An Uncertain Climate Drives Investors to Franchising
“Are we there yet?” It used to be the cry of bored children on long road trips. It’s now apropos of the post-pandemic landscape where some norms are returning, as some newfound shifts in the way we consume are sticking around — all while an unprecedented combination of market conditions have left many of us scratching our heads. Returning to a pre-pandemic lifestyle is no longer in cards, but that may not always be a bad thing.
For instance, even though consumers are returning to indoor dining (especially now that the colder temps make patios in many places a no-go), takeout and delivery are still going strong. All-you-can-eat buffets fell out of favor, while drive-thrus and contactless delivery remain popular ways to grab our morning coffee, as well as our late-night burrito.
Downtown retail locations are still struggling, thanks to employees embracing working at home and pressuring employers to continue this “perk” indefinitely.
Resilient Industries
While some industries may be limping along, others have found legs. A surge in pet adoptions during lockdown means dog owners need diverse doggy daycare options. The shortage of computer chips and essential materials for manufacturing new vehicles has led to an increase in the number of used vehicles on the road, therefore boosting not only used car prices to record highs, but the global auto aftermarket, as well, to an estimated $542.1 billion by 2026. This, along with many other newly evolving opportunities, presents lucrative markets for franchised businesses to address.
At the same time, current unemployment rates may be low and many businesses are starving for labor, but there’s no doubt that the U.S. economy has been slowing, due in part to global instability and conflicts which are impacting gas prices and ongoing supply chain shortages. Much of what we’re seeing now is uncharted territory. Even the experts and the scribes are confused by the twists and turns of the marketplace, with some even calling what we’ve seen in these recent economic times as “really weird” and “super strange.”
Inflation and Managing Costs
Inflation has increased to levels not seen in the last four decades. And, managing costs is even more crucial in inflationary times. The good news is that franchise systems have built-in group buying power and on-site owner-operators who will manage labor and other costs much more closely than their employed managerial counterparts. And since franchisors with buying power can often access inventory and pass down savings, franchisees can sometimes avoid product shortages (such as chicken wings, Sriracha® or helium) so they will not have to “86” popular items – keeping the business offering attractive, both at the consumer and at the franchise buyer level.
Turbulent times are when independent business owners should take a serious look at franchising.
This unusual business climate, however, is when franchising, as a business expansion solution, remains a steadfast way to navigate these changing scenarios as we move toward a new year. Turbulent times are when independent business owners should take a serious look at franchising as a means of expanding while minimizing their risk. And one of the things that has been characteristic of these strange times is that more and more people are looking to get into business for themselves – creating a surge in franchise buying unlike any we have seen in recent years – providing you with both access to capital that is becoming increasingly expensive and the managerial talent that is more and more difficult to attract and retain.
Of course, the first step in any business strategy or due diligence process is to enlist your trusted advisers, such as your accountant and attorney, along with a franchising expert to help determine how to benefit from these never-before-seen market dynamics and to determine if, in fact, your business is franchisable.
As we maneuver through these uncharted waters, what we’ve learned during the past couple of years is the value of connectiveness, but also nimbleness. And franchising, when done right, provides proven systems and best practices for growing your business in a way that keeps it scalable and relevant, and able to tackle the ups and downs of just about any economy.