Q: What should prospective franchisees look for in a long-term business model?
Before you can get a business loan from your bank, you will be required to complete a risk profile. This helps the bank avoid investments that venture too far from your intended strategy. It is equally important to consider your own risk profile as it pertains to franchising before you put a great deal of time into research.
When searching for a business with a promising future while mitigating risk, you should first look at industries with significant depth and history. Long-established franchise categories like food, automotive, residential and business services may not sound very sexy, but generally speaking, even new franchises succeed by entering industries like these with improved systems. They aren’t inventing a category so much as building a better mousetrap, through elements like their operational systems and marketing.
Once you have narrowed your search down to a particular industry, your next step is to find franchisors with the best track record. Those with decades of experience can cite examples of how their system has weathered economic storms.
Another safe bet may be a franchise concept that has specifically been developed to take on fragmented, locally focused and unsophisticated competitors. The key is for the system to be easily and consistently replicable.
Q: Which types of franchises have proven the most recession-proof in the past?
Not long ago, we heard many franchisors claiming their businesses were ‘recession-proof.’ Then many downgrade those claims to ‘recession-resistant.’ And today, we don’t see many making such bold claims at all.
Still, it is never prudent to only consider the franchisor’s claim. During the validation stage of your research, you should interview existing franchisees about their first-hand experience.