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Buying a Franchise During Recession

Written by : Expert Article
2009-04-15
Historically franchise recruitment managers will tell you that when times are good in the economy, new recruitment slows down. This is because people who would like to be self employed, via franchise business development, are simply too comfortable. They want to become self employed but don't want to take the risk of giving up the day job or moving highly performing share capital.

However, in the down times this all changes and franchise recruitment increases. This is because the comfort blanket of job and investment security can be removed. So is the motivator of having your comfort removed a negative one? In many ways it can be the best thing that can happen. This is because the removal of security can release the 'would be' business builder into being proactive. The result can be the achievement of self employed empowerment via franchise business building. It is anticipated that 2009 will be a very good year for franchise sales in countries like Canada and the UK. This is good news for the economy, new franchise business owners and franchisors.

So is there a market for new franchise business owners? People are still Buying products and services; they are simply focusing more on value. This is good news for franchise builders. The concept of franchising is to build your business around proven best practise. What the customer wants and wil pay is always the focus of quality franchise operations.

Let's face it, the mere word "recession" strikes fear into many people, because it implies hardship, job loss, and therefore, loss of income. So, in times of recession, those without jobs, but with the economic means, will seek to replace routine employment with self-employment. This is a common scenario found in each economic downturn. Now, franchise consultants, at least those with true knowledge of the industry, will always advise in favor of purchasing a franchise opportunity that best fits the buyer, but what if funds are not available for the 'perfect business'? Then logic dictates that 'you do what you have to do', and often that means buying the best job you can afford. Sorry to be so blunt about it, but many entrepreneurs have been borne out of hardship.

Remember, the purchase of a franchise usually demands that the investment be collateralized by the buyer's present assets. And in times of recession, qualifications may be 'tightened'. That doesn't mean that funds aren't available, but the buyer may be reluctant to bend to the demand. The bottom line is this: if a 'quality' franchise investment represents a means to replace a job (or better yet, create a new found lifestyle), then the option is positive. If successful, one can always move into a different business or expand beyond the initial investment.

The question to ask is How to choose franchise in a recession?

This is a great question because it spotlights a prime consideration in 'franchise selection' that is necessary outside of recessionary periods, but critical when experiencing one. When performing 'franchise due diligence' one of the most crucial elements is whether or not an opportunity can actually be 'profitable'. Now, in case you are scoffing at that remark, rest assured that most franchise buyers 'never' fully understand the nature of the investment, indeed, very few understand the documents that they are signing. This may be surprising, but it's true.

In times of recession, quality due diligence moves from a necessary step to a 'must' do step. Why? Because there is simply less margin for error if one cares to succeed.Of course, another consideration for purchases in times of economic downturn is that of product/service pricing. Why is the 'dollar menu' at fast food chains seeing such demand? Well, there you go, you just answered the question yourself.I remember years ago my father told me that during the 'big depression' the chewing gum people never really suffered. I guess that you always had a penny for gum, or today, a dollar for a burger.



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