Opportunity in the time of recession

We have heard how franchisees can benefit from the recession but the question remains, what do franchisors stand to gain in the prevalent economic climate? Is there a need in the market that franchisors can look at capitalizing on? Is there a market of franchisees ready to buy? The answer to all these questions is, yes.

In Australian, the unemployment rate is now the worst it has been in four years and has hit 5.2% after the economy suffered the biggest monthly drop in full-time jobs since 1991. The data from February shows the biggest drop in full-time positions since July 1991, when 79,400 full-time jobs were lost. Economists had tipped 20,000 positions would be wiped out in February.

As disheartening as it can be to think about the current unemployment rate, the truth is this atmosphere of unemployment, fear of losing one’s job and general dissatisfaction in the workplace causes people to look for alternatives to buffer this unhappiness and uncertainty. Some might choose to start their own business but others might look to a safer option of franchises with already established systems.

There is strength in numbers with franchising. You have the benefit of being your own boss with the advantage of having an established system to fall back on. Additionally, it has been predicted by a leading franchising company that the industry is set to boom in 2009 as more people consider becoming self employed. Indeed, franchising is proven to be the easiest and most successful form of business for those that wish to be self employed for the first time.

The other aspect to consider is financial capability. We have established that there is definitely a want to buy but the only want is not sufficient. The question that follows the want is, ‘Is there an ability to buy?’ This can be answered by looking at two areas that could potentially affect financial ability – the stock market and the credit availability. First, let’s look at the stock market. The mindset that dominates the stock market is either entirely optimistic or entirely pessimistic. If stocks are going up, people have the tendency to keep investing. However, when stocks go down, people almost impulsively withdraw their financial investments and look for alternatives and safer investment options. With the way the market is at the moment, investors will probably not only withdraw their investment but also stay away from any kind of stock market investments until the market presents itself as more stable. However, they are going to have to consider what do with their now withdrawn capital. As franchises and small business ownership continue to provide a high return on investment alternative, it is most likely to be the option that they consider.

Secondly, let’s look at credit availability. Although there are aspects of the recession that could benefit franchising, the current situation of credit availability could reduce the number of franchises that could benefit from the recession. Commercial institutions tend to be more cynical about lending in such economic climates and this could result in individuals that are forced to consider franchising alternatives that are less expensive. Franchisors need to understand that it is not that commercial institutions are not out casting borrowers altogether, they are merely looking for better quality borrowers. One needs to also remember that credit crunches tend to be short lived.

On the bright side, the government has numerous rebates in place that support small business ownership. Now is the time to make the move and consider franchising.

This article appears courtesy of Elaine Rose of Franchise Central