Franchises to survive and thrive in downturn

Written on the 10 December 2008

Former Chairman of the Franchise Council of Australia and CEO of Australia’s largest pool and spa care network PoolWerx, Mr John O’Brien said he was confident the franchising sector would ride out the economic downturn if franchisees were smart about their business tactics.

“In my 25 years experience franchising has always been an exponential growth industry,” he said. “The systems and support unique to this industry offer more stability than most businesses, but it is not recession proof and requires franchise owners to reassess their business development plans and adapt to new market pressures.”

Mr O’Brien who also co-chairs the World Franchise Council said there were a number of strategies franchisees could implement to help them cope with the situation and believed the current crisis was an opportunity to capitalise on potential market growth.

“My greatest advice is to follow the system. This is the time for any franchisee, no matter what business they have to ensure the systems and practices they have been taught are followed closely.

“Franchising works because it is based on proven systems and those franchisees that want to ride out this downturn need to show extra diligence in following the business model that they have invested in.”

Mr O’Brien said close monitoring of cash flow and minimising debt should be a priority for franchisees.

“Develop cashflow modules and check it daily as well as reviewing overall expenses. Now is not the right time to be dealing with unnecessary debt or cost structures so franchisees should assess their financial status and work out what can be consolidated.”

Mr O’Brien advised the key was adjusting spend not reducing it.

“One of the first expenses people want to lower is staff costs but if the team is performing this is not a good tactic. Franchising is about service and maintaining this is imperative to a franchise business’ long-term success.

“Marketing is also another cost franchisees look to reduce in hard times but driving awareness of their brand right now is a smarter option.

“Franchisees should aim to improve and increase their local area and relationship marketing activity to work towards securing their position and share of the market. When other businesses are floundering and reducing their presence in the market place a solid franchise can shine and pick up unsatisfied customers.”

Mr O’Brien recommended business owners also consider ‘good’ debt.

“There will potentially be competitors that can be acquired during this time.  Franchisees should assess their financial position and decide how their income can be utilised to grow the business if an opportunity arose.”

Mr O’Brien reflected the mood of the industry should be positive with franchisees finding solace in knowing it was not the first time the industry had weathered a downturn.  

“Franchising is a robust industry and due to the structure of the business model has a greater chance of riding out the waves of this economic ‘storm’.

“Business owners need to refocus their outlook and be smarter with their business decisions. The key to surviving this downturn is about how you look at the situation and react accordingly.

“It’s not all about doom and gloom and I am confident the industry will ride this current economic storm out as it has in the past.”