27 percent of its workers in the past year, according to the Bureau of Labor Statistics.

Has the industry hit bottom? It’s hard to say, but some industry experts are cautiously optimistic. According to Staffing Industry Analysts, the staffing industry overall is expected to shrink by 10.3 percent this year, but professional staffing is projected to grow by 0.8 percent this year, and health-care staffing by 1.5 percent. Within health care, locum tenens (temporary physicians) are a particular bright spot, with projected growth of 14 percent.

Another growth area is positions that help companies collect on receivables, as all types of businesses are eager to get paid. At Express Employment Professionals, a full service staffing franchisor, vice president of franchising Fred Bartliff says he is seeing steady job growth in accounting and administrative positions including accounts receivable and payable clerks, accountant, account administrator, account coordinator, and administrative assistant.

The staffing industry is what’s called a lagging economic indicator, because people don’t get laid off until the economy has gone downhill, and don’t get re-hired until the economy has improved. So even after an economic uptick, it takes a while before companies that have let workers go are confident enough to rehire.

Today, staffing companies are dealing with huge numbers of job seekers, but a shortage of jobs in which to place them. Barry Cohen, managing director of Rockwood Search Associates, a New York City recruiting firm, has been in the industry for nearly 30 years. Cohen says that with so many online job sites to choose from and so many unemployed workers, “companies are trying to hire on their own” rather than use staffing services. The jobs he is being asked to fill are hard-to-find candidates with very specialized or unusual experience.

But while staffing may be going through a downturn now, the industry has been consistently strong for the past several decades. It’s not a question of whether staffing will pick up again, but when. “At some point [the economy] will get back to normalcy, and the boomers will have to retire, so there will be a shortage of people,” says Cohen.

“Staffing growth will resume when economic growth resumes,” says Reem El-Khatib of the American Staffing Association. “While some economists are predicting that the recession will end in August, we probably won’t see sufficient economic growth to spur staffing industry growth until the fourth quarter at the earliest.”

When recovery happens, Cohen predicts temporary help and niche recruiting will be the first sectors of the industry to bounce back.

“Express is focusing more attention towards professional and contract positions in IT, accounting and finance, and marketing and advertising, which will no doubt be some of the first areas to bounce back,” says Jonathan Thom, vice president of professional staffing at Express Employment Professionals. “Many of these areas were the first to endure budget adjustments at the beginning of the downturn and will be the first to realize growth when the economy turns around.”

What about the long term? “We expect to see strong [long-term] growth in medical administrative, accounting and finance, IT, software services, high-tech manufacturing and electrical engineers,” says Thom. El-Khatib believes the best long-term growth prospects are in professional-managerial staffing.

To succeed now, companies must offer a diverse range of services rather than focusing on just one sector or industry niche. Independent staffing firms are likely to be the most vulnerable in a recession, so if you’re considering getting into this industry, there’s more reason than ever to investigate buying a franchise. Buying into a franchise system also gives you an edge because you have a franchisor keeping up with the niches that are poised for growth. A system with locations throughout a region or nationwide will have its finger on the pulse of trends across the country in a way that one independent can’t.

Because you have to cover the employees’ payroll before you receive payment from the companies that hire them, staffing is a notoriously high-cost business to launch. A staffing franchisor will finance this cost for you -- a huge advantage at a time when financing for independent startups is tougher to find than ever.

What do you need to succeed as a staffing franchisee? At Express Employment Professionals, Jennifer Anderson, vice president of marketing and communications, says good candidates have at least five years of staffing experience or strong sales and business management experience, success in team building and delegating, and an outgoing, “people” personality. “Additionally,” says Anderson, “they must demonstrate a willingness to follow the franchisor’s systems and programs.”

For a complete list of staffing franchises, visit the Staffing Agencies section of the AllBusiness.com Franchise Directory.