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Lessons learnt from past recessions

Lessons learnt from past recessions

In an exclusive for What Franchise, six thought leaders consider how franchising as an industry can navigate the challenging times facing UK businesses, and the key takeaways we draw upon from previous events

“The franchise industry can continue to collaborate, learn and strengthen”

Jo Middleton is an entrepreneur, keynote speaker, author and investor, and owner of the Franchise Business School and Wizziwoos Kids Clubs

As we reach a further period of economic uncertainty in the UK, it is understandable that there are widespread concerns within the franchise industry. Both household and commercial costs are rising, seemingly out of control, for franchisors and franchisees alike.

The franchise industry is known to be resilient. Franchisees come on board with a brand that is able to provide them with a security blanket of a proven and successful business model along with all the tools and support they need. It’s well documented how buying into a franchise is a lower risk than starting your own business.

However, it really concerns me when I see sweeping statements made about how great it is to buy a franchise during uncertain economic times. I question whether those making statements around a franchise brand being “recessionproof” or a “safe investment during a recession” are able to back up those claims by having come out of the last recession unscathed. Many franchisors have indeed been established for several decades and have already experienced similar financial climes. But is the economic downturn we are currently facing comparable to the last one, or even the one before? Perhaps. Perhaps not, as we had not just come out of a two-year global pandemic before.

It’s simply common sense that there will be some franchises that do commercially better than others during a recession. I don’t believe it’s fair or ethical to sell a dream to prospective franchisees when you can’t back up your statements or are prepared to guarantee the promises you are making.

Franchisors and franchisees alike have been forced to become more resilient over the COVID pandemic. There’s no reason why the franchise industry cannot continue to collaborate, learn and strengthen further together during any economic downturns that we are now presented with.

There will be many areas that are outside of our control; stressing and worrying about these and what may or may not happen is not productive, nor healthy. Franchisors will need to once again have systems and processes in place to reassure franchisees that they are protecting and growing their brands to the best of their ability, while also increasing network motivation and providing their franchisees with the ‘tool kit’ they need to weather a financial storm.

Franchisors need to take a strategic and measured approach, rather than being complacent or sticking their heads in the sand. Providing they are transparent and open with prospective franchisees, rather than selling a pipe dream and making empty promises, there’s no reason why franchisees looking to buy into their brand should not feel confident to proceed.

There will be many opportunities presented, both in the UK and internationally. Many brands will see a boom in the coming times. There may be diminished job opportunities and increased redundancies leading to more people with a lump sum to invest and the desire to work for themselves, but with a lower-risk entry level.

There are absolutely areas that are within our control to focus on, if only to ensure that we’re not swallowed up in the negative media hype, and we will no doubt reap benefits. We’ve had financial downturns before – and not that long ago – so let’s use them as learning opportunities to make sure that mistakes are not repeated. Researching thoroughly how similar businesses fared in the last economic crisis, reaching out to those who have already been through this for advice, and making contingency plans accordingly is a strategic way to approach this.

We can also all continue personal development, working on strengthening our mindsets and “catching” negative thoughts, flipping them to positive ones. It is possible to consciously control the volume of negative media we’re exposed to, and take time to work on our own wellbeing as well as the wellbeing of our teams and networks.

If you’re a franchisee looking to buy into a brand then you need to be doing your own due diligence. Look into the impact of the last recession on the industry you’re looking to buy into. Be sure to ask the franchisor strategic questions to reassure yourself that they too have done their research. I would recommend that you do some work around what your key values are and what your motivation is for buying the franchise so that you can make an informed decision about whether this is the right opportunity for you.

“Together we are stronger”

Julie Wagstaff is the MD of ActionCOACH UK, the world’s number one business coaching franchise

With the announcement of Rishi Sunak as PM, and a new UK government, Westminster should – and can – get back to restoring financial stability to the UK, which will then increase market confidence.

There are many reasons and excuses we can all look to blame: Brexit, COVID, the Queen’s passing, Putin’s war on Ukraine. It’s important as business owners that we channel our focus, energy, and mindset on areas which we can influence.

Communication and planning are more critical than ever when faced with challenges, and the businesses that do this well will create new opportunities and thrive during these times. Think about the businesses you know and how they came through the pandemic, adapting for the better.

Unemployment is at 3.5 per cent – that’s the lowest in over 50 years – and many employees, as a result of the pandemic, have some of the best work-life balance on record. This has changed how many businesses recruit top talent as location is no longer a barrier.

In terms of communication, listen to your team, customers, and suppliers. Be creative in adding value as they will each have their own challenges. By working together, you will all benefit and go the extra mile for each other.

When it comes to planning, build a 90-day plan for your business. Understand the key priorities, get focused with clear actions, and involve the key stakeholders. Stay in control of your cash flow by understanding your numbers – both costs and sales – and adapt to the challenges facing the business. Businesses often cut spending in areas like marketing when faced with cost challenges, but this is the time to market more than ever. Let everyone know that you can help them with your products or services.

And if there’s one thing I would want you to take away from this, it would be that you’re not alone. Reach out for help – together we are stronger.

“Looking after your staff has never been more important”

Lucy Campbell is CEO of national home care provider Right at Home UK

Being in home care, we feel very fortunate not to be hugely impacted by rising energy costs, which is sadly not the same for many care home providers who may struggle to keep their doors open this winter. Likewise, we are not hugely impacted by rising costs relating to food and other key consumables, such as paper.

