You may have been thinking and planning for it before the pandemic brought everything to a halt, investing in a franchise is still a great opportunity to start a business with a proven track record without having to build everything from the ground up.
But what will the franchise landscape look like post-Covid-19?
Here we take a closer look at what you need to consider before investing in any particular business model.
Business Resilience is Vital
There’s no getting away from the fact that every business has been affected by the pandemic and the subsequent lockdown. Some are going to struggle more than others, however, when it comes to reopening.
Franchises that operate in tourism and hospitality face a particularly difficult time. It’s not just the prospect of having to close for a long period either.
Once businesses such as bars, restaurants and hotels open, issues over social distancing may mean that most will have to operate at 50% or less of capacity. As a business model, this is going to have a profound impact on revenue and it’s not likely to be something that will suddenly disappear. Many hospitality businesses operate to tight margins and are seasonal dependent. Even small changes can drastically affect their viability.
When considering any future franchise, resilience is going to be an even bigger issue than before. Some businesses will see a delayed rather than a compromised service. That includes retail where customers might be holding back on buying certain products and saving their pennies but may come out in numbers once the worst of the pandemic is passed.
Another issue is not just the loss of customers and reduction in business but the challenges of the supply chain for the business. Franchisors that have strong relationships with their supply chain and have better procurement processes than others on the market may well be a better placed to continue after the outbreak.
How Has the Franchise Responded to Covid-19?
It’s important to look at how a particular franchise has responded to the Covid-19 pandemic and what their business plan is for the future. For example, if it is a retail franchise, how did the business model change to boost business? An example would be introducing online sales or click and collect services. What measures are they introducing to overcome challenges in the next few years?
Why Due Diligence Will Be More Important Than Ever
Due diligence when deciding to invest in a franchise has always been important. If you are putting in a good deal of capital to get up and running, it pays to pick a franchise opportunity that is going to be resilient and able to cope with a ‘force majeure’ such as this.
What If Your Are Considering Franchising Your Own Business?
The same challenges face any business that may have been looking to expand before the pandemic through the franchise process. Again, resilience is an issue. If your company has been badly affected by the lockdown, it’s difficult to see things succeeding if you are unable to do business at all. Adding services or finding different ways of operating may make a difference.
When the economy does open up more, there’s the added challenge of attracting potential franchisees to your business model. It’s important to start putting in place measures that will improve your resilience and make you more appealing, especially in a marketplace that is likely to be more than a little reticent, at least to begin with.
If you are considering investing in a franchise after the Covid-19 pandemic, it’s important to get as much advice as possible. This is a new situation for all of us but taking your time, doing your research and due diligence and picking the right business opportunity is going to be vital.