As interest rates rise and a possible recession looms, some franchise business owners are worried about what 2023 has in store for them.
A lot of franchise businesses have just got over the global pandemic, and now they are staring down the barrel of more adverse economic conditions.
Whilst growing sales during difficult economic times can be challenging, it is ‘definitely’ possible. In fact, numerous household brands all started during difficult times, namely General Electric, Microsoft, IBM, General Motors, and Disney. The great news is, if they can grow during a recession, then so can you.
In this article I share 7 strategies that you can implement in your franchise business to ensure that you don’t just survive an adverse economy, but you thrive. With the right strategies in place, a recession can provide franchise businesses with an opportunity to gain market share and emerge even stronger.
1. Diversify Your Products
Tough times can force franchise businesses into more creative thinking. It’s the feeling of having your back against the wall, knowing that the only way is forwards. As a Business Coach, I encourage my clients to ask themselves better questions, as I know they’ll come up with better answers. What else can we sell? Do our customers have different needs because of the changing economy? And so on.
Think back to how Covid-19 lead to countless franchise businesses coming up with different product offerings. Supermarkets and convenience stores couldn’t keep up with the demand for hand sanitiser and cleaning products. Mask sales exploded in hardware stores. Service-based businesses developed ‘contactless’ services. Products popped up to help people work from home more effectively. Cleaning franchisees are still riding the wave of increased enquiries.
Certain industries will automatically do well in adverse economic conditions, ie. Healthcare, Supermarkets, and Childcare, whilst others will need to be creative and diversify their product offering.
2. Manage Your Expenses
There’s no better time than adverse economic conditions to incentivise you to better manage your expenses. Up until now, perhaps you’ve been saying, “I’ll get to that one day”, or you’ve been spending money in certain areas because you’ve always done so.
Before you can improve managing your expenses, you need to have awareness of what you’re currently purchasing. From there you can start to prioritise your expenditure and become strategic with what you spend and who you spend it with.
During difficult times, the automatic response of most franchise business owners is to reduce their labour costs. Whilst I understand why this is the case, I don’t always agree. Less labour could impact customer service, which will lead to further revenue declines. Instead, research to see if some tasks can be automated by leveraging technology. Another perspective is to reallocate labour resources and focus more on sales and customer service roles, that way you’ll be able to ‘wow’ your customers and prospective customers.
Another expense management strategy is to negotiate with your suppliers, and see if you can get a better deal, or more favourable payment terms. Make the time to shop around and compare the market to see what else is available.
Cash should always be king, but even more so during adverse economic conditions, therefore focus on reducing unnecessary stock holdings. Maybe you’re carrying too much stock because your inventory systems are outdated, and your scared of running out of stock. If so, now is a great time to upgrade your inventory management system. Whilst this would mean a short-term expense, when done correctly, it can provide medium-term savings.
3. Invest In Marketing
In the section above I discussed better managing expenses, however you shouldn’t cut back on marketing and sales driving initiatives. After all, I want to grow your sales during adverse economic conditions.
Instead of reducing your marketing spend, make time to analyse your marketing dollars and re-allocate them to ensure a better return on investment (ROI).
Start by focusing on a narrow target audience, either demographically and/or geographically. I call this, “Inch wide, mile deep”. In other words, market more intensively to a smaller audience. Don’t be like many franchise businesses who adopt a scatter gun approach to their Local Area Marketing, only to skim the surface. It’s imperative that you spend your marketing dollars on prospective customers who are most likely to buy your products and services.
Collaborate with other franchisees and pool your marketing resources. This way you leverage economies of scale to get a better marketing price or increase your target market catchment. In addition, you can share and learn from each other.
Use cost effective platforms to market your franchise. Organic social media and email marketing are free. Be consistent with your activities on the relevant platforms, and concentrate on adding value to your audience, as opposed to always selling.
4. Target New Markets
Another great way to grow your business during adverse economic conditions is by targeting new markets. Start marketing to prospective customers that you haven’t sold to previously.
For a customer to buy from you, it starts with creating awareness of your franchise business, products, and services. If you’re not creating awareness, then you’re trying to sell a secret.
You could market to different geographic locations. Even if your franchise is bound by a territory, inevitably there’ll be parts of your territory that you have previously focused on more heavily than others.
Another target could be Business to Business (B2B). A lot of franchises are focused on Business to Customer (B2C), which ordinarily is fine, however difficult times create different solutions. The B2B opportunity can be a high risk, high reward approach. If you’re a home services franchise, an ideal B2B target is a Property Manager, who manages hundreds of homes. By building a strong partnership with a Property Manager, one strong contact can lead to hundreds of customers.
5. Offer Promotions And Incentives
Customers are looking for ways to save money during adverse economic conditions. Your opportunity is to offer promotions and incentivise them to either buy something or buy more.
Below are some promotional ideas that you could implement in your franchise:
Loyalty Programs: Customers can earn points from every purchase, that can be redeemed for discounts. Alternatively, they can buy a select number of items to get the next one free.
Bundling: Sell more products in the same transaction. If you’re a fast food franchise, offer a meal deal, bundling the burger, chips, and drink. Other bundle promotions could be buy 1 item for $20 or buy 2 items for $30, encouraging customers to take advantage of the savings associated with purchasing more.
Limited Time Offers: As the name suggests, these offers are only available for a short period of time and are a great way to create urgency and encourage a purchase.
Contest and Giveaways: Run contests and giveaways on social media or in-store to encourage engagement and build brand awareness. A franchise could run a contest where customers submit photos of themselves using the franchise’s products for a chance to win a prize.
Ultimately, the role of promotions and incentives is to provide your customers and prospects with a reason to buy from you.
6. Build Strong Relationships With Existing Customers
Increasing sales with your existing customers is generally the most efficient and effective method for your franchise business to thrive when the economy is under pressure.
In essence, your existing customers already Know, Like, and Trust you, therefore what additional value can you deliver them?
You can also provide exceptional customer service and create memorable moments for your customers. Go above and beyond. Whilst you’re dealing with the adverse economy, remember, that your customers will also be going through the same adverse economic conditions. What can you do to support them?
7. Invest in staff training
Sadly, staff training is normally one of the first items to be stopped when times are tough, in an attempt to save money. My advice is to head in the opposite direction and invest in staff training and development, as it’s even more essential during tough economic conditions.
Staff retention is a direct benefit from training, as it’s an indication that you value and appreciate their contribution. By retaining your best staff you’ll be well equipped to navigate the difficult economic conditions.
A downturn in the economy can lead to a downturn in staff morale, therefore a focus on the development of your staff can help boost their motivation, which can lead to increased productivity and performance.
In summary, none of us can control what happens to the economy, but we can control what takes place within our franchise business. You can either allow an economic slowdown to impact your franchise, or you can be implementing the strategies I have outlined in this article and take control of the success of your franchise. By adopting these strategies, franchise businesses can not only survive but emerge stronger on the other side of adverse economic conditions.