When The Going Gets Tough, Can Franchises Keep Going?

For business owners, franchisors and franchisees alike the past two and a half years have been one hard hit after another – a global pandemic and long periods of lockdown and restrictions, the impact of the invasion of Ukraine, a cost of living crisis and now here in the United Kingdom a bleak warning yesterday from the Bank of England that we’re facing a recession. The UK economy is predicted to shrink in the last three months of this year, and to continue to shrink until the end of 2023.

With such grim news on the horizon, many franchisors will have cause to feel worried that franchise enquiries will dry up and that prospects will be unwilling to invest both financially and emotionally in a new business venture at such a time of uncertainty. However, the good news is that franchising as a business model has shown itself to be pretty resilient through times of past economic crisis – the caveat being of course that franchising spans a wide variety of industries and some sectors will be much more heavily impacted by a financial downturn and decrease in optional consumer spending habits than others.

So what are the factors that can give franchisors some hope as we look ahead to the next twelve months and beyond?

More Potential Franchisees

A shrinking economy inevitably leads to restructuring, redundancies and therefore an increased number of individuals looking for a new direction and change of career. That’s great news for franchise brands who can offer the opportunity to take control of your destiny and become a business owner with the security of being part of an established brand.

Proven Business Model

For anyone looking to launch a new business idea, gaining access to funding during an economic downturn is inevitably more of a challenge. However, lenders are more likely to look favourably on applications for funding to finance a franchise that comes with a track record of success as opposed to an independent venture that is perceived as being higher risk. And of course, franchisees are already benefiting from an established business model that works – all of the expensive and time consuming mistakes and detours have already been made so they can get straight onto the path to success.

The Power of A Network

In times of stress and uncertainty, the support that a franchisee gains from the franchisor and wider franchisee network becomes invaluable and is one of the reasons why franchise businesses on the whole have a higher rate of success than independently ran ventures, whatever the trading conditions. At the height of the pandemic and when negotiating many difficult restrictions, within my own industry of children’s activities we saw many independent business owners struggling for help and not knowing where to turn. As we head into this next stormy period, franchise brands can not only offer reassurance, support and assistance backed with experience, but can also take advantage of their strength in terms of numbers by working together to reduce costs, negotiate more favourable trading terms and make a bigger impact with advertising. Established franchises will also have weathered different trading conditions over their lifespan and have the ability and know-how to react quickly to changing customer spending habits, providing their franchisees with a likely advantage over their competitors in the marketplace.

During times of uncertainty, a franchise can offer a low risk route to business ownership, offering the backing of an experienced network and brand and a proven business model. And whilst no business can be said to be “recession proof”, as we look to the times ahead there are plenty of reasons to feel optimistic that a well managed franchise brand can weather the storm of the recession to come.

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