So you’re pretty sure you want to franchise your business. You’ve done the research, you’ve crunched the numbers, and now all you need to do now is pull the trigger.
The question is… when?
The answer? Today.
There are many reasons a business looks into franchising and decides to move forward with franchising. The typical response you see from the general franchise consulting, franchise advisors, and other franchise experts usually orient around three common reasons why a business franchises. We typically summarize them as being: 1. Capital (or rather the lack of sufficient money to grow), 2. Human Resources (the lack of sufficient staff and management resources), 3. Speed (the ability to grow your business faster). While all three of these reasons are always viable and one, two, or all three of them typically apply to most businesses which franchise.
We thought it would be interesting (or at least intriguing) to put together three reasons you might not have thought about as to why you should franchise your business.
Here are the three reasons why you should franchise your business that you maybe had not thought about.
1. The Economy. In times of tough economies, or good economies, Americans still look to buy franchises. The one thing that many entrepreneurs do not realize when they look to franchise their business is that during tough economic times people are forced into entrepreneurship. In fact, if you are a business owner reading this message there is a good chance you started your business during a difficult economic time period. The same will be true for potential buyers. As the unemployment rate goes up the potential franchise candidate pool also increases because people are forced into a situation where they need to find a way to generate an income. The typical scenario is that a person looks for several months for a job and realizes it is going to be more difficult to find the kind of work they are looking to do. Therefore, they eventually turn to owning a business and tend to look at franchises due to the training, support, and systems offered in the franchise system.
Inversely, when the economy is going well, it generates a positive mood and a climate which inspires could be franchisees to take the leap and move forward with franchising. It is a more positive motivation behind the decision. The candidates will say things like, “I am tired of working for someone else, I am ready to be my own boss.”
Additionally, there are many business segments show very positive growth opportunities in the present state of the economy. Here are two. In times of tough economies, Americans can pinch and save like nobody’s business. But one thing they refuse to stop spending money on is their children. According to a report from the U.S. Department of Agriculture, the cost to raise a child from birth to age 18 is nearly one quarter of a million dollars – and more, if you adjust for inflation. So it’s no wonder that youth services franchises are one of the fastest growing franchise sectors in the nation. And between 2010 and 2014, youth-related franchises have managed to rake in over $450 million. As the millennial generation ages, no doubt the market for kid stuff will grow – and with that growth comes plenty of franchise opportunities, from daycares to sports programs.
And the franchise opportunities aren’t just kid-related. As the Baby Boomer generation enters full retirement age, home-health aides and other senior services are in high demand. According to the Wall Street Journal, the senior home-care sector has grown by 6.6 percent annually. Whatever the demographic, the U.S. population is slowly changing, providing ample opportunity to franchise.
2. The lending is in your favor. Did you know that interest rates for small business loans are at a historic low? As of March 2016, interest rates for government-backed small business loans were 4.33 percent for a 10-year loan and only 4.55 percent for a 20-year loan. And although insiders say that the application process can be long, SBA interest rates are undoubtedly the lowest. As interest rates are expected to rise sharply, the Small Business Administration is urging people to strike while the iron is hot. Why is this important to you as a potential franchisor? It means that your prospective franchisees should be able to find better rates and, hopefully, create an eagerness to secure loans and funding to invest into the franchise they purchase. It also might mean that as a business owner you can more easily find the additional working capital you need to help grow when you franchise your business.
3. Franchising creates jobs and helps communities thrive. It’s no secret that unemployment is a great American shame. Since 2015, the U.S. unemployment rate has hovered around 5 percent, or roughly 12.5 million adults. In many parts of the U.S., job loss and poverty run rampant – and franchising just might be the solution. In 2016, franchises are expected to add over a quarter of a million jobs to the national economy. Ah hem…franchising is expected to add more than 250,000 jobs in 2016! You could be part of our national solution. Remember, every new job created adds up to a big total.
In an interview with the International Franchise Association, Vice President for HDG Hotels Azim Saju relayed his story of how his franchise business helped pull himself and his parents, both immigrants from East Africa, out of poverty. Saju says: “HDG Hotels employs nearly 400 people, growing at a rate of 10-20 people per year since its founding in 2003. These jobs offer a variety of opportunities – from accountants and cooks, to housekeepers and general managers. Irrespective of skill level or education, our businesses are affording those who seek employment the opportunity to match their determination to succeed with the ability for advancement.”
He goes on to say: “My family’s success was made possible by the franchise model and its empowerment of franchisees and employees alike. But I take the most pride in creating the same opportunity for our employees.”
Franchising is an exciting and dynamic growth vehicle to expand your business. We hope that after your review of our three reasons to franchise your business you did not know about helps you to make a decision to move forward in franchising your business. You can continue to help many local communities by franchising, your franchisees have access to low interest rate loans, and the current economy is a great time to take that next step. So what are you waiting for?