The biggest barrier to taking on a new business venture during a downturn is the fear of failure believes Andy Simpkin, founder of mobile coffee franchise Cafe2U, but franchisors can counteract this if they devise inducements and value-add to attract new investors.

“Negative sentiment can flow into all areas of your life in a recession and potential franchisees do fear they are taking too big a leap and wonÕt be able to make their business work,” he said.

The economic situation shouldn’t deter potential franchisees keen to invest in a system, he advised.

“The franchising industry tends to pick up during a recessionary period because some very talented operators, middle and upper management, are as vulnerable as anyone to being retrenched. These sorts of people often want to take on the challenge of starting their own business instead of waiting for another opportunity in their previous career.”

And the alternative choice of setting up in business by yourself requires a lot of time and energy, and often far more than the set costs of buying a franchise, he added.

“Starting a new venture from scratch requires you to research the viability of the product or service and if there is a demand for it in your area. Building a brand profile and attracting a customer base can take years to achieve. In a recession these variables can prove a major barrier to profitability. A successful franchise has done the leg work for you.”

Despite optimism in the franchising sector Simpkin suggested franchisees must implement a number of strategies to help recession-proof their business.

“To succeed you must conduct regular cash flow forecasts, keep accounts easily accessible, know where your costs are and manage accordingly. Monitor outgoing expenses and you must endeavour to maintain your marketing budget. This is one of the first things businesses pull back on and it invites a case of out of sight, out of mind.

“You must assess whether the opportunity is actually going to be profitable. Another key consideration is the pricing of the product of service you are offering. Smaller priced items are less likely to be spurned in a recession, particularly items like chocolate, flowers and coffee. People will always find a way to afford small luxuries such as these.”