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How To Buy A Franchise In A Recession

With the apparent doom and gloom of the economy and likelihood of a prolonged recession, your appetite for looking into buying a franchise right now might now have stalled, however, now could be one of the best times to do so. Have a read of this short article to find out why…

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There Is Still An Opportunity For You In Franchising

Now let us get one thing straight from the outset, a franchise should not be seen as a straight replacement for employment, but it is fair to say that often individuals investigate franchising, not just in turbulent times, as a way for some level of security.

There Are A Number Of Reasons To Buy A Franchise In A Recession

Look at the historical facts of franchising first; you might well be able to look around on the very site you are reading this article on to find some information on the history of franchising, if not, just do some extended research on your browser. The good news about the franchising sector is that is has been around for probably longer than you realise, at least several decades and within that, some economic resets! And as such, there will be lots of data online to show you despite any impact of the economy, this is good news for you!

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5 Factors To Consider A Franchise Right Now

There will be more of course, but just to highlight a few in this short article:

  1. You typically will not be the very first to buy into a proven model, at least one other has done this before you. This will undoubtably be the Franchisor, or early adopter franchisees, therefore; your own chance of success will have considerably increased, you just need to follow the system!
  2. Most Franchisors have a system in place to teach anyone, regardless of background, how to operate their franchise. This is excellent news for you as now you might be able to look at industries outside your natural skill set. This is great if you feel that the market you know about will be hit harder than others in a recession, although, for completeness, you should still have a passion for whatever it is you are looking to do!
  3. Franchisors will be more strategic about the future with any threat of recession or economic downturn is presented, so you can follow that system and not have to necessarily deal with this element by yourself, after all, franchising is all about being in business for yourself, but not by yourself.
  4. Before buying any franchise, you will be able to get all the facts and figures before you even part with a single penny! This will vary immensely from starting your own business, which is often done on a whim - no need for this when buying a franchise! Others have done this before you, and they will be a great resource for you.
  5. Check out any franchise resales in the franchise brand you are looking into, talk to them as well as other franchisees as they will be non-competing anyway. There is nothing stopping you from talking to them at the appropriate stage!

There Are Risks To Mitigate

It is fair to say that your decision to enter franchising needs to be for the long-term, not least because you will probably be entering a contract for a prolonged period. So, let us look at other elements you should also be considering.

Finance - is this still readily available? You might find that some financial institutions decide to pull back from the amount of lending that they were once offering. However, there are some great schemes still available though, regardless of this.

A brand-new Franchisor- we looked earlier in this report about historical data; one advantage of buying a franchise that is new is that you will probably be offered some ‘early adopter incentives’ this can bring higher rewards, although there is an increased risk of course.

Buying any franchise can take time - you should fully research all options before fully committing, so factor what you do during this time; should you keep your job and do your research in your downtime? It might be that you have been made redundant for example, and whilst it might take a few months to actually commit to a franchise, this will have an impact of your own financials of course.

Working capital - the funds to buy any franchise is often just the start, think about the cash requirements of the business moving forwards and ensure you can sustain this. Getting this point wrong can be extremely costly and hamper the growth of your business.

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Recessions Do Not Last Forever!

It is too easy to play into all the doom and gloom isn’t it! However, it will turn a corner at some point, and if you have come into franchising for all the right reasons, factored in the positives and negatives, then also built your own solid business, imagine what great shape you will be in as we come out of any recession.

A Poor Outlook For Some, Great News For Others!

Let us look at some at some scenarios that might be presented in the coming months, obviously this is sad and disappointing for many, but there is opportunity there for you as well.

  • Sites and locations - you might find they become more readily available with landlords willing to accept preferential commercial terms.
  • Staff - this has been more of a problem of late, could more people looking for alterative jobs be the outcome to fix this? Often it will also drive down salary demands.
  • Franchisor incentives - franchisors will want more franchisees so you can see what they might be willing to offer to help you make your decision now.
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Stay Focused!

If you are serious about a franchise, you will do your research and this will often become very apparent to the franchisor with the questions you put to them. Asking for example how long they have been operating is not a good question - you’d be expected to know this! That said, if you don’t ever feel that your questions have been answered, the good news for you and franchising is that there are always more options, so power to you!One more thing to remember, there are no recession-proof franchises, no matter what anyone tells you! However, some franchise businesses are recession-resistant and hold up better in a down market.

The franchise community is very friendly, ask anyone for an opinion, I’m sure they will be only too happy to assist!

Richard Pakey is a franchising expert and Managing Director for the award-winning Lime Licensing Group and can be contacted in the following ways:

Email: 07904 697591

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