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How to support your franchisees through a recession
Most franchisors have suffered over the last 18 months or so. Some have seen their weaker franchisees fail, and almost all have seen even their strongest franchisees struggle for their share of their market. This has led to a consolidation and a re-think of strategy in many franchise organisations.
In an economic climate where more good quality franchisee candidates are in the market, either through redundancy or uncertainty regarding their future, it could be assumed that recruitment would be good. However, many franchisors have seen just the opposite. Many of these candidates are still unsure of the economic climate, especially if we are heading for a double dip recession.
Increasingly, as franchisee recruitment is remaining a challenge, franchisors are concentrating more on increasing the turnover of their existing network. This however can be equally as challenging, as the recession has bitten hard into the finances of many of the prospective customers in the market place.
The most successful franchisees and franchisors are still expanding their businesses. They are looking for, and finding sectors of the market that have either not been hit too hard by the recession, or in some cases that have expanded in these hard times.
One such example of this is a home improvement retail franchise that has identified that sales of higher value products are still good, whilst sales of its ‘budget range' have been poor. It has been identified that it is usually the older end of the population making the higher value purchases, i.e. the ‘grey pound'. This franchise has therefore introduced more high end products, and reduced its budget range.
Franchisors should re-examine their market place, and find new opportunities for their product or service. Is there an opportunity you can exploit? Is there a specific part of your product range you can promote to a specific industry sector? Do you have a service you can adjust, tweak or introduce to make your business more attractive in this economic climate?
It can often be difficult for a business to self-diagnose its problems and challenges, and to identify new strategies for growth. Networking with other franchisors at events can help, as can professional consultants and specialist training courses. Courses on monitoring and motivating franchisees or understanding franchisee financial performance can be invaluable.
It would be great to think that we have seen the worst as far as economic conditions, and that the measures that Cameron and co. are putting in place will start to increase confidence and kick-start economic growth. Will this effect be immediate, will it be this year, or are we in for a long hard climb on the road to recovery? Only time will tell. One thing however is for sure, franchisors would be best advised to ensure that they are well positioned to take advantage of the up-turn when it comes, and to make sure they have all the knowledge and know-how in their armoury in the meantime.
The Franchising Centre's Alan Wilkinson has 15 years' experience in franchising and has been involved with several UK franchise start-ups, including running a pilot operation himself. Alan has also been a franchisee with two franchise concepts.
Read more on The Franchising Centre.
