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If you’re relatively risk-averse and contemplating buying a franchise, you may want to look for a recession-resistant franchise. Although the U.S. is currently in the midst of the longest economic expansion in our history, experts say there are warning signs that the next recession may be on its way. Though no business is 100% recession-proof, it’s a wise move to look for a franchise that produces good results even in bad market conditions. Here are some examples:
Necessity vs. Luxury
When looking for a recession-resistant franchise, look at businesses that provides a necessary product or service. Consider, as an example, a hair salon. Regardless of the state of the economy, hair grows and most people like to keep theirs to a particular length. Thus, the demand for haircuts usually survives a downturn. Tax preparation services are another example of recession-resistant services. We all need to file a tax return each year, and many people find the process too complicated to do themselves. Lastly, child care is a necessary service in all economic conditions. Quality providers frequently operate at near-capacity in all market conditions.
Lower price tag
Most consumers decrease their spending patterns during a downturn. For this reason, lower-priced and fast-food restaurants will often thrive at the expense of more upscale, expensive establishments. Decreased spending patterns also benefit companies that sell discounted or used items (such as clothes, sports equipment, etc.) as an alternative to buying new items from a full-priced retailer.
Services paid for by insurance companies
Businesses that provide services that are covered or reimbursable by insurance frequently survive a recession. For example, when a pipe bursts and floods your basement, you’ll search for professional services to restore your space. If your car is damaged in an accident, you’ll want it fixed. In both cases, insurance will likely pay for at least part of the cost of these services. And for that reason, demand for such services will usually continue through a downturn.
Rapidly growing demand
Demographic or other trends can increase demand for particular services. Businesses providing such services often do very well even in tough times. Take, for example, the senior care industry. As Baby Boomers age, senior-care franchises seem to be growing in number and doing very well. Outplacement agencies for people who have been downsized are also expanding from growing demand.
The great escape
Businesses that offer entertainment or another “escape” from the daily grind may do well in grim times. Examples include movies, game/sport arcades, treats, or other indulgences. On the flip side, however, decreased consumer spending can affect these categories. Be sure to consider past and present industry fluctuations before making an investment decision.
Child- and pet-related services
In good times and bad, people spend money providing for cherished members of the family: kids and pets. Child-related franchises include supplemental education/tutoring and enrichment classes for art, music, and sports. In the pet sector, groomers and sellers of boutique accessories will likely flourish even during economic recessions.
There are many other examples of businesses that can thrive through fluctuations in the economy. A FranChoice franchise consultant can steer you in the right direction if you’re looking for a recession-resistant franchise. Our seasoned professionals have an especially good grasp on which industries and companies are faring the best. Their services are free and often save you time by helping you narrow your search.
No matter how you decide to research franchise opportunities, it’s essential to be thorough. Take all the time you need to ensure that you find a franchise that thrives during tough times. Then you’ll be one of the few who are happy with the economy during a recovery period.Read More
A popular misconception in franchising concerns entrepreneurs as franchisees. Are franchise companies looking to recruit “true entrepreneurs” as new franchisees in their systems? Not necessarily.
What is a “true entrepreneur?”
Before looking at entrepreneurs as franchisees, let’s narrow in on the type of entrepreneur we are talking about. “True entrepreneurs” are those relatively rare individuals who are willing to go way out on a limb in terms of taking the risks associated with starting a new business. They have supreme confidence in their ability to overcome whatever obstacles arise as they journey build their business.
True entrepreneurs tend to shoot from the hip. They’re willing and able to create new solutions or change their business model on the fly. They may resist being told what to do. They’re wired to make all important decisions for themselves. Some consider them the epitome of the American form of capitalism, and they are a relatively rare breed.
Are true entrepreneurs desirable as potential franchisees?
The type of entrepreneur described above greatly contrasts with what most franchise companies are actually looking for in a franchisee. Strong franchise companies undertake years of trial and error perfecting their model. Their experience enables them to determine exactly how a new franchisee should launch and operate a business in order to be successful. They aren’t looking for people who want to blaze a new path or reinvent the wheel. They want people who will excel at executing the specific plan the franchise company sets forth.
The advantages and benefits of owning a franchise (vs. an independent start-up business) include less risk, a proven game plan to follow, a support team in place to consult for advice, and peace of mind in knowing how to overcome challenges. The problem for a true entrepreneur is that there may be little opportunity for self-expression, especially in the early stages of building the business.
The differences between owning a franchise and starting your own business
If you have strong entrepreneurial traits, you may still make a great franchisee. However, it’s worthwhile to carefully consider the differences in operating a franchise and an independent start-up.
Trading some of your freedom for less risk
Many entrepreneurs who contemplate owning a franchise have already tried launching their own business. They’ve paid their dues and learned first-hand just how difficult and expensive the process can be. If you’re in this category, perhaps you may be willing to forego some of your independence in exchange for less risk. Owning a franchise often comes with a greater likelihood that your new business will succeed. Are you comfortable with this trade-off?
The security of a proven system
As much fun as it is for an entrepreneur to “wing it” in operating their business, it can also be very stressful. If you’re on board with following a clear and tested roadmap for bringing the business to market, owning a franchise can offer less stress than starting up your own business. But make sure to conduct a thorough investigation when deciding what franchise system to join. Having a clear understanding of the rules you’ll be following will help you avoid frustration as a new franchisee.
Opportunities for personal expression
Even though good franchises are very regimented, they may have opportunities for franchisees to express their thoughts about system improvements. Ask whether the franchise company has franchisee advisory groups, such as those involved in marketing, operations, or technology. These types of opportunities can offer a great creative outlet.
Opportunities for innovation
Many of the most important innovations in franchise systems are developed and tested by franchisees, in conjunction with the franchisor. Entrepreneurial franchisees can often participate in the development and testing of potential new products and services, an important growth area for any franchise. Take note that these opportunities usually come along only after you’ve proved yourself as a franchisee who executes the system as instructed. When researching franchises, find out what avenues exist for innovation and ask yourself whether they suit your needs.
Entrepreneurs as franchisees: how to succeed
Good franchisors want their franchisees to succeed. They’ve developed a proven business model for just that reason. Most have seen the struggles of franchisees who deviate from the model. If you are entrepreneurial but willing to hold off your natural inclination to make changes, at least until your business is established and running well, you may be well suited for franchising. It’s very important to be upfront about your intentions and expectations, so you’ll find a system that’s right for you.Read More