With the apparent doom and gloom of the economy and the likelihood of a prolonged recession, your appetite for looking into buying a franchise right now might now have stalled. However, now could be one of the best times to do so, and in this article, we discuss how to buy a franchise in a recession.
There Is Still An Opportunity For You In Franchising
Now let us get one thing straight from the outset, a franchise should not be seen as a straight replacement for employment, but it is fair to say that often individuals investigate franchising, not just in turbulent times, as a way for some level of security.
There Are Several Reasons To Buy A Franchise In A Recession
Look at the historical facts of franchising first. You can look around on this site to find some information on the history of franchising. The good news about the franchising sector is that it has been around for probably longer than you realise, at least several decades, and within that, some economic resets! And as such, there will be lots of data online to show you any impact of the economy, and this is good news for you!
5 Factors To Consider A Franchise Right Now
There will be more, of course, but just to highlight a few in this short article:
You typically will not be the first to buy into a proven model; at least one other has done this before you. This will undoubtedly be the franchisor or early adopter franchisees. Therefore, your chance of success will have considerably increased; you just need to follow the system!
Most Franchisors have a system in place to teach anyone, regardless of background, how to operate their franchise. This is excellent news for you; now, you might be able to look at industries outside your natural skill set, which is ideal if you feel that the market you know about will be hit harder than others in a recession. However, for completeness, you should still have a passion for whatever it is you are looking to do!
Franchisors will be more strategic about the future with any threat of recession or economic downturn presented, so you can follow that system and not have to deal with this element by yourself necessarily. After all, franchising is all about being in business for yourself, but not by yourself.
Before buying any franchise, you can get all the facts and figures before you even part with a single penny! 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 have done this before you, and they will be an excellent resource for you. Check out any franchise resales in the franchise brand you are looking into, and talk to them as well as other franchisees. They will be non-competing anyway; nothing stops you from talking to them at the appropriate stage!
There Are Risks To Mitigate
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 considering.
Finance – is this still readily available? You might find that some financial institutions decide to pull back from the amount of lending they were once offering. There are some great schemes still available, though, regardless of this.
A brand-new Franchisor – we looked earlier in this report at historical data. One advantage of buying a new franchise is that you will probably be offered some ‘early adopter incentives’, which can bring higher rewards, although there is an increased risk.
Buying any franchise can take time – you should thoroughly research all options before fully committing, so factor in what you do during this time. Should you keep your job and do your research in your downtime? It might be that you have been made redundant, for example, and whilst it might take a few months to commit to a franchise, this will have an impact on your financials.
Working capital – the funds to buy any franchise is often just the start. Think about the cash requirements of the business moving forwards, and ensure you can sustain this. Getting this point wrong can be highly costly and hamper your business growth.
Recessions Do Not Last Forever!
It is too easy to play into all the doom and gloom. However, it 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 in as we come out of any recession.
A Poor Outlook For Some, Great News For Others!
Let us look at some scenarios that might be presented in the coming months. This is sad and disappointing for many, but there is an opportunity for you.
Sites and locations – you might find they become more readily available with landlords willing to accept preferential commercial terms,
Staff – this has been more of a problem of late. Could more people looking for alternative jobs be the outcome of fixing this? Often it will also drive down salary demands,
Franchisor incentives – franchisors will want more franchisees, see what they might be willing to offer to help you make your decision now.
Stay 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. Asking, for example, how long they have been operating is not a good question; you’d be expected to know this! That said, if you don’t ever feel that your questions have been answered, the good news for you and franchising is that there are always more options, so power to you!
One more thing to remember, there are no recession-proof franchises, no matter what anyone tells you! However, some franchise businesses are recession resistant and hold up better in a down market.
The franchise community is very friendly, ask anyone for an opinion; I’m sure they will be only too happy to assist!
This article was written by Richard Pakey, who is a franchising expert and Regional Director for the award-winning Lime Licensing Group.
