The coronavirus pandemic has given rise to a significant amount of confusion, stress and uncertainty over the past few months. It is unlike anything people have seen in their lifetime. Most retail businesses have suffered hefty losses, and companies are asking their staff members to work from home. The franchising sector has been impacted significantly, as well.
If you had been considering venturing into this space before the pandemic erupted across the globe, you likely have many questions about whether you should go ahead with your plan and look for franchising opportunities. You will realise that your franchise search has been affected due to the pandemic outbreak. Read on to find out how the COVID-19 crisis will impact your search for a franchising opportunity.
Some Relevant Questions
Here we take a look at some common questions that prospective franchisees might have.
1. Do You Need To Stop Your Search For A Franchise Opportunity?
This is not necessary, and we believe it’s best to power through. Looking for opportunities is very different from committing to something. Even if you are working at a job from home currently, you may have more time on your hands than before. It means you also have the extra time required to research various business opportunities. It is also necessary to conduct due diligence, and you should take advantage of the spare time you have on your hands at the moment.
You can collate some questions to ask franchisors. And now you can also add another one related to what systems and processes they have in place to deal with a crisis such as the current one. Start checking which franchising businesses have been less impacted than others and also speak with other franchisees within the networks you are considering. It will give you a better idea about how a particular franchisor is managing their network and whether they are supportive of their franchisees during this difficult time.
If you are looking at something in the food industry, you can also ask whether the establishments are ramping up their home delivery or take-out services like Dominoes has been doing and what precautionary measures they have set in place. Even if you do not plan to join a particular franchise in the current environment, having this information will still give you a better idea about how a specific franchisor manages challenging situations.
2. Is This The Wrong Time To Venture Into A Business?
The current situation is not ideal, and the economic landscape can impact a business you are researching. However, as mentioned earlier, conducting research is very different from committing to investing in anything or starting a business. So you should do your research and ensure that you are getting satisfactory answers from the franchisor you are researching. If you start looking extensively, you may notice that some businesses haven’t been affected at all. Some service industries continue to surge ahead even in the pandemic situation- like the office cleaning industry.
No one really knows how long the pandemic will last and when everything will get back to normal. However, if you have all your research and due diligence in place when things go back to the way they were, you will find it easier to get your plans into motion. It will put you in an advantageous position because you can then quickly open up at a time when others are only starting to check things out.
What is even more important is that you would then be able to join a franchise that is solid and stable enough to weather storms such as one that we are experiencing at the moment. Under normal circumstances, regardless of how solid a business looks, it may not be put through the test in the manner that it is now.
It means that you may never be able to determine how stable and sustainable a particular business can be during challenging times. However, if a company can move through these choppy waters and come out stronger, it will be worth your while to be part of such an enterprise.
3. Do I Need To Change My Research Approach During This Time?
Since you will have some additional time on your hands if you are working from home, you can use that extra time in different ways. Here are some suggestions:
- Review your finances and see how you can create more of a financial cushion, so you are on more solid footing a few months down the line.
- Start to conduct due diligence on financing and check which banks or financial institutions have attractive loan options.
- As a reaction to the pandemic, there has also been a drop in interest rates, potentially offering you the opportunity to lock-in on a specific rate that you might not have had access to a month ago.
- If you have made any enquiries with individual franchises, follow up on those calls. At the moment, they are a good resource to understand whether their business concept will work for you. You can return their calls and follow up on any emails you might have received from them.
- You must understand that this is not a standard buyer-seller relationship, and the process is not referred to as ‘selling’ in the franchise space. Just as you do not want to associate yourself with a shaky franchisor, they too would not like to risk doing business with someone incapable of running a franchise in their network. After all, your success and position in the market will have an impact on their brand recognition as well.
- You can start building your business relationship with them now. This approach will put you in a stronger position if and when you decide to buy into the franchise.
- Now is the time to talk to more franchisees. It is an integral and essential aspect of your due diligence. The larger the number of franchisees you contact and discuss things with, the more information you would be able to gather. You can ask them how the pandemic has impacted their business and what the franchisor has done to support them. Keep in mind that the franchisee might be going through a very tough period. It also means that they might not be able to carve out the time that you want. They may not even be in the right frame of mind at the moment to have detailed discussions with you. However, you can check whether some of them are willing to have more in-depth conversations about the things you want to know.
- When you are planning to purchase a franchise, you also need to speak with an experienced franchise lawyer. Legal representation is crucial in any business deal, even a franchise. The franchise disclosure document is packed with legal jargon and is also very lengthy, making it difficult for anyone without legal knowledge to understand it correctly. It’s why you must work with a credible franchise lawyer who has a good understanding about the ins and outs of this sector.
- You should also start working on your business plan. Most financial institutions that you approach for a loan would require you to submit one. The plan could be the difference between approval and rejection of your loan.
Read and Research
Start reading on how the franchising industry in Australia works. Visit the FCA website to get more information about how the system functions and what is involved in it. Also, when you do by a franchise, you can sign up to become a member of the FCA. The site has valuable information and resources that you can check out.
It’s a good idea to conduct some research online on how different franchises in Australia are faring in the current pandemic landscape. If you are considering investing and starting a franchise in a specific industry, read up a little more about it.
Sometimes, doing this research could give you other ideas, and you may find a franchising opportunity better than what you had been considering. As you can see, there is no need to shelve your plans of buying a franchise or even put it on the backburner. You just need to change your pace and focus a bit and make the best of this time you have to create a solid foundation for your planned business.
If you want any more information or support and ideas on how to plan investment in a franchise business, with the least impact now, contact the experts at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form, and one of our experts will contact you as soon as we can.
Thanks for reading,
The Franchise Institute Team
1300 855 435
Stats Sources:
https://businessviewoceania.com/franchise-council-australia-delivering-strong-framework-franchising/
https://indaily.com.au/news/business/2020/04/08/office-cleaning-boom-on-back-of-coronavirus/
https://www.franchise.org.au/advice/covid-19-resources/
https://www.afr.com/companies/retail/domino-s-sees-carry-out-orders-grow-as-stores-reopen-20200609-p550w2