During periods of economic turbulence, some aspiring entrepreneurs shy away from starting a business because of the perceived risk in the market. However, what most people don’t consider is that franchises have the potential to perform well during recessions for a number of reasons. This can make franchising an attractive business opportunity as other industries attempt to stabilize.
If you’ve been considering opening a business, don’t let economic uncertainty slow you down. Purchasing a franchise may prove to be an excellent business move that allows your company to thrive in spite of a recession. Here’s why.
Franchises use a stable, proven system
One of the biggest benefits of owning a franchise is that it comes with a proven business model and operational system that is designed for success. It is this benefit that can offer franchisees the most assistance in both stable economies and during a recession.
The franchise model provides business owners all the tools they need to set up a successful business from day one. Most franchise systems provide training, marketing and ongoing support—key resources that can help your business stay afloat during uncertain times. Franchisees are also able to tap into supplier networks and leverage the system’s buying power, which can secure better prices.
Franchises are recognizable
Another key element of owning a franchise is buying into a business model that customers already recognize. There’s an added level of familiarity and trust that comes with purchasing an existing business, which can help companies tremendously during a recession.
When money is tight, buyers are more likely to visit businesses they trust and already enjoy, rather than take a risk on a new business. Therefore, franchisees can benefit from the added customer loyalty as they navigate market uncertainty.
Franchise products are attractive to buyers
Franchise types vary wildly, and some are much more stable in a recession than others. A large segment of the franchise market caters to low-cost or necessary goods and services. These things are generally more accessible to buyers and can be more attractive when the economy has affected their budgets.
Although customers might turn away from large, risky purchases like a new car, they may be willing to treat themselves to low-risk items or services like a haircut or coffee. They will also still need to turn to necessary services like home and auto repair. This type of customer behavior keeps franchises well-frequented, even when the market takes a turn.
Franchisees can leverage market opportunities
During a recession, franchisees might also be able to use other market changes to their advantage. One change might be in the real estate market, where downturns reduce demand and drive prices down. This might provide an opportunity to negotiate a lease in your favor or purchase a well-located property that is anticipated to appreciate when the market upswings again. Other opportunities might include better payment terms and prices with suppliers.
Financing for new franchises is also still available during periods of economic turbulence. Small Business Administration (SBA) loans and lines of credit are still obtainable to many aspiring business owners, as are capitalization methods like Rollovers as Business Startups (ROBS). Using these startup products, savvy entrepreneurs can successfully start and operate franchises, even when the economy takes a turn.
Tenet Financial Group connects small business owners with startup funding and recapitalization methods that are the right fit for them. If you’re interested in buying a franchise, contact us today to learn more.