Having dedicated over 23 years of my life to franchise recruitment, one thing is for certain; there is no crystal ball when it comes to finding franchisees. It’s amazing how quickly things can change and how world events can have a real effect on people’s confidence to invest in business opportunities.
I was only writing 2 months ago, about how bright things were looking for 2022. Now, many franchisors are reporting another slow down or drop in franchise enquiries. Others, report candidates pulling out of signing franchise agreements right at the last minute, in favour of employment. Other franchise brands who are having a great year, cannot seem to give me a specific reason why.
Let’s examine some of the reasons why the summer of 2022 could be giving some franchisors the Summertime Blues.
Is franchise recruitment experiencing a perfect storm.
There are many reasons why potential franchisees lose confidence to invest. Having recently sat in on a Bank Seminar discussing the effect of some of these factors on the franchise industry, it seems that the remainder of 2022 and possibly longer, could be a tough time for Franchisors and Franchisees alike. The perfect storm, where all of the factors that normally affect franchise recruitment, may all be happening at once.
According to figures recently released by the Office for Budget Responsibility, the U.K. is bracing itself for the biggest drop in its living standards since the 1950’s. There is a lot of discussion as to the reasons why this is happening.
Brexit
Is still causing a great deal of trade and supply chain issues for some franchise businesses. These are made worse in the UK by significant uncertainty over trade and investment conditions, and restrictions on international labour mobility in a variety of key sectors.
Russia’s invasion of Ukraine
Looks like being a longer drawn out affair than was first anticipated. Apart from the tragic humanitarian situation, the UN warns that Russia’s invasion of Ukraine could soon cause a global food crisis that may last for years.
Ukrainian farms have been left unattended. Ukraine’s ports, which once exported vast amounts of cooking oil as well as cereals such as maize and wheat, now lay in ruins or are unable to ship their goods. This reduces the global supply and is causing prices of alternatives to soar, almost 30% higher than the same time last year. Added to this, is the huge pressure on energy prices, as countries around the world scramble to find alternatives to Russian oil and gas.
Inflation
Inflation reached 9% in the UK in April this year, a 40-year high. Bank of England governor Andrew Bailey has told MPs he is unable to stop inflation reaching 10%, while warning of an “apocalyptic” rise in global food prices. This is driven by labour market shortages, the rising costs of fuel and food and some product supply chain issues.
Andrew Bailey went on to say that rising global food prices are a “major worry” and shopping bills are increasing. Prices were up 6.7% last month. One food industry boss has warned that food prices could rise by up to 15% this year.
The Bank of England also expects the UK’s energy price cap to rise again in October, which will push inflation up to 10% this autumn. Historically, when inflation has risen above 9% it has taken years, not months, to recover.
By raising interest rates
The Bank of England can make borrowing more expensive – encouraging people to save instead of spend. Higher interest rates also make mortgage payments more expensive for some homeowners and if the banks seek to raise interest rates to ease inflation, then people will really feel the pressure.
The dreaded “R” word (Recession) is being banded around again.
These things have a massive effect on Franchisors and Franchisees. Supply chain issues, such as Van based franchisors having difficulty sourcing vehicles. Food and energy costs along with difficulties recruiting staff are affecting QSR franchises.
Is there a cure for the summertime blues?
If you are experiencing a slowdown in franchise recruitment, well you are not alone. Franchise Recruitment has been incredibly challenging over the past months, with many candidates deciding to choose well paid employment opportunities over business ownership.
We are entering an interesting period. Some of the main attractive incentives for looking at a franchise such as increased earning potentials and lifestyle flexibility, are being offered by the employment market. Job seekers and employees are being paid larger financial packages and are benefiting from hybrid-working type arrangements.
Even some of the well-known, established franchise brokers whose service plays an integral part to the UK’s annual franchise recruitment have decided to call it a day, or are looking for new directions, away from franchising.
There could be tough times ahead. The next few months will be interesting, as summertime traditionally in franchising can be a quiet time for Franchise Recruitment. This candidate driven market, means that decision-making is a lot slower. Although people remain interested in franchising, uncertainty is still in the back of their minds.
It may be time to batten down the hatches, focus on your network and head office staff to help them navigate these unchartered waters and stay afloat. Treat them well, don’t forget that your employees are suffering these effects too. This will help you to retain your existing network in times of low recruitment and reduce staff turnover. Build and promote a culture of help and mentoring, both at your head office and within your franchise network. This will help your franchisees to remain profitable, creating a happier environment for them, your staff and you.
