How to Buy a Franchise in a Down Economy

With inflation rising and consumer spending continuing to drop, can it really be a good time to buy a franchise?

“Yes,” said FranChoice President Lori Kiser-Block. “While the headlines concentrate on what isn’t working in our economy, there are still plenty of businesses that are thriving. If you know what to look for in a Franchise business, you can actually take advantage of some aspects of the current economic environment to lower your start-up costs.

“For example,” said Kiser-Block, “current low interest rates can mean that borrowing money for your purchase will cost you less. A higher unemployment rate means you will have more good employees to choose from to help you run your business. You may also find that you can now buy or rent business property at a better price than you could have in the past.”

The key to finding a viable business in this economy, suggests Kiser-Block, is to choose a business that fulfills a need for consumers that cannot be put off until better times.

“Think about what you can and cannot live without,” said Kiser-Block, “and you’ll have an idea of business that can do well even in a slow economy.”

One example of a franchise business that has continued to prosper includes disaster restoration companies that help a homeowner after a fire, flood, or even a hurricane. When your home is filled with water, you need to take care of it immediately.

“Service businesses tend to be more recession-resistant,” says Kiser-Block, “as they provide something you either can’t or don’t want to do for yourself. Whether it is tax preparation, senior care, child care, or home maintenance, these are services people need.”

Kiser-Block offers these suggestions for starting a business in a shaky economic environment:

• Pick a recession resistant business, such as one providing a needed service to the community.
• Look for businesses with low start-up costs. The less you pay to begin the greater your chances of reaching profitability.
• 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.
• Look for a franchisor that has a very strong executive management team with experience, wisdom and strategic vision in their specific industry.
• Search for an established franchise with a number of happy franchisees. The more you can learn about the business from those working in it, the better decision you will make. Choosing an established franchise may also lower the risk of your investment.
• Current franchisees will be your most accurate source of information about a franchise opportunity. Ask how they are doing in the current economy. 
• Financing a new business can be more difficult during a recession. Use the resources available from a business funding specialist (Guidant and FranFund are two examples) if needed, that can help you find the best method of borrowing money for your circumstances.

“If business ownership is something you’ve dreamed about,” said Kiser-Block, “you don’t need to wait for the economy to turn around. Definitely pay attention to trends in business (such as senior care and business that help the environment) but steer clear of franchise fads. If you choose carefully and wisely, your new business could bring you success even in this economic climate.”

FranChoice is a national network of consultants dedicated to helping consumers find their ideal match in a franchise business. Since 2000, Franchoice has helped over 3,000 people become Franchise Business owners through their free service.

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