Abstract
Perhaps the greatest problem with forecasts is that they are treated as a parlor game. Competing numbers are often presented in news reports without any supporting assumptions. Rather than try to sort out the confusion, many operators simply ignore them. Even when they do pay attention, operators dislike forecasts because they worry that optimistic predictions will attract competitors and negative outlooks will chase away financing and potential franchise customers. The way to construct a forecast is to build a statistically reliable database of information that can be analyzed against new economic and financial information. Those numbers can further be used to develop a short-term outlook for the industry as a whole or various geographic and market segments. Regardless of how reliable the base data are, however, long-term predictions-longer than 6 or 12 months-are just educated guesses.
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