Should You Buy A Franchise If A Recession Is Looming?

Reading Time: 3 minutes

Suppose you believe everything you read, the way things are going, the UK will probably ‘talk’ its way into a recession. In that case, although the facts are that a recession is defined as negative economic growth for two consecutive quarters in the UK, this apparently is still a way off. Still, some financial experts are warning that it could be a possibility down the line, when though, who knows!

However, what does this mean in the ‘real’ world will impact your daily life? And how does this affect your ability to secure a franchise in this climate? Should you even do so?

A Franchise Can Be A Viable Option If We Enter A Recession

Maybe you have chosen to consider franchising because you have indeed had the threat of redundancy and impending unemployment. This may have happened to you before, and often people want to take back control.

It is often this very reason that some people look into starting their own business, and franchising can be part of that equation because there is a helping hand not just to get started but also for continued ongoing support. This is just one of the fundamentals in franchising, being in business for yourself, but not by yourself!

It is a fair point, though, that some careful thought needs to go into choosing the right franchise in uncertain times, or is it? Are all franchises the same?

Are All Franchises Recession Proof?

First, you will need to consider the business sector you will be looking to represent as a franchisee. Do you believe that the franchise can survive any downturn? What does the franchisor have to say about this? Are you completely confident that your research is correct? Have you sought an expert option? If you are unsure, it will probably be best to do this first.

Next, think about whether you have the correct capital and ongoing cash flow to cover the actual costs of the franchise?

Having the upfront capital might well be just the start! Can you keep the business well-funded should business growth be slower than anticipated? If not, maybe the recession is not your real challenge here; funding the business to start with is your bigger challenge! There are options for you, though.

Is A Loan The Answer?

Always consider what would be in the franchise’s best interests and you personally.

Maybe, given the economic outlook, it could well be better to retain any cash you personally have right now, and with interest rates still unbelievably historically low, take advantage of this with a low-interest rate loan. There are even loans specific to franchising as the government wants to get more people out of employment into self-employment.

You might gasp at the very thought of taking on a loan, and you definitely should not do so if it will not be affordable. However, could this be an option to get the franchise purchased and then have sufficient cash flow so that the family budget is not affected? In which case, this could be an extremely viable option for you!

Please do not dismiss this; it is again just another option you can explore.

Franchise Recession

How Have Franchises Survived During Uncertain Times?

There is some excellent news for you; the facts on franchised businesses look very good compared to non-franchised businesses. For example, more than 90% of franchise businesses report that they are profitable. Now go and compare this to other business formats; you will be encouraged to see that a franchise performs much better in general than the whole market.

The franchise sector is still growing, as it always has, and in fact, per capita is still a tiny fraction compared to other developed counties like America and Australia, for example. These countries have around five times more franchises than the UK. Some people in those countries start looking at business options as a franchise rather than anything else!

You might also be surprised to read that there are currently only around 1,000 active franchise systems in the UK; again, this is very low compared to other countries! Do you want to be one of the one thousand?

How Much Risk Is There With A Franchise?

Like any business, there are zero guarantees. Still, you will benefit from seeing some history of how the franchise has been performing, probably in different areas to where you might be looking.

Take your time, and ask plenty of questions; there is often assistance out there from consultants that act as a third party to ensure you fully understand what you are getting into.

Look at funding options as a solution, but never be coerced into this.

Only ever move forwards if you are truly confident that this will work for the current economic situation and your personal circumstances; you will be making a long-term commitment. There is lots and lots of living proof that, when done correctly, franchising can be an excellent solution for any economy!

Related Articles