A business strategy known as franchising is one in which an entrepreneur buys the rights to run a company under an already-established brand name. This transaction often involves the payment of a franchise fee as well as monthly royalties. Compared with the process of establishing a company from scratch, franchising has a longer track record of success and a lower rate of failure, which has contributed to the sector’s rise in popularity in recent years. This article will provide an overview of franchising, explain the reasons why franchises survive in a recession, and look at some instances of franchises that have been successful during times of economic slump.
But, the economic downturns and recessions that have occurred in the past have put a shadow of uncertainty over the possibility of successfully operating a franchise. In this article, I will demonstrate that franchisees are able to not only survive recessions but also prosper inside them.
Overview of Franchising
A franchise is an arrangement between a franchisor and a franchisee in which the franchisor grants the franchisee permission to utilize the franchisor’s operating system and brand name in return for a fee. This agreement is known as a franchise. In return for a cut of the franchisee’s total sales, the franchisor will give the franchisee continuing help, as well as support in the form of training and support sessions. Some of the most common types of companies to operate as franchises survive in a Recession are those in the food and beverage, retail, and service sectors.
Reasons How Franchises Survive in a Recession
1. Established Brand and Operating System
A well-known brand name and successful business model are often included in the purchase of a franchise, which is one of the most significant benefits of this business model. Especially in times of uncertainty, consumers are more inclined to place their faith in and choose a brand that is already recognizable to them.
Also, Franchises Survive in a Recession comes with a tried and tested business model, which decreases the likelihood of failure on the part of the franchisee. The franchisor is responsible for providing training as well as continuing assistance to the franchisee in order to guarantee that the franchisee is adhering to the agreed operating system. This ensures that all franchise sites maintain the same level of consistency.
2. Economies of Scale
The buying power of the whole franchise system allows the franchisor to negotiate cheaper pricing for supplies and materials on behalf of the franchise system as a whole, which is one of the many ways that franchisees profit from economies of scale. Franchisees have the opportunity to benefit from these cost reductions, which enable them to run their businesses more effectively and may result in increased profit margins. This is of utmost importance during a recession when people are searching for products and services that can be purchased at reduced prices.
3. Adaptability and Flexibility
It is often easier and faster for franchises to adjust to new circumstances and make adjustments than it is for independent enterprises. Alterations to the operating system, marketing approach, or product offers may be made by the franchisor, and such modifications may then be implemented across the whole franchise system. This may be of utmost significance during a recession when customer tastes and spending patterns are more likely to be subject to fast shifts.
4. Support from the Franchisor
The continual assistance and training that franchisers provide to their business partners, known as franchisees, may be extremely helpful during economic downturns. Franchisors are in a position to assist their franchisees in overcoming obstacles and provide them with the skills and resources necessary for success. During challenging times, franchisors are also able to assist franchisees in gaining access to funding and other resources.
Examples of Successful Franchises Survive in a Recession
Sandwiches and salads are the primary fares of the quick-service restaurant chain known as Subway. Subway maintained its growth and expansion during the economic downturn that began in 2008, building over 5,000 new outlets. Subway’s success during the economic downturn was in part attributable to the reduced prices of the items on its menu, which attracted customers who were searching for inexpensive meal choices. Also, in response to the economic slump, Subway took advantage of the situation by providing prospective franchisees with financial incentives and discounts.
7-Eleven is a franchised chain of convenience stores that provides a wide range of products, such as savory and sweet snacks, beverages, and basic necessities for the home. During the economic downturn that began in 2008, 7-Eleven reported a surge in sales as a result of customers’ decision to reduce their spending on bigger supermarket items in favor of more frequent, smaller purchases. 7-Eleven, like many other businesses, capitalized on the economic crisis by providing franchisees with financial incentives and discounts.
3. UPS Store
The UPS Store is a franchise that specializes in providing services relating to printing, shipping, and mailboxes. The economic downturn that began in 2008 resulted in an increase in the demand for cost-efficient shipping options among small firms, which led to a rise in sales at the UPS Store. The UPS Store profited not just from its well-known brand name but also from its well-established reputation for trustworthy and proficient service.
4. Anytime Fitness
Anytime Fitness is a franchise for health and fitness centers that are open around the clock and have an emphasis on providing a more intimate and individualized workout experience. Anytime Fitness maintained its expansion and growth during the economic downturn that began in 2008, establishing over 300 new facilities.
Anytime Fitness was able to maintain its popularity during the economic downturn in part because of the flexible membership choices and lower-priced membership fees it offered. These factors appealed to customers who were searching for cheap alternatives for getting in shape.
Recessions are not only something that franchises may endure, but they can even prosper in. During times of economic uncertainty, franchises may be beneficial for a number of reasons, including their established brand names and operational systems, economies of scale, adaptability and flexibility, and assistance from the franchisor.
Subway, 7-Eleven, the UPS Store, and Anytime Fitness are some of the franchises survive in a Recession, indicating that franchising can be a viable business model even in the midst of adverse financial conditions. If an entrepreneur is interested in franchising as a prospective business opportunity, they should do extensive research and evaluations of potential franchises to guarantee that they are in a strong position for achievement regardless of the state of the economy.