In times of economic uncertainty, interest in franchise business increases. The coronavirus pandemic is changing the workplace in obvious ways, such as a move to remote work and employee layoffs, and likely in ways that won’t be apparent for some time. Women are leaving the workforce at four times the rate of their male counterparts due to the strains of child rearing, household responsibilities and the demands of working a job.
For those who’ve left the workforce or are envisioning the next stage of their life, a franchise business offers the opportunity to control their professional and financial destiny.
Owning a franchise can be a challenge with many rewards. There are numerous ownership models that give franchise owners the flexibility to set their own hours and even work remotely. Franchise owners actually report having more work-life balance than traditional employees.
When evaluating franchises, take a closer look at industries that have experienced growth during 2020, including insurance and medical franchises. One way to help you evaluate the stability of a franchise and its financial risk is to answer the following questions in your research:
1. Is the franchise considered an essential business? This can vary depending on where you want to operate your franchise, but in most states, grocery stores, liquor stores, pharmacies, gas stations, banks, financial services, insurance, hardware stores, technology stores and funeral homes qualify as essential. Businesses that don’t require face to face contact have tended to stay operational through strict shelter-in-place measures.
2. What’s the startup cost? Cost of entry will vary by brand and industry, but for most franchises, you’ll need between $50,000 and $250,000 to start. Franchises with a lower barrier to entry include many home-based businesses and service-based franchises, such as insurance.
3. Is the revenue cyclical or seasonal — upfront or recurring? Seasonal trends and long-term economic cycles can influence business demand. It’s important to know what you can expect so you can better anticipate and weather any ebbs and flows. One way to smooth out the curves is to get into a business that brings in a consistent revenue stream. When revenue is recurring, as it often is with insurance products, you have more predictable income, which franchise owners love.
4. How established is the franchise brand? In uncertain times, people look for businesses with a proven track record. Look for a franchise that has been running profitably for five years or more with a seasoned leadership team. While some successful businesses turn to a franchise model to grow quickly, they may not have experience working with franchisees. Be sure that you’re comfortable with the service level and support that partners receive.
While starting a business comes with inherent risks, you can help mitigate them by using an analytical selection process. To choose a business that suits your needs, include questions that explore brand, revenue, upfront costs, and performance in challenging times.