With demand for our services continuously on the increase, our main challenge is around the supply of an appropriate workforce to meet this need. And in order to be as resilient as possible, we need to be attracting new people to the sector – people who want to stay and develop with us. The answer to the recruitment challenge is complex, but it must start with the sector taking a united front to truly professionalise the rhetoric around a career in care while giving it the kudos it deserves. Only then will we start to attract new talent to the workforce and create much-needed resilience for the future.

Looking after your staff has never been more important – irrespective of what industry you’re working in. With rising costs of living, most people are having to make sacrifices – and as an employer, it really is a case of doing what you can to make a difference and ensure that your staff members feel valued and cared for.

In a nutshell, you need to pay as well as you can afford to; ensure that staff are being recognised and rewarded in a way that’s meaningful to them; and offer them a career pathway that aligns with their goals and ambitions.

“Focus on the variables that you can control”

Paul Lewis is the MD of Pitman Training, a leading independent training provider offering world-class office and IT skills to thousands of students across the UK and around the world

We’re clearly at a challenging time with our economy, costs rising and lots of uncertainty ahead. It’s not just in the UK but worldwide, and nobody knows what the future holds. While you can try to second guess, I’ve always found the key for any business is to ensure they have solid foundations, understand their customer base, and ensure they are doing everything 100 per cent – it’s the small things that add up to the bigger picture.

When times are hard, businesses will close and it’s the strong who will be left standing. You need to be doing everything better than your competitors, from providing exceptional customer service to managing your teams and driving sales. You can’t control the economy, but you can control the culture, values and work ethic of your teams. In times of uncertainty, it’s important to focus on the variables in your business that you can control.

You need to ensure your team and the people in your business are OK – from your head office team to your franchise partners and their staff. Check in and see how the current situation is affecting them. Do you need to make any adjustments for them? People are key to the success of your business and you’ll need them fully onboard. If they’ve bought into your company’s values and mission statement, then it really comes down to whether you can make any adjustments to the tool kit that they need to succeed – two key tools being marketing and mindset.

When it comes to your business model, be proud of what you supply and stand by your product. For us at Pitman Training, it’s really important to add value to our students’ experience with us. Instead of discounting, we’ll add value by offering career support services, highlighting and helping students apply for new roles, and ultimately ensuring they reach the goal of why they came to us in the first place. People don’t come to us just for training – they want to change their lives, upskill, get a promotion, or secure a new job. If we help them achieve this, we then have advocates that help our brand grow.

“Think ahead to the future to stay in front of competition”

Ed Purnell is a franchise recruitment specialist and director and founder of The Franchised, the multi-channel content hub for franchisors and franchisees

Individuals considering investing in a franchise license should, in my opinion, be looking for opportunities that have the ability to ride out the storm. In other words, providing a service that’s considered essential by the masses. These businesses tend to be service-driven and have less focus on the luxuries in life. Sectors such as elderly care, pet care, and maintenance could be a good place to start.

For franchisors, now is the time, before the storm really hits, to educate people as to why your brand has a chance to be successful no matter what the crisis. You’ll be ahead of the competition and will show that you’re already thinking about the future, which will add some reassurance to prospective investors.

“Planning for the medium to long term is better than short-term thinking”

Dugan Aylan, Farrah Rose, Alan Wilkinson and Steve Felmingham are co-owners of The Franchising Centre, Europe’s leading franchise consultancy representing businesses, franchisors, franchisees and other professionals advising the franchise sector

At The Franchising Centre, we’ve worked with more than 800 companies over the past 25 years, both franchisors and business owners. We’ve seen it all when it comes to political strife and economic difficulties and how the franchise sector is affected by these.

Whether you’re an independent business looking to franchise, an existing franchisor seeking franchisees, or someone looking to invest in a franchise, it may seem like an easy decision to put a hold on your plans for growth, both personal and business, in times like these.

Our advice to all those who find themselves caught in this dilemma is to do your research, ask the right questions, and make sure that the answers that you get make sense.

Businesses are affected in all sorts of different ways when times seem tough, but in our opinion, the key area to focus on when deciding what to do next is the profile of the customer or client of the business or franchise you own, or the franchise you’re looking to invest in.

Whether B2C or B2B, there are a couple of key questions that need to be addressed around the customer profile: how is the end customer being affected by current situations, and is the product or service being offered to the customer considered a necessity, a luxury, or somewhere in between?

Even though the answers to these questions may appear to make taking the next steps seem risky, it always takes time to set things up and get them going, so planning ahead is important.

For owners looking to franchise their business, you’ll know the answers to these questions and will also know how they may affect attracting potential franchisees. Bear in mind that it can take between three to six months to be in a position to start finding franchisees, so the best time to take those next steps to franchise your business may be right now!

For existing franchisors looking for franchisees, the answers will help you understand how franchise recruitment might be affected during this period, and ensure you put a strategy in place to deal with this.

For people looking to invest in a franchise (at either a local or national level), you need to ask the franchisor, and their franchisees, these questions and hear what they have to say. It’s important not to make firm decisions based on the current situation – investing in a franchise is usually a minimum five-year initial commitment, and can be for the next 20 years, so planning for the medium to long-term is better than making decisions on short-term thinking.

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