Could 2009 Be The Best Time To Buy a Franchise?

By Kevin Bugeja, Managing Director, Franchise Selection

This article appeared in Issue 3#4 (May/June 2009) of Business Franchise Australia & New Zealand

Every day we all wake up to more negative news about the economy and the state of the financial market.  We turn on the news to listen to the so called experts telling us what to do with our investments.  Here is a thought that I would like everyone to consider "Invest in yourself” by buying a business.

I am not talking about just any business, but more specifically a Franchise business. Let's consider the advantages.  

The Franchise Industry is regulated by the ACCC & the Franchising Code of Conduct and that is one of the biggest reasons why we have not had a large scandal in the Franchise Industry.  

Franchises have a 95% success rate, which was determined by a study conducted by the Griffith University.  The study looked at start up businesses, both franchised and non-franchised, and showed that after five years from the inception of the business, 95% of franchised businesses were still in business and 87% of those were still owned by the same owner; only 18% were still in business of the non-franchised start ups.

Imagine investing your hard earned money into something that has a 95% success rate.  Imagine also having full control of your destiny and making all the decisions in your financial future. 

So, why are franchises so successful? Because they eliminate the learning curve.  When you buy a franchise, you are buying an existing and a proven business model, where the franchisor is providing you with the training, support, marketing, trade secrets etc.  Franchises give you all the tools to be successful and all you have to do is use those tools.  Most people think of franchises as a fast food concepts, but there are many other industries that offer franchise concepts from different investment levels.

In so many ways, the current economic situation actually works in favor of franchise ownership:  a franchisor will provide you with the training to run your business; the marketing expertise to get it going; and a proven system of operations.

Here are a couple of reasons 2009 may be the best time ever to buy a franchise:

My job security isn’t so secure

Unemployment is up – way up. Major industries are cutting back. Smaller companies aren’t hiring. Everyone is waiting to see what will happen next.

Owning a franchise will let you take control of your future. It’s your business but you have an entire organisation behind you, helping you to achieve success. That’s why a franchise business is much more likely to succeed than a stand-alone, start-up business. You’re in business for yourself but not by yourself.

We’re headed into a recession

Whether we call it a full-blown recession or just a depressed economy, it’s not likely to improve anytime soon. 

Look at the numerous recession-resistant segments of the franchise industry. The most popular Franchises out there are Food Service businesses.  From fast food to casual dining, most people looking for a business will almost always look at Food.  Now food is a tough business (take it from someone who has been in the business).  Long hours and high employee turnover are some of the factors that make the food business tough; having said all that, the food industry is virtually recession proof in most cases. However, you needn’t be limited in your scope – there are many businesses that do well in any economy. For example, senior care is growing and expected to continue growing as the huge baby boomer population continues to age.

How do you buy a business that is recession proof?

To me the definition of a recession proof business is a business that continues to thrive, grow, and make money in any economic condition.  But first we need to look at the differences between needs and wants. Needs are things that we as consumers need to maintain our lifestyles and the daily activities, in other words "NECESSITIES".  Things like food, clothing, a roof to live under etc.  Wants are things we want to have, but are not necessary to maintain our life styles or daily activities:  things like a 50" Plasma TV, fancy car, diamond ring etc. 

When the economy is good and people are making money, we tend to spend on our wants, however when the economy is bad, we tend to cut down or even eliminate wants, however our NEEDS never go away, so here is a list of industries that I feel are in the NEEDS Category. 

Automotive Repair

Cars will be around forever (well at least our lifetime) and they require repairs and maintenance and regardless of the economic conditions, we will continue to spend money on our cars. When consumers hold back on making new car purchases during tough economic times, the repair and maintenance of their current vehicles generally becomes the priority. Auto service businesses and franchises such as car repair, oil & lube, and even tyre centres tend to do well, and in many cases thrive during recessionary times because of this market dynamic.

Children Businesses

Everything from tutoring to enrichment programs, after school programs, birthday parties.  Parents will spend money on their kids well-being. 

Senior Care

Just like our children, we take care of our parents and grandparents.  Whether they have illnesses, need help around the house or companionship, one thing is certain:  as we get older, we will have special needs.  This industry is one of the most stable and fast growing. 

Fitness/Weight Management

Here is an industry that has been growing rapidly for the last decade and has gotten a great deal of media coverage and there have been plenty of studies done that have determined that obesity causes many other health problems. 

Pet Care

The pet industry is a billion dollar industry and pet owners consider their pets as members of their family, thus spend money on the well being of their pets, from grooming, training, spas, gourmet treats, camps, etc.  

One of the most common questions I am often asked is "What's the hottest business out there?"  The reason people ask that is because everybody wants to be on board when the next "Best Thing" comes out.  Here are a few industries to keep an eye on!

Healthy Fast Food

Healthy Fast Food franchises have grown a lot trendier over the past five years. By offering something different from the normal fast food like menu, these businesses can reach out to crowds that are tired of unhealthy, processed foods. Two brands that are growing well in this category are Grill’d Healthy Burgers and Crust Gourmet Pizza Bars.  Both of these businesses have taken something we have grown up with and reinvented it with a more up-to-date offer that is in touch with consumers’ tastes and expectations today. 

Going Green

Nowadays any business can be labelled ‘green’ just by stating their cups are made of recycled materials or their food is organic. However, there is now a franchise that really is green.  Allsafe Energy Efficient Products is more than trendy; it offers environmental and financial benefits to its customers by selling and installing products like solar power systems, insulation, skylights, ventilation systems, solar & gas hot water systems, and much more. 

Many of these products also qualify for government rebates so not only will you be saving the planet, you will also be saving money for your clients. Now that sounds like a business you could be really proud to own.

Because of the major economic crisis we are currently experiencing, there has been a heightened interest in business opportunities and franchises that have the right stuff to weather and potentially thrive during this stormy environment. Recession proof franchises are businesses that traditionally offer products and services that consumers and business owners just can’t (or won’t) live without. The demand for these types of non-discretionary products and services is fairly consistent because they are considered necessary to run a household or successful business, even during a major economic downturn.

I could go on and on about the benefits of owning a business, but the bottom line is this:  invest in the right business, within the right industry and the sky is the limit.

Even in the current economy, there has never been a better time to consider franchising.

Kevin Bugeja, Managing Director
Franchise Selection
Suite 201, Level 2, 566 St Kilda Rd
Melbourne, Vic 3004
PH: 1300 FRANCHISE (372 624)
Mobile: 0412 511 630