Franchising As A Model For Success In Economic Crises

Do you want to fall back on a crisis-proof business model when starting your business? Find out why franchising holds its own better even in economic crises.

The corona crisis has already had a strong influence on many Businesses: Many Franchising companies had initially close to the spread of the coronavirus stem largely on legal arrangement.

Further economic consequences of the pandemic are to be expected in the future as well. However, the franchise industry has already proven itself to be a crisis-proof model in previous economic recessions.

The franchise economy and economic crises

Anyone who becomes self-employed as a franchisee benefits from the extensive support and experience of the franchisor. This is helpful insofar as the experienced partner usually has entrepreneurial advice on how to deal with economic crises – after all, he has a competent management team in the franchise headquarters.

Ultimately, this is exactly the reason why startups choose franchising: you know you are not alone! You can also find out which franchise business models are crisis-proof – especially in the current Corona crisis.

Startups in economically difficult times

Since the last global economic crisis in 2008, which was triggered by the banking and financial world, it has often been difficult for people starting up their own business to raise money for their own business on the capital market.

The trust was gone, and any risk was largely avoided! Investors feared that the founders would not be able to service the loan. This meant that many founders could not realize their dream of self-employment on their own.

If you want to know more about how companies dealt with the last economic crisis and successfully survived the difficult crisis, then click in our article: This is how well-known brands survived the economic crisis!

Starting your own business with franchising

The situation was different when those interested in founding a company chose the successful franchise sales model: the banks and investors had greater confidence when someone set up as a franchisee with an already established franchise system.

Thanks to franchising, numerous founders were able to realize their dream and start their entrepreneurship: the loan approval was easier, they benefited from the experience of the entire system and the awareness of the franchise brand.

Are franchise systems generally crisis-proof?

Realistically, of course, no business model is risk-free and completely crisis-proof. Crises can affect a wide variety of economic sectors and affect various industries.

However, franchise systems have a certain advantage: Of course, they too will suffer in the event of an economic crisis, but they are considered safer than businesses that are run by independent entrepreneurs due to the following five factors.

Five factors that make franchise systems more resistant to crises 

Reason# 1: Franchise systems have established business models! 

The success of franchising is often based on the fact that those willing to set up a business start their own business with a concept that has already asserted itself on the market and is therefore highly optimized.

Independent founders have to make these experiences themselves in order to better adapt their concept to the actual market conditions and the needs of the target group.

For aspiring franchisees, this enormously reduces the entrepreneurial risk of founding a company – and at the same time, it increases the prospect of substantial returns!

Reason# 2: It is easier to finance franchise formation!

Even in economically difficult times, future franchisees can find the capital they need to set up more easily because they have a strong franchise partner and a tried and tested business concept at their side.

Founders who want to go their own way often pose too great a risk for investors, which is why loans are not approved. Franchising, therefore, enjoys a good standing in the financial world!

Reason# 3: be strong together!

In addition, franchisees benefit from the expertise and experience of the franchisor.

You can set up your own business with a business model of your choice, and you will also receive comprehensive support from the system! In franchising, everyone pulls together:

The franchisor provides the franchisees with a functioning, established concept for their business startups, while they can use the franchisees to capture a larger sales market. Founders on their own are completely on their own in all matters.

Reason# 4: Franchise systems have greater brand awareness

Another advantage of franchising is that franchisees can set up their own business with an established brand.

There are large franchise brands that are known far beyond the country’s borders. It is precisely these big brands that appear crisis-proof to investors due to their reputation even in difficult economic times.

They pose a lower risk and are considered a comparatively safe investment.

Reason# 5: The Success Rate In Franchising

Establishing franchises has been proven to be more successful than self-initiated business startups. Franchise systems are characterized by an average of 90 per cent success rate!

This shows that franchising is more stable than numerous other startup models – even in times of crisis, franchise systems were able to assert themselves successfully thanks to their special model with outsourced sales by the franchisees.

Franchises and global economic crises

In retrospect, experts find that franchising has been able to hold its own in any economic situation: If there is an economic boom, many would like to benefit from the economic growth, and they dare to take the step into self-employment with the help of franchising.

In times of economic upswing, business startups via franchising are increasing. But even when an economic downturn is imminent, franchisees are set up: employees fear losing their jobs and income, which is why many want to take their professional future into their own hands and become self-employed as franchisees.

Surviving global recessions

If a global economic crisis is imminent, then understandably no entrepreneur is safe from bankruptcy and bankruptcy – franchising or not! However, due to the strong franchise network, franchise systems have already proven to be relatively crisis-proof in the past.

The cohesion through the network, the experience and expertise of the franchisor and the awareness of a brand was definitely success factors here in order to be able to get through crises better!

Conclusion: Better through difficult economic times with franchising

Franchise systems are large, experienced organizations that are characterized by an established and well-functioning business model. These are also some of the key characteristics that have helped franchising gain so much ground in recent years.

We hope that we have been able to provide you with comprehensive information about startups with franchising.

If you want to find out more about setting up a business with a system, please browse our pages, get in touch with us or use the comment function. We wish all entrepreneurs a lot of strength in the Corona crisis. Together we can make it!