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18th
August

HOW TO CHOOSE A FRANCHISE TO INVEST IN DURING OR POST THE PANDEMIC

The spread of the COVID-19 pandemic has posed a significant threat, not just to the nation’s economy, but to the world as a whole. The current situation is something that very few have never experienced during their lifetime. Ever since the World Health Organisation declared the global pandemic, there have been many repercussions.

Not only have the stock markets crashed, but travel restrictions have also been set in place, and many countries have declared a state of emergency as well. Today, Australia is bracing for the biggest post-war deficit. Just when we feel that the situation is getting a little under control, there are sudden spurts in the COVID-19 case in various states in the country.

Many businesses have either shut down or been forced to adopt work from home methodologies. Colleges, schools etc. have also shut down while some are now trying to open up physical classes. The focus now is on how to flatten the curve and slow down the virus transmission.

Is This The Right time To Invest in a Franchise?

People that have been laid-off or wanted out of the 9-5 grind, are reconsidering their decision to venture into the business space. This is quite a valid concern, especially in a situation when an economic downturn seems to be on the horizon. Even franchising businesses are facing the same kind of pressures that other companies are.

Customer accounts and overall revenues have seen a sharp and unexpected fall. Supply chains have been impacted. But what makes this entire situation dire is that there is a degree of uncertainty about the duration for which the disruption will last.

While many countries across the world are in efforts to develop vaccines, no one knows how severe this situation will become by the time a viable vaccine hits the market. Many well-established franchising networks have taken severe blows during the pandemic. Even ones that had solid business models have been unable to weather the COVID-19 storm.

Many companies and businesses that provided non-essential services have shut down. Others that continue to remain open are unable to stay profitable. Numerous parts of the country are now seeing a second wave of COVID-19, and that is a worrisome trend. While this situation is temporary, for many franchisees and other businesses, the aftermath is going to be permanent.

Some will not survive at all. So once the pandemic ends, what is going to happen to all of these businesses? People everywhere are asking questions like these. If you had been considering investing in a franchise, and are wondering whether it is a smart decision in the current situation, here is some information that will help along with a few tips on how to choose a franchise to invest in during or post the pandemic.

Some Facts

Many people that had kept their franchise business purchase decisions on hold due to the pandemic may still be feeling that they would want to control their destiny, and not have to respond to a boss. The COVID-19 issue has caused a phenomenal increase in unemployment rates. Here are some stats to consider:

  • Every economy requires commerce to survive, and people need jobs. Franchising networks in Australia are a big component of that.
  • Today, there are about 95,600 franchising businesses in the country.
  • Almost 600,000 people are employed in franchising businesses.

These stats clearly indicate that our country needs franchise businesses to be up and running as soon as possible. Historically, franchising businesses have done well under even the most challenging economic conditions.

During boom periods, there is a spurt in franchise growth as people fear missing out on excellent business opportunities. On the other hand, during a downturn, fear of job loss or lack of good employment opportunities are the factors that drive people to consider franchise ownership.

Sectors that Have Been Less Impacted In the Current Pandemic

Certain franchises have had to pause their business and would need time to recover completely. The sectors that provide services or goods which fulfil various basic needs have managed to stay afloat even in these difficult times. Likely, they will also be able to grow at a steady pace when there is an economic downturn.

Before you invest in any franchise, understanding how a particular business will perform when there is a recession is a crucial aspect to keep in view. As a potential franchisee, you need to ask yourself whether the business’s services or products are everyday necessities or categorised as luxury items. What is the typical target market, and how would their purchasing decisions change during times such as these. These are some of the questions you should be asking and getting answers for.

During uncertain times it is a good idea to look back at history for some guidance. Even when the economic situation has been terrible in the past, some businesses continued to forge ahead. This fact will not change even today. Many franchise networks are pivoting their business models entirely or at least making some adjustments. These efforts help businesses outperform others.

Research Potential Business Options and Self Reflect Too

When you are first considering whether you should venture into the franchising space, whether a retail store, sports franchise or food franchise, you need to analyse various things, including your life situation. After that, be prudent and brainstorm multiple ideas. These steps are essential before you even decide to start looking for possible business franchising options.

The good thing about the current scenario is that you have the time. Explore your options and be a little proactive with researching various sectors and businesses. Check out which companies exist on the market and how they are performing and coping with the current situation. It will help you determine which of them would be potentially a good fit for you.

Chalk Out a Budget

Just as you start to research companies, you need to take stock of your financial situation. Think about how much capital you have and the amount that you would need to or can borrow. Determine which expenses would be essential and how you can get the best value for your money. This planning needs to be done immediately.

If a business is lucrative, there is no direct relation to how much money you invest and the amount that you can make. Look for a business that the community needs and not necessarily one that you want. While it is necessary to be happy with what you do, making a smart business decision also involves keeping your emotions on the backburner.

Conduct Extensive Research

Find out which franchises have been able to maintain some stability during this pandemic. Are retail stores or hardware stores doing better or food outlets and cleaning franchises thriving? The businesses that serve the community best would be the ones that will do well.

Now is the time to take stock of the situation and look for a franchise that will potentially perform well through peaks and troughs in the economy. The idea is to look for a needs-based business, as it will be able to sail through various types of situations.

Conduct some amount of research on the competition. It is a necessary step because it will give you a better understanding of how the market is accepting their products or services. The franchising space in Australia is very well regulated. The good thing about it is that there is a lot of transparency in this landscape. You should also consider consulting someone with experience in the industry. Discuss your ideas and plans, get some legal advice and talk to other franchisees from the companies you have on your radar.

Once you have decided that you want to buy a franchise, and determine the budget, conduct research and examine the competition, there are many other tasks to be done. You would have to decide what market strategies will work, how many employees you would need and have a contingency plan in place that will see you through thick and thin. This level of planning will set you on more stable ground and will give you the confidence you need to make this crucial decision.

If you want any more information on how to plan your venture into the franchising space, 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 References:
https://in.reuters.com/article/us-health-coronavirus-australia-economy/australia-facing-harsh-reality-of-pandemic-braces-for-biggest-postwar-deficit-idINKCN24O04X
https://www.reuters.com/article/australia-economy-rba/australias-economic-recovery-slowed-by-coronavirus-second-wave-rba-official-idUSS9N2EK01B
https://www.ibisworld.com/au/industry/franchising/1902/

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