SHOULD YOU BUY A FRANCHISE DURING A BAD ECONOMY?

The answer is yes, so long as you buy wisely. That's why today's potential franchisees are asking tougher questions before signing on.

- KIM KAVIN

We all have big questions about the economy. Are we heading into a recession? Are we already in one? How high can interest rates go? Will inflation cool anytime soon? How long will "help wanted" signs linger?

But in the franchise world, people are often asking this: Is now still a good time to buy a franchise?

Industry experts say yes-but your approach should be different than in boom times.

First, let's consider the emotional reality: "We have more people interested in owning and operating franchises, because they just don't have the same belief system in the old-fashioned, stable job," says franchise executive coach Rick Grossmann, coauthor of Franchise Bible. The pandemic caused many people to see long-term jobs as precarious, single streams of income.

As a result, many went into business for themselves. In the past year alone, some 83% of people surveyed said the pandemic accelerated their plans to start their own businesses. According to the U.S. Census Bureau, even after the wave of business creation in 2020 and 2021, corporate registrations were still above pre-pandemic levels in 2022.

Everyone seems to want more flexibility, resiliency, and control-and that's exactly what attracts many people to franchising. Plus, Grossmann says, a strong economy that started a few years before COVID hit-and a strong real estate market-have created a very qualified group of franchise buyers. "People have a lot of equity in their homes, and there are still people with money in the bank and good credit," he says. "It's a perfect storm for franchise ownership."

But that's not to say it's a gold rush, with people grabbing any opportunity they can. Quite the opposite: Industry insiders say they're seeing increasing selectiveness among prospective franchisees.