What is striking about a franchise when many businesses are for sale?

November 5, 2009

One of the worst areas of any depression has to be the numbers of firms that don’t survive. In a market like the one the world has experienced over the last eighteen months a number of things have affected the capacity of organisation to continue to operate.

Firstly and most clear, the drop in consumer spending, which has resulted in increased competition in the marketplace. Only the most effective firms survive in this situation.

Secondly the shortage of access to money and resourses. When firms experience cash flow or revenue problems then they rely on the Banks to give funds to get them through. As we all are aware those funds have not been available.

The net outcome of these factors is that firms are failing. When businesses fail they leave gaps in the market; demand for a product or service has not necessarily lowered just because a organisation providing it has ceased trading. To start a new organisation in a recession just re-providing a product or service needs funds or access to funds. If a new start up is funded by the owners then there is natural personal risk in the possible failure of that organisation, and as we have already recognised assistance from the banks is unlikely to be available.

The other way of breaking into a market sector is through the procurement of a Franchise Opportunity. Where there is a franchise for sale, there is the opportunity to get into business with less risk.

Even where there is a Franchise For Sale there is some risk as the success of the business will rely on the skills of the Franchise operator. That said the investment is preset and known and the market opportunities should be apparent as the owners should be able to display success in that particular market place.

Of course while franchises do provide a moderately low risk entry they do have some issues which need to be taken into account, including a thorough appraisal of the Franchise For Sale and of the figures put forward by the seller. Also, for a free spirited entrepreneur the opportunity may be a little rigid. A franchisor will expect the brand and product or service to be maintained, with very little space for self- expression.

There is also the issue of competition to be taken into account within the Franchise itself, if it is a national business for example strict boundaries will need to be enforced. All that said the Franchise Opportunity does offer a low risk, soft start in running your own company.