Should You Buy a Franchise During a Pandemic-Economy?

Posted by Tom Scarda, Certified Franchise Executive on Mar 22, 2021 8:00:00 AM

In franchise consultant, life decisions

Contrary to what you may be seeing on the news, not all businesses have been affected by the Covid-depressed economy. There are many businesses, including franchises, that do well in both up or down economic climates. If you've thought about owning your own business but are concerned about the economy, you may be missing the boat. There are many advantages to investing in "the right" franchise business today.

Here are five reasons why it's a great time to buy a franchise:

1. You'll have your pick of good employees. The Bureau of Labor reported the unemployment rate is way above typical averages. Jobs in hospitality and retail continue to fall. Even professions that were always safe, such as doctors and nurses, took a hit because of the pandemic.

What does this mean for you? It indicates that good employees are plentiful, and you should be able to find and retain great people to help you start and grow your business. Whether your new franchise requires IT, marketing, sales, or skilled labor positions, you'll have more people to choose from in the current economy. Even better, you'll be creating jobs and helping your community!

2. Interest rates are at an all-time low. A weak dollar usually means lower interest rates. You'll need to have some cash in hand to buy a franchise, but many business owners borrow a portion of the amount required to buy a franchise. Just don't expect to get these rates if your credit rating is low. You'll need a credit score at least in the 700s (the exact number depends on the lending institution) to qualify. If you are ready to become a business owner, don't wait for rates to rise. A low-interest rate will mean more money in your pocket.

3. Money is available. Many banks recognize that a franchise purchase is a "safe" investment. While mom-and-pop start-up businesses are deemed risky, some financial institutions know that franchising has a verifiable success record. Therefore, even in a weak economy, banks are willing to provide loans for franchise purchases. If you need help finding a bank specializing in franchise lending, contact me for a list of franchise finance specialists.

Some of the reasons that buying a franchise is considered a safer investment than a start-up include:

  • A well-tested business model
  • Comprehensive operations manual
  • Thorough initial training
  • A company dedicated to the success of the franchise
  • Mandatory marketing program ensuring adequate national advertising
  • Ongoing support and training

4. You'll find lots of business property available and at reasonable prices. Prices for leasing or purchasing a business location can fluctuate along with the economy. It is currently a renter's or buyer's market, but as the demand for space increases, so will the cost. If you find a reasonable rent in a good location, act quickly. Your franchisor should help you choose which property and location will be best for you. Still, you may also want to hire someone to check out the terms of your purchase or rental agreement to be sure you are getting the best deal possible.

5. Customers who didn't survive the pandemic are displaced and looking for a new establishment to take their business to and spend their money. If a local nail salon closed its doors, those customers will still need that service. If a big gym couldn't sustain itself, those gym enthusiasts will be on the hunt for a new workout spot.

If you genuinely want to be your own boss, steer your own course and take control of your career, this is an excellent time to buy a business, especially if you invest in a solid franchise with excellent training and support.

Tips for Buying a Franchise:

  • Pick an Amazon-resistant business that is a local service and requires a person to deliver the service.
  • Look for one with a low start-up cost.
  • If your credit isn't great, clean it up now - you'll need good credit to qualify for a loan.
  • Don't disregard 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.
  • Stay within your budget. One of the main reasons for the failure of a business is being under-capitalized. 
  • Search for an established franchise with numerous franchisees (I like 25 units operating more than one year). The track record gives the bank plenty of data to ascertain the business's overall potential.
  • Read the Franchise Disclosure Document and other documents carefully. 
  • Your best source of information about a franchise opportunity is the existing franchisees. Use this resource wisely, and you'll get a good sense of the overall business. (Email me at tom@TheFranchiseAcademy, for my 39 questions to ask franchise owners to make your calls effective and efficient).
  • Choose carefully. Unlike a job that you can change at will, you'll need to stick with your franchise purchase to appreciate your investment return fully.

If you cover all of your bases and follow the concept's operating systems, you may trade in your commute and your cubicle to become a Covid-millionaire.



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