Over the course of the last three months, while stuck in my garage working away in some of the coldest conditions known to man (or a least this man), I have looked for positives where there only seem to be negatives. In doing so, I remembered that, in my career so far, I have already been through a complete economic collapse.
In 2008, almost every financial institution was on its knees begging for money, along with almost everyone else, and the thing that seemed to flourish on the other side of all of it was the F&B industry, because, well, everyone’s got to eat right? The same could be said in today’s market. While the restaurant industry is on its knees this time, it’s only temporary, and, although businesses are all trying everything they can to pivot to delivery, the question is, are they set up for this type of activity?
So, why, in a time like this, would franchising, which is normally associated with F&B, flourish and even prosper? There is a short answer, but also a really long one to this, and it all revolves around the general public and human requirements for consumption in today’s world.
Now, as someone who works in London and Dubai, the ease of getting things delivered and using different brands is always at my fingertips. However, I live 50 miles outside London, and the only thing that delivers is Dominos, which, if I’m honest, I’m not the biggest fan of. So, what will happen when I go back to normality, or what if normality never returns?
Firstly, when I get back to normality, I will go to restaurants and brands that I know I will get a great experience and quality products from, because I’ve been locked away for so long and want to experience the things I’ve missed. Moreover, I don’t want to risk going somewhere new, as it might turn out to be awful. Secondly, if life never returns to normal, I would hope to eventually find my favourite restaurant/delivery service and, as an entrepreneur with a little bit of business sense, I would look for opportunities to develop a business model that could make money in circumstances like these.
This leads me, via a long road, to the subject of why franchising booms in a recession. In simple terms, people have less money to spend on going out, buying clothing and enjoying themselves, so, instead of risking visiting new places and trying new brands, they go for brands they know and love. This then leads to increased demand for those brands in new areas, countries and territories, which encourages the owners of those brands to allow people to open up versions of their business in particular areas.
Something that happens, particularly during a global financial crisis, recession or pandemic, is that employees are made redundant. Some of those employees will leave those jobs with nest eggs saved up for rainy days, or larger nest eggs they can use to invest, while others may receive golden goodbyes that enable them to invest even more. Maybe, for example, one of redundant workers does not want to return to being an employee, but wants to become an employer instead. He/she might want to take the risk and become the entrepreneur he/she has always wanted to be, but might be scared to do it alone.
Perhaps that potential entrepreneur doesn’t have experience in F&B or another sector, but can see a worthwhile opportunity. Well, wouldn’t it make sense, then, if a system existed that provided a support network, development tools and ways of getting into industries that up-and-coming entrepreneurs don’t know very well. With the right system in place, they could get to know the ins and outs of their chosen industries through the experiences of others. This is why franchising becomes so popular, and why every business owner who doesn’t consider it, should consider it.
Business owners sometimes feel that franchising can mean losing control of the business, but that doesn’t have to be the case. By finding the right franchisees, ensuring the franchise is structured in the right way, and opening in the right spaces, franchising can not only provide an effective growth strategy, but also afford business owners the luxury of a lucrative exit strategy.
By Richard Kay, managing director at Pressman and Collard