Should You Buy a Franchise During an Economic Slowdown?

Contrary to what you may be seeing on the news, not all businesses have been affected by the current depressed economy. There are many businesses, including franchises, that do well in both up or down economic climates. If you’ve thought about owning your own business but have been waiting for the economy to improve, you may be missing the boat. There are many advantages to buying a franchise business today.

 

Here are four reasons why it’s a great time to buy a franchise:

 

  1. You’ll have your pick of good employees. The Bureau of Labor reported the unemployment rate for September at 6.1 percent. Jobs in construction, manufacturing, and retail continue to fall. New home sales have slumped. Major banks have failed and new car sales are at a ten-year low. Detroit automakers were hit hard: Ford Motor was down 28 percent in June while Chrysler dropped 36 percent.

 

What does this mean for you? It indicates that good employees are plentiful and you should be able to find and retain great people to help you start and grow your business. Whether your new franchise requires IT, marketing, sales or skilled labor positions, you’ll have more people to choose from in the current economy. Even better, you’ll be creating jobs and helping your community!

 

  1. Interest rates are low. A weak dollar usually means lower interest rates. You’ll need to have some cash in hand to buy a franchise but many business owners borrow a portion of the amount needed to buy a franchise. Just don’t expect to get these rates if your credit rating is poor. You’ll need a credit score at least in the 700s (the exact number depends on the lending institution) to qualify. If you are ready to become a business owner, don’t wait for rates to rise. A low interest rate will mean more money in your pocket.

 

  1. Money is available and many banks recognize that a franchise purchase is a “safe” investment. While start-up businesses are deemed risky, some financial institutions are well aware that franchising has a good record of success. Therefore, even in a weak economy banks are willing to provide loans for franchise purchases. If you need help finding a bank that specializes in franchise lending, contact a franchise financing company – they can assist you in researching a variety of options.

 

 

 

Some of the reasons that buying a franchise is considered a safer investment than a start-up include:

 

  • A well-tested business model
  • Comprehensive operations manual
  • Thorough initial training
  • A company dedicated to the success of the franchisee
  • Mandatory marketing program ensuring adequate national advertising
  • Brand recognition
  • Ongoing support and training

 

  1. You’ll find lots of business property available and at reasonable prices. Prices for leasing or purchasing a business location can fluctuate along with the economy. Right now it’s a buyer’s market but as the demand for space increases so will the cost. If you find a good price in a good location, act quickly. Your franchisor should be able to help you choose which property and location will be best for you but you may also want to hire someone to check out the terms of your purchase or rental agreement to be sure you are getting the best deal possible.

 

If you truly want to be your own boss, steer your own course and take control of your career, this is an excellent time to buy a business, particularly if you invest in a solid franchise with great training and support.

“Don’t be afraid to take a big step if one is indicated; you can’t cross a chasm in two small jumps.”  William Lloyd George

 

Tips for Buying a Franchise:

 

  • Pick a recession resistant business.
  • Look for one with a low start-up cost.
  • If your credit isn’t great, clean it up now – you’ll need good credit to qualify for a loan.
  • Don’t discount service businesses because they aren’t “sexy.” They are among the best values among franchises because of their lower entry cost, high demand and good margins.
  • Stay within your budget. One of the main reasons for failure of a franchise is being under-capitalized.
  • Search for an established franchise with numerous franchisees, which will give the bank plenty of data to ascertain the overall potential of the business.
  • Read the Franchise Disclosure Document and other documents carefully.
  • Your best source of information about a franchise opportunity is the existing franchisees. Use this resource wisely and you’ll get a good sense of the overall business.
  • Choose carefully. Unlike a job, which you can change at will, you’ll need to stick with your franchise purchase to fully appreciate the return on your investment.

CHANGE YOUR LIFE

I use my skills and experience to guide you from the beginning to the end of the franchise investing process