As a business owner, it’s important to consider how well your business will be able to navigate the ups and downs of the ever-changing economic landscape. In the event of an economic crash or recession, a strategic, future-proof business model is much more likely to survive a downturn.
The franchising sector has always been an industry of exponential growth. If franchisees are smart about their business tactics, their franchise is highly likely to successfully ride out an economic downturn and come out the other side – perhaps even better than before.
Discover how a business can survive an economic crisis and the signs pointing to a strong franchise.
Current Economic Market
After the unprecedented challenges of COVID-19, there’s no doubt most businesses are cautiously looking forward to a better financial year in 2021. With on-going lockdowns and tough restrictions, businesses have been required to quickly adapt and innovate in order to survive these uncertain times.
In February, ABC News reported that it’s expected the recovery period that began in September of 2020 will propel the economy forward by a larger-than-normal 3.2 percent through 2021, well above the bleak 1.7 percent expected just six months ago. Economic forecasters are now cautiously optimistic, predicting the Australian economy will grow in the years leading up to 2025.
Reliable Signs a Franchise Can Survive an Economic Crisis
There are several signs that indicate how a franchise business will not only survive but thrive in times of economic crisis.
Experience & Longevity
While longevity in itself is no guarantee of ongoing success, an established and experienced business comes with a well-known and respected reputation in the industry. A franchise with years of experience will have tried-and-tested systems in place to help keep operations running during more difficult periods.
Flexible & Pivoting Operations
Taking action, thinking quickly and looking toward future performance will ensure a business thrives during tumultuous times. Initiatives such as embracing new ways of working, pivoting business operations, investing in the brand and building new digital platforms can help a franchise become more agile in an everchanging economic landscape.
Support & Communication
Every franchise is built on a foundation of strong support and open communication between franchisee and franchisor. Support from top-down management could include training, marketing and business development and proactive approaches to disputes. Support is crucial when times are tough, which is why franchises tend to do well in such instances.
A franchise that can strictly control its operating costs will usually come out the other side of a downturn relatively unscathed. The general viability of the service/product during market fluctuations, the profitability and associated costs of the business (including franchise fees, supplier rates, planned capital expenditure and lease negotiation) are all important considerations when it comes to running an economically viable business. The other consideration is balance – it’s not all about reducing or controlling costs. Sales and business building strategies are paramount to maximising whole of business performance.
What You Can Do to Prepare for an Economic Downturn
Nothing in life comes guaranteed and as 2020 showed, businesses need to be prepared to handle whatever comes their way. There are several things that franchisors, franchisees and suppliers can do to better position their business if an economic downturn occurs:
- Keep open lines of communication with key stakeholders – we ourselves appreciate being ‘kept in the loop’ and so do they and they are far more likely to want to support you if they know what’s going on.
- Improve your employee retention – consistency of offer is a key during uncertainty.
- Look for growth opportunities when you can – they can come from surprising and unexpected quarters.
- Improve customer satisfaction and loyalty – this is absolutely paramount. Customers can ‘read’ problems within a store so, as difficult as it might be, working above any concerns gives you the best chance of maintaining and growing customer relationships.
Since COVID-19, the priority has been getting the Australian economy up and thriving once again. Franchisors need to think strategically for what might lie ahead and consider strategies that will help the business regain strength and stay sustainable in the future.
Interested in owning a franchise? Learn more about franchising with Sleepy’s.