Buying a Franchise in an Unpredictable Economy

It is widely believed within the franchise industry that franchise brands often grow their franchisee footprint fastest in times when the economy is not performing well.  That may be a trend that is similar to people selling stocks to buy bonds as they seek stability and comfort. 

In past years it may have also tracked along side downsizing trends.  It is not uncommon for people that have lost their jobs to seek control over their income stream.

The important note there is that franchising and opportunity do not come to a halt when the stock market drops; quite the opposite seems to be true. Some believe the opportunities even improve.

“We need a good recession”, a franchise executive talking about how proud commercial real estate owners are of their properties that are renting fast and for high prices recently as the economy was more stable and looked to be growing without end.  He wanted to get his franchisees open faster and at better lease costs.  His point was that in a recession, weaker businesses (he was focused on independent operations without the branding, experience, systems or support) sometimes have more trouble adapting to market changes and vacate their locations.  The end result of this can be lower rents and more sites available for franchise brands to put franchisees into.

Some businesses seem relatively unshaken by stock market declines.  For those segments you would expect to have similar opportunities in up or down markets.  Here are some examples:

Home and business repair services: HVAC, plumbing and electrical.  While there can be differences in how individual companies in these segments operate, the likelihood is that much of their business is need based and would be called upon regardless of how the stock market is performing.  Few homeowners or businesses would want to be without air conditioning in the Summer or heat in the winter.  In those cases the property owner will prioritize those repairs over any disposable income expenses they might otherwise be drawn to.

Those repairs are not often planned ahead, they are the result of a break down.  Yes, some of their business would be from new builds or renovations but that seems to be the minority or revenue for many of these companies so do check that ratio if you are seeking consistent revenue.

Typically the owner in these businesses manages a team or experienced managers and techs that they have hired.

B2B services for insurance companies: Disaster recovery, exterior repairs, electronics and art repairs.  Again, these are not planned events and they are paid for by the insurance company you pay your monthly or quarterly bill to.  When an event happens your insurance company works to get it resolved.  A down stock market does not impact that process.

Owners role in these businesses can vary from being a hands on owner operator to an executive role managing the manager and team.

Value priced hair salons. Watching these brands for over 20 years they seem to suffer little impact from a down stock market, some stores even seem to thrive as customers leave more expensive options to get a quality haircut at a lower price. This is the first category here that may also benefit from real estate opening up and becoming less expensive. These are very stable and predictable businesses with professional licensed workers.  They tend to be among the most stable businesses in franchising when you look across their franchise systems.

Owners in these businesses manage the managers that run the operations, many of these owners keep their jobs and business this business as a second cash flow. There are some great lending programs in this category.

Senior care: Home care, placement services, home modification and other support services.  We are aging, no way to get around that.  Families often try to take care of loved ones themselves at home but there is not always the bandwidth to do that without assistance.  We became two income family households and working single parent households ages ago.  When a family member needs help we now have options. 

On the simple side it could be someone coming into your home and providing support services to your loved one. For more time or service intense needs there are services that help find the perfect place for your loved one to live and get the services that will serve their needs best.

Owners have a wide range of roles, most are owner involved. Demand for these services is expected to grow as Baby Boomers continue to age.

These are just a handful of examples, I work with my candidates on these and more.  The key takeaway is that with planning a high or low stock market may be less of an impact than you envision.

What will your success story be? Let’s go find it!

George Knauf is a highly sought after, trusted advisor to many of the top franchise ownership groups in the world. With over 25 years of experience in both start-up and mature business franchise operations he is uniquely qualified to advise individuals that have dreamed of Building their own empires. Whether you have an existing portfolio or searching for your first franchise, he can help you to pursue your dreams. Contact the Franchising USA Expert, George’s Hotline: 703-424-2980.

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