Considering Opening a Franchise During a Recession? 3 Key Factors to Consider

The impact of the COVID-19 pandemic was felt by all – business owners, consumers, and everyone in between. This global crisis triggered a recession due to sudden state- and city-mandated shutdowns – restaurant dining, shopping, traveling, events, entertainment and more were put on hold. However, there are opportunities to be found amid a crisis, and for many furloughed or laid off professionals, business ownership was now an option to consider.

While many people wouldn’t immediately think to launch a business during a recession, the move can be quite strategic if done correctly. Perhaps there’s a clear marketplace gap, or the recession has created increased opportunity with less business competition. During a recession, institutions tend to reduce interest rates to help stimulate the economy and properties may be easier to come by as the demand for real estate shrinks.

If launching amid a recession, aspiring entrepreneurs would be wise to consider a franchise, as the business model has already been built for you and has likely had proven success.

While there are numerous benefits to starting a business during a recession, how do you choose the right one? Conducting research to find the right franchise is critical. It’s important to find a brand and company that will provide the support, trust and transparency needed to succeed. Below are three key factors aspiring entrepreneurs should seek out when considering opening a franchise amid a recession.

1. Differentiation in the Marketplace

In every industry, there are competing brands that offer seemingly identical products or services. Think about the restaurant industry – how many burger places do consumers have to choose from? In a crowded marketplace during an economic recession, a business needs to clearly differentiate itself from others in the space in order to thrive.

For Winmark, that meant becoming a market leader in the resale sector of retail. We distinguish our resale model from other secondhand and consignment shops by purchasing used items from our customers in exchange for cash on the spot. During the health and economic crisis in 2020, we saw an increased demand for secondhand products. Families were looking to stretch every dollar and find less expensive alternatives for items such as clothes, accessories, workout equipment and more. In the current budget-conscious economy, consumers continue to seek out sensible prices for everything from clothes, to sporting goods, to musical instruments.

Our resale retail franchises have consistently delivered sales with growth margins not found in traditional retail. We continue to thrive in an increasingly competitive marketplace – and we do this through differentiation via our business model.

2. A Brand that Prioritizes Innovation

Brands that continuously invest in innovation – even during a recession – tend to outperform those that choose to stick with a well-worn operating model. Post-COVID, brands that pivoted or developed a multi-channel presence were at an advantage, which gave customers the option to shop online and in stores.

Among the Winmark resale brands, Music Go Round®, Play It Again Sports® and Style Encore® rolled out new platforms that allowed consumers to find and purchase products online for both in-store pickup and home delivery. During the height of the pandemic, Once Upon A Child® and Plato’s Closet® franchisees set up online shopping storefronts to drive customer sales.

Our franchisees continued to be creative with how to support their communities during the pandemic. Curbside pickup, delivery, bundling children’s items together in Spring Essential boxes and even virtual personal shopping options were just a few of the many adjustments franchisees made.

As a brand, we continue to empower our franchise network to remain creative and share innovative ideas. Our team is constantly inspired by the adaptability of our franchisees, which we make sure to share with the entire network to drive our innovative culture forward. This is a critical trait for aspiring entrepreneurs to look for as they research franchise investment options.

3. Resilient Franchise Support in the Face of Uncertainty

A franchise network is only as strong as its support team. These are the people that will remain focused and goal-oriented to provide franchisees with the tools, resources and guidance needed to withstand a crisis or navigate a recession. It’s these very systems and processes that allow the franchise to grow and refine operations, making business easier for owners.

As part of your research, ask to be shown the support provided to franchisees. Even better, reach out to existing franchise owners in different markets to gain candid insight on the level of support provided.

Going hand-in-hand with innovation, resilience is another key attribute of brands that can hold up well during a recession. Franchises that are able to be flexible and adapt to difficult circumstances while maintaining operational standards have an advantage over those that remain rooted in a “that’s how we’ve always done it” attitude that can hinder growth. It’s critical that a franchise support team and leadership team don’t throw out operational procedures wholesale when disruptions occur, but rather have a clear plan of action in place that can weather a variety of crises.

Even as our stores re-opened to full operations in most communities, our team continued to guide our franchisees on COVID-19 health and safety protocols to keep employees and customers safe. In fact, at Winmark, having strong support and leadership teams is even more important as we are a fully franchised system, meaning there are no corporate stores. We’ve chosen this model so that all of our time, effort and resources are focused on providing support to our franchisees to ensure they are in the best position to succeed.

The partnerships we have with our franchisees have been strengthened even more as we navigated the pandemic together. And, we were able to draw on our experience in operating through the 2008 economic crisis and recognize that the resale franchise opportunity, paired with our historical brand strength, proved to be attractive to budding entrepreneurs. The Winmark model and support continues to bring in new franchise inquiries daily and we see that growth continuing post-COVID-19.

There are plenty of reasons why people decide to start a business during a recession, but the type of business you choose to open is equally important. Franchising can provide a solid business model to build from, and when researching investment options, it’s critical to keep marketplace differentiation, prioritization of innovation, and the quality of leadership support in mind. 

Renae Gaudette is President of Franchising for Winmark Corporation. Prior to that, Renae was Vice President, Franchising for Once Upon A Child®, Plato’s Closet®, Music Go Round®, Style Encore® and Play it Again Sports®. Renae has been employed by Winmark in various positions since 1995, including Vice President of Franchise Operations, and Director of Plato’s Closet®.

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