Sticking Together

Manzoor Ishani on what benefits a franchise network brings, particularly in times of recession

Those of us who have been involved with franchising for a few decades are now seeing a third recession. Is this worse than the one in the early 70’s? In some ways – no. At that time people were paying 18-20 per cent interest on their mortgages and franchising in the UK was in its infancy. People were concerned that it would have a very serious adverse effect on small businesses and with it on franchising. We were proved wrong, so far as franchising was concerned at any rate! At that time franchisors were worried that they would not be able to sell franchises and that their business would collapse.

In fact it turned out to be the opposite. Widespread redundancies meant the newly unemployed were disillusioned with the jobs market and with large redundancy payments burning a hole in their pockets, chose to try their hand at being their own boss and starting a business. What better way to do so than to buy a tried-and-tested business system? Franchising flourished as a consequence. If truth be known, franchising not only survived – it prospered. There were a number of reasons for this, and the lessons learned in previous decades have stood us in good stead.

The main reason why franchised units perform better than managed ones, is because the ‘owner is behind the counter’ – never truer than when times are difficult. Owners work hard, make do with less and make greater efforts to keep their business going. This is easier said than done when the uphill struggle is a lonely one, particularly for independent retailers, but not so for franchisees. There is another reason why conditions favour franchisees over independent traders – one of the major strengths of franchising is that franchisees have someone to talk to in the form of their franchisor and network of fellow franchisees.

An independent retailer will seldom talk to a competitor and compare notes and although they will take some comfort in discussing problems of a general nature (high cost of borrowing, etc) they will not be able to discuss frankly how business is doing or solicit advice. Whereas a franchisee is able to discuss his/ her business with other franchisees within the network, who all are, of course, trading within the same economic conditions. Furthermore, they also have the invaluable advice and help from his franchisor, who may also be their supplier and who has the expertise and resources to make a difference.

Franchisees also have the power of the brand to sustain them through difficult times and bolster them in boom times and are able to achieve a greater impact in the market through central marketing spend than an independent retailer will on their budget.

Franchisees are able, via their franchisor, to negotiate more favourable trading terms from their suppliers. The sum-total of all these things, some small, some significant, help franchised business to ride out the storm. Small wonder that the success rate of franchised business, whatever the trading conditions, is significantly higher than that for independent small businesses, and small wonder that franchising is less affected by recession than other forms of trading.

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