Recession … What recession? Fix the gamble in your favour with a franchise

Franchising a business, like buying a franchise, involves the investment of money in a vehicle – but not certain – to deliver healthy returns. Tony Urwin, Regional Director of FDS North, shares his thoughts.

The last five years have been difficult for most businesses regardless of sector. For those of us not deemed ‘too big to fail’, getting help and support has been almost impossible. While repeating the mantra ‘we are still lending’ ad infinitum, banks have set the bar so high that funding is extremely difficult to obtain.

With the banks now required to bolster their balance sheets, even though the Government is extending its Funding for Lending scheme, a seed change in the bank’s attitude to SME-lending is unlikely. We therefore have no choice but to take matters into our own hands and make things happen. Despite the general economic gloom, it is noticeable that entrepreneurs are looking seriously at franchising as a way of breaking out of the straitjacket. Franchising is an investment for both franchisor and franchisee. With borrowing risk spread between two parties, the security that risk-averse banks crave is potentially doubled.
I needn’t catalogue the precariousness of most investments today. There was a time when selling or buying a business – even one offering a nationally-recognised brand, proven business formula, initial training and ongoing support – was still riskier than an investment in real estate or a balanced portfolio.

Now, franchising’s formula of shared risk and gain, and its natural conservatism (a business must be proven before it can be franchised) makes it an attractive option for well-informed prospective franchisees and well-advised businesses.
Not every franchise is destined for success – in fact far from it. However, those businesses that have demonstrated their business model works, has staying power and can be successfully replicated with proper support, do make sound investments. Allow me to qualify what I mean by ‘staying power’. Businesses built upon unsustainable trends or propositions unsuited to recession (think overseas properties) may work as cut-and-run enterprises, but tend to make disastrous franchises. Franchise systems are composed of a web of like businesses – when the central concept fails, the bloodshed is all the worst. Conversely, when a business is based upon a sound, durable, recession-proof proposition, the resulting franchise system, when well-executed, can last a lifetime. Think McDonald’s. The businesses listed in the red box (right) are not guaranteed to succeed in this downturn but have been historically shown to resist downturns better than others. As society and technology change, businesses may be added or removed from this list. For example, fitness clubs for mature ladies are doing well, while tobacco sales – once a sure thing – are falling. If you are looking to invest in a business that may generate good returns for you while providing you with ample engagement, the above list may help guide your research.

What propositions are recession-proof? You may be surprised at the list of commonly accepted recession-proof business:

  • Vehicle repair and maintenance
  • Tax services
  • Security and alarm service companies
  • Pharmaceuticals
  • Necessitites (food/grocery stores/chain)
  • Medical services and health care (including health care for pets)
  • Life coaching
  • Insurance
  • Home repair and maintenance
  • High end services for the wealthy
  • Gambling
  • Funeral homes
  • Entertainment
  • Energy provision, efficiency and savings
  • Education
  • Debt collectors
  • Cosmetics
  • Career and job search
  • Auctions
  • Air conditioning and heating
  • Alcohol

Tony helped us to set up our franchise system in 2005. He repeatedly stressed the importance of long-term thinking, and was committed to developing a business model and franchise offering that would be ‘sustainably’ profitable. Seven years later, our business is thriving, our network is strong, and our prospects are very bright indeed. If you are looking to franchise your business, you want Tony developing your system.

Keith Roberts, Managing Director, All Trades Network

The decision to work with FDS North was strategic. The consultancy’s experience and reputation – Tony’s in particular – are peerless, and we quickly saw why. Tony quickly grasped our business, market and objectives and helped us to position A-Star Sports head and shoulders above the competition. I’d recommend FDS North to anyone looking to franchise their business the right way.

Gary Bassett, Managing Director, A-Star Sports