Retrenched? Which Franchise to Consider Right Now
South Africa, like the rest of the world, is finding itself in the grip of the Covid-19 crisis. To make matters worse, our economy was in a recession prior to the outbreak and many businesses did not have the reserves to weather this storm.
This has led to waves of retrenchments across industries. For many, these are desperate times but also a time to look at the options available to generate income. Franchising is one of those options. It offers access to a proven business formula and expertise of a franchisor who has tested the business and proven successful.
However, it’s critical that you research your options and not make desperate moves. Not all franchises are equal and now more than ever it’s important to choose a franchise with a proven track record and potential to survive the fallout of Covid-19.
Here’s what you should consider when researching franchise opportunities at this time:
- Track record of the franchise – How long has the business been operational and what is their history? Some businesses may be relatively new to franchising but could have a solid business and sales history in their category. All of this should be revealed in the disclosure document
- Ask the franchisor how they plan to mitigate the Covid-19 crisis. Do they have special marketing campaigns planned? Is their supply chain secure? Are they able to pay their own staff and keep head office viable?
- Now is a good time to negotiate fees, not the amount, but how it is paid. In these extraordinary circumstances, franchisors should be open to things like staggering upfront fees to help franchisees gain a foothold in the market
- Ask the franchisor about its support measures during the lockdown periods and the aftermath, what additional measures will they take to support franchisees? Speak to other franchisees to find out how they are experiencing this support and the franchise in general. A good question to ask is: Would you buy this franchise again?
In addition to the research outlined above, another aspect to consider carefully is the industry or category of franchise you may want to buy. Ask yourself, which industry stands to survive Covid-19 or even benefit from it?
Here are some suggestions of industries or categories that could have potential:
Automotive – During times of recession, automotive franchises tend to perform well due to the fact that people generally take longer to replace their cars. Therefore, vehicle repairs and maintenance are much-needed services.
Cleaning – All workplaces, retailers and institutions will implement strict measures to clean and sanitise their premises. Franchises specialising in this service could benefit from this opportunity. Again, it’s important to research the track record of such franchises and ensure that their level of expertise is on par with the requirements of the industry and regulatory requirements.
Workplace health and safety – Similar to the cleaning category, it seems that regulations with regard to workplace health and safety will remain stringent. There will be opportunities in this category, but the franchisor’s expertise must be well established.
DIY and Hardware – With more people spending time at home, DIY and hardware could be a lucrative