With the constant barrage of topical reasons to not invest right now; from Covid-19, to the cost-of-living increase, should I really be thinking about starting a franchise business right now?
We are living in troubled times. An energy crisis, the war in Ukraine, high inflation, hikes in transportation costs and the aftermath of Brexit being but a few of the problems that we currently face. We are also seeing labour shortages and rising interest rates. All this makes one wonder what else can possibly happen to stifle economic growth. Surely this is not a good time to be starting your own business. And to support caution, the labour shortage is making jobs more secure. Maybe it is best to play safe and wait.
However, it is paradoxically true that some of the greatest success stories in corporate history involve enterprises that were started in times that were perceived to be difficult for business. James Dyson started his journey to become a multi-billionaire in 1987 when UK interest rates were over 8% and unemployment was rising rapidly. Larry Page and Sergey Brin founded Google in 1998 when the US base rate was 7%, unemployment was rising and share prices were stagnant. On all these metrics the economic conditions in 1987 and 1998 were more challenging than those that exist here now. Borrowing rates were far higher than anything predicted by the Bank of England for the immediate future. These entrepreneurs could easily have been cautious and taken well paid jobs. But they didn’t.
For many, the first step into business is to invest in a franchise. This greatly reduces the risk and cuts out the lengthy and tedious process of developing a business format. It eliminates the mistakes and blind alleys that are an inevitable part of starting a business from scratch. Joining a good franchise massively increases the success rate and makes the business journey far more pleasurable.
Another reason to get started without delay is that, in spite of predictions of an impending recession, there are many business sectors that are very busy and where supply outstrips demand. An obvious example of this is the building industry and in particular home renovation and refurbishment. Another growth area is elderly care. This industry will continually expand in the coming years as the baby boomer generation, with large financial reserves in the form of the equity in their family homes, start to need care. Many other sectors are also enjoying buoyant sales and profitability.
The logic behind all this consumer spending is sound. With forecasts for the rate of inflation many percentage points in excess of predicted interest rates, it makes sense to spend rather than save. The new kitchen, window shutters or replacement garage door will probably cost more in the future than they do now but the value of cash on deposit is being steadily eroded by inflation.
Funding an investment into a new franchised business has seldom been easier. The main banks who have always supported the franchising industry are committed to continue. They have funds available and are keen to lend. The challenger banks also see franchising as a growth sector and have become active lenders. Although the pandemic has impacted badly on the finances of some regional and social demographics, it has left others much better off. Overall, the suppressed spending during the lockdowns has left the total value of UK savings near an all-time high. This means that the often-overlooked bank of Mom and Pop may be flush with funds and can often be relied upon to get a family member started.
Another very good reason to proceed without delay is that for the best franchises, recruitment is strong which is reducing availability. In some cases, the networks of well-established, premier league franchisors are now sold out or close to full capacity. As a result, the only method of entry is to buy a resale, but the chances of finding one in a chosen area are slim. Those who waited are now often finding that the ship has sailed without them.
Running one’s own business is a positive, life-changing experience. Investing in a franchise is the best way of minimising the risks and speeding up the process. The Government’s ‘levelling up’ initiative is aimed at creating a favourable economic environment. Some local authorities still have pandemic related business support schemes and grants available for new businesses. Now is unquestionably an ideal time to get started by investing in a franchise.