Why you should consider franchising in recession times

You might be thinking it is all doom and gloom and the likelihood of a prolonged recession, then your appetite for looking into buying a franchise right now might have stalled, however, now could be one of the best times to commit to a franchise

Why you should consider franchising in recession times

You might be thinking it is all doom and gloom and the likelihood of a prolonged recession, then your appetite for looking into buying a franchise right now might have stalled, however, now could be one of the best times to commit to a franchise, probably not what you expected to read, but have a read of this short article to find out why…

There are opportunities in franchising during a recession

It is a fair statement to make, that, a franchise should not be seen as a straight replacement for employment, it certainly does not carry many of the employment benefits, and, it is common that often individuals investigate franchising, not only just in turbulent times, as a way for some level of security.

Consider the reasons to buy a franchise in a recession

Looking at the historical facts of franchising, you might well be able to look around on the very site you are reading this article on to find some information on the history of franchising, if not, just do some extended research yourself, on your browser. The good news about the franchising sector is that is has been around for probably longer than you realise, in fact, at least several decades and within that some substantial economic resets! And as such, there will be lots of data online to show you any impact of the economy, this is good news for you!

Five reasons to consider a franchise right now

There will be more of course, but just to highlight a few in this short article:

You will typically not be the very first to buy into a proven model, at least one other will most probably have done this before you, this will undoubtably be the Franchisor, and/or early adopter franchisees, or pilot franchisee, therefore you own chance of success will have considerably increased because of this, you then just need to follow the system!

Most Franchisors already have a system in place to teach anyone, regardless of their background, such as, how to operate their franchise, this is excellent news for you, as you now might be able to look at industries outside your natural skill set, or qualifications, this is great if you feel that the market you know about will be hit harder than others during a recession, although, for completeness, you should still have a passion for whatever it is you are looking to do!

Franchisors will undoubtably have to be more strategic about the future thanks to any threat of recession or economic downturn, so you can follow that system and not have to necessarily deal with this element by yourself, after all, franchising is all about being in business for yourself, but not by yourself.

Before you buy any franchise, you need to be able to get all the facts and figures before you even part with any cash! This will vary immensely from starting your own business, which is often done on a whim, no need for this when buying a franchise!

Others will have done this before you, and these people will be a great resource for you. Check out all franchise resales in the franchise brand you are looking into, talk to them as well as other current franchisees, they will be almost certainly be non-competing anyway, there is nothing stopping you from talking to them at the appropriate stage!

There are risks though

It is fair to say that your decision to enter franchising needs to be for the long term, not least because you will probably be entering a contract for a prolonged period, so let us look at other elements you should also be looking at.

Funding- check to see if this is still readily available, you might find that some financial institutions have decided to pull back from the amount of lending that they were once offering, pre-pandemic, thankfully, there are some great schemes still available though, regardless of this.

Are they brand-new Franchisors? We suggested earlier in this report about historical data, one advantage of buying a franchise that is new, is that you will probably be offered some ‘early adopter incentives’  to become a pilot franchisee, this can bring higher rewards, although there is an increased risk of course.

Buying a franchise can be timely- do not underestimate this, you should fully research all options before fully committing to anything, so factor what you do during this time, should you keep your job and do your research in your spare time? It might be that you have been made redundant perhaps, and whilst it might take a few months to actually commit to a franchise, this will have an impact of your own financial situation of course.

Working capital- this refers to the funds you need to buy any franchise, and this is often just the start of your cash requirements, so think about the cash requirements of the business moving forwards, and ensure you can sustain this, getting this point wrong can be extremely costly and hamper the growth of your own business.

Recessions are thankfully short-lived

It is too easy to play into all the doom and gloom isn’t it! However, any recession historically, will turn a corner at some point, and if you have come into franchising for all the right reasons, then factored in the positives and negatives, then also built your own solid business, imagine what great shape you will be as we exit any recession.

Bad for some, opportunities for others

Let us look at some at some scenarios that might be presented in the coming months, needless to say that this is sad and disappointing for many, but there is opportunity there for you as well.

Potential units – you might find they become more readily available with landlords willing to accept preferential commercial terms.

Staffing – this has been more of a problem of late, could more people be looking for alterative jobs be the outcome to fix this? Often it will also drive down salary demands.

Franchisor incentives – franchisors always want more franchisees, see what they might be willing to offer to help you make your decision now.

Keep laser focused!

If you are serious about a franchise, you will do your research, this will often become very apparent to the franchisor with the questions you put to them, but, asking for example how long they have been operating is not a good question, for you to ask them during your due diligence, you would be expected to know this! That said, if you don’t ever feel that your questions have been answered fully, the good news for you and franchising is that there are always more options, so the power is to you!

One more thing for you to think about, is that there are no recession proof franchise, no matter what anyone tells you! However, some franchise businesses are more recession resistant than others and hold up better in a depressed market.

The franchise community is very friendly, ask anyone for an opinion, I’m sure anyone with some knowledge, will be only too happy to assist!

Richard Pakey
Richard Pakey