Learn why now is a good time for opening a franchise business.
Starting your own business is challenging and can be a little scary regardless of the economic climate, but especially during a global pandemic. No matter what industry you choose, there will always be a certain amount of risk involved. There is no guarantee of success in any new business venture. According to the U.S. Bureau of Labor Statistics, approximately 20 percent of new businesses fail within the first two years. However, opening a franchise can help mitigate that risk and lead to a greater chance for survival, even in times like these. In fact, data collected for FranchiseInsights.com shows a surge in aspiring owners anticipating starting a business in the next few months. Here’s a look at a few of the factors that helped franchise businesses survive the pandemic thus far and what makes now a great time to join a franchise network.
Franchise Network Resiliency
According to a study conducted by economists at the University of Illinois, Harvard Business School, Harvard University and the University of Chicago, more than 100,000 small businesses have succumbed to the coronavirus pandemic and permanently closed their doors since March. Although franchise businesses were not immune to the hardship, they did tend to fare better than independently owned small businesses. Why? There are several attributes inherent in the franchise model that help provide protection.
First, the foundational strength of franchise systems allows them to adapt more quickly and continue to grow. Unlike an independent small business, franchise owners have the bandwidth of an established brand to develop ideas for pivoting the business to sustain relevance. The brand recognition that comes from belonging to a franchise network can also provide an extra layer of protection. Consumers tend to trust and feel more confident in businesses that are part of a larger network in terms of safety protocols, quality control standards and staff training procedures.
The franchise business model also provides an edge with financial relief. While franchisees are required to pay royalties and other ongoing fees in order to operate under the brand’s name, a franchisor may suspend, reduce or forgive these fees. This can have a significant impact on the financial health of the business. In addition to this flexibility, franchisors can also help ease financial stress by leveraging their supplier relationships and buying power. They may be able to negotiate with vendors to temporarily lower costs for their franchisees, an advantage most independent businesses lack.
Why Now is a Good Time to Consider Opening a Franchise Business
There’s no doubt that franchise networks provide a certain degree of certainty and stability, which is even more attractive in challenging times like these. Access to capital, job security, reduced competition and availability of prime real estate are four big advantages of starting a business now.
Access to Capital
Perhaps you have accumulated substantial savings in the form of home equity, a retirement account, personal savings or other financial resources. Or maybe you were recently let go but were fortunate enough to receive a sizeable severance package. Even if you don’t already have money available, there are multiple ways to secure funding.
Startup capital is readily accessible at historically low interest rates. The coming months will likely provide even greater access to lending for aspiring entrepreneurs thanks to government programs and new incentives from the Small Business Administration to encourage small business growth. Some franchisors are also offering temporary incentives like discounted fees and greater flexibility regarding opening dates to make opening a franchise business even more affordable.
Owning your own business is the ultimate way to create real job security. Being your own boss puts you in control of your own destiny. However, one of the biggest challenges of business ownership is finding good employees. But with so many displaced workers right now the labor pool is flooded, making it easier to find reliable employees to help get your business off the ground.
While it’s unfortunate that the pandemic forced many out of business, that means less competition. Fewer options for consumers seeking the products or services you provide can help bolster your sales. It can also result in less price competition and lower advertising costs.
Availability of Prime Real Estate
Finding a great location is critical for the success of a brick and mortar business. The real estate once occupied by now-shuttered businesses is becoming available giving new franchise owners a much better chance of securing a prime location, and at a reasonable rate. Property owners will likely be more willing to negotiate and offer favorable deals to secure new tenants.
The Bottom Line
Business ownership isn’t for everyone and starting a business certainly isn’t a decision you should make overnight. It requires a lot of homework and due diligence. There are many good opportunities available for opening a franchise, even if you have a limited budget. Despite the current state of the economy, now is a great time to join a franchise network. It may end up being the best decision you’ve ever made.