TORC

Bitten by the franchising bug, Marge and her pretzels create quite a stir

Franchising isn’t for everyone, as Marge discovered in that 1997 Simpsons’ episode:  where her pretzel product ignited a riot at the local baseball game and landed her in the hottest of water with Fat Tony and his goons.

Still, the very fact that the Simpsons chose to devote a whole episode to the subject testifies to how central a part franchising now plays in modern commerce.

This is also borne out in the data, with franchise businesses now employing 8.5 million Americans, ½ million British & 25,000 Irish – respectively, corresponding to 3%, 1% & ½% of each country’s population.

Place in Career Transition
As a career transition option, franchising has become an increasingly popular avenue to explore – especially, with mid-career executives opting for the self-employment route, but wishing to piggy-back on the experience and track record of a franchisor, as opposed to starting out completely on their own.

Traditional franchising categories include: fast-food restaurants, couriers, real estate, beauty salons, personnel services, security operators, grocery outlets, health & fitness gyms.

And, the range is expanding all the time; newer service categories currently gathering momentum include: healthcare, wireless, dry cleaning, dog grooming, even DNA testing.

In theory, of course, any business is capable of being franchised – with one important proviso: that it has sufficient trading margin to satisfy the combined rates of return sought by both the franchisor and the franchisee.

Need for Due Diligence
Nonetheless, the franchising route is not to be taken lightly.

It demands a broad evaluation of franchise options – with over 5000 to choose from, globally.

This must be followed by an even deeper analysis of one’s shortlist, involving completion of a systematic checklist, validating some important dimensions:

- funding arrangements

- track record of existing franchisees

- fit with your local area

- one’s ability & mindset to comply with the franchisor’s system

- the franchise agreement – fees, duration, territory limits, etc.

Impact of the Recession
These considerations intensify during an economic downturn, where the aggregate market is inevitably shrinking.

However, for a truly strong franchise a recession can also present some unique advantages:

-  weakened competitors may be closing shop

-  it can be a buyer’s market for commercial space

-  staffing talent may be more easily available

-  franchisors may be inclined to offer discounts.   

Add to these the ingredient of a ‘must-have’ product/service (eg. plumbing repairs, essential home maintenance, cleaning services) and one may well  be on track to identifying a ‘recession resilient’  franchise.

Keeping other options open
If not, it may be best to pass on the idea until the economy picks up.

In the meantime, there are always other avenues to explore.

Again, the Simpsons are a good case in point: recall the episode where Homer gets laid off from the nuclear plant – how, while looking for a job, he becomes a community crusader for safety and so impresses Mr Burns that he not only gets his old job back, but is promoted to safety manager to boot!

As Homer himself explains: ‘I got to get where the action is’.

(By the way, this is also the episode that gives us the most notable HR line from the entire Simpsons series, when Mr. Burns turns to Homer and says: “Hmmm . . . you’re not as stupid as you look . . . or sound . . . or our best testing indicates”.)

PS. For more franchising pointers, please click on a related case study here.