December 20, 2008 - Historically, franchising tends to perform better in a recession than other comparable, non franchised businesses. Opportunities are often created due to competitor failures, and because of the resilience of both franchisees and franchisors to seek out and exploit areas of the market which are less affected by a downturn in the economy than others.
Many existing franchised businesses are concentrating their marketing efforts on a different customer demographic than they were a couple of years ago. The grey pound is king in today’s economic climate, with over 70% of disposable income belonging to the over 50s. Also, the more wealthy in our society are either not feeling the pinch so much, or are better placed to weather the storm.
So, is there a product or service within the franchise offering which can be aimed specifically at the over 50s? Can you introduce more high value product to attract the wealthy consumer? Can you re-position your marketing message to appeal to areas of the market who can afford, and need your products or services?
There is no doubt that franchisee recruitment for most franchisors has suffered over the last few months. However, in previous recessions franchisors have in the main been able to recruit good numbers of franchisees. As unemployment rises, and more redundancies occur, more potential franchisees will enter the market with cash in the bank, looking for an opportunity to set themselves up in business. Granted, it is unlikely that we will see the sort of big payouts we saw in the early 1990s, but there will be significant numbers of people with enough funds to start a business, and with the skills required to be a franchisee.
In addition, there are many potential franchisees out there who have been watching a worsening economy, and falling house prices over recent months. When the economy stabilises, and bottoms out, many of these people will have the confidence to start to look seriously at the opportunities which prevail. In a depressed market, would you want to start your own business, with all the risks that would bring, or would you want to consider a safer option, one with the back up and support of somebody who has been there, done that and got the t-shirt, and who can guide you on your way through these difficult times, and position you well to take full advantage of the next period of boom?
Contrary to popular belief, the banks are still lending to franchisees in most industry sectors. Yes, this may be at a higher percentage above base rate than they were a couple of years ago, but as base rate is low, and looking likely to go even lower, the impact of this is reduced. Franchisors need to speak to their contacts in the main franchising banks, confirm what they are willing to lend to prospective franchisees, and then get the message out in their marketing, that the banks are supporting new franchisees. There will be many potential franchisees out there who think they will not get funding, and so are not applying. If they had the confidence of knowing funding is available, they might just bite the bullet and purchase a franchise.
The message, therefore, to franchisors, and to those considering franchising your business is simple: Batten down the hatches, take all the professional help and advice that you can, look for new and innovative ways of marketing your products and services, perhaps to new market sectors, and recruit like you have never recruited before. Ensure that you come out of this recession stronger and wiser than you went into it, and with an expanded, more experienced group of franchisees.
Alan has over 10 years’ experience in franchising, having worked as both franchisor and franchisee. He plays a key role in the consultancy team at The Franchise Development Centre, part of The Howarth Franchising Group. Alan has responsibility for the North and North East of England and offers a complete range of consultancy services to prospective and existing franchisors.
To find out more about the extensive range of services that The Howarth Franchising Group provides, please visit www.franchise-consultants.com or call 0870 458 6682.
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