Historically, economic downturns have been among the best times for people to start franchises.
That may be hard to believe on the surface, but it has been true, according to this business/franchise blog.
Many people who have lost their jobs become intrigued with the idea of having a career in which they can control their destiny and not have a boss, so they turn to becoming a franchisee.
With the COVID-19 pandemic causing unemployment rates to soar quickly, starting a franchise might be on people’s minds.
Diana Trondsen, a small business and franchising expert who is also a consultant with FranNet, offered five suggestions for those interested in starting their own franchise.
Self-reflect and research potential fits.
When first considering whether to start a franchise, whether it’s a food or retail store, taking the time to analyze your life situation and then brainstorm the best ideas are essential.
“The nice thing about this process during this time is that you have the time,” Trondsen said. “Being proactive and exploring options -- now is the time to really take a look and see what’s out there and what could potentially be a good fit.”
Determine a budget.
Trondsen said thinking how much money you can or need to borrow, what expenses are essential and how much bang for your buck you can get, are all things that would need to be planned out immediately.
“There’s no correlation in the amount of money you invest and the amount of money you can make,” she said.
Open a business that a community needs, not what you want.
While people might have a passion for certain types of franchises, that should be on the backburner.
Have food stores such as McDonald’s or Jimmy Johns done well in that area? Or are hardware or retail stores doing better?
It’s all about what will best serve a community and what will thrive, and Trondsen said starting a franchise that will do well in both good and bad economic times is imperative.
“You have to think through what business are going to withstand the test of time,” she said. "(It’s about) needs-based businesses -- different types of industries that continue to serve guests once the downturn passes.”
Research the competition.
When researching what type of franchise to open, one needs to see how well competitors have done in that community.
Trondsen said this is fairly easy to research because franchises are regulated by the Federal Trade Commission and disclosure documents are required.
“You want to see different companies and how you differentiate from the competition,” she said. “The nice thing about franchising is that there is a transparency there.”
Don’t be afraid to ask for help.
Once the decision is made to start a franchise, a budget has been determined and competitors have been examined, there are still tasks that need to be done, such as figuring out what marketing strategies are already in place and which ones have worked, or how many employees are needed.
Trondsen said asking for guidance from consultants or other franchisees can be a big help.
“That’s basically what you are receiving – a playbook,” she said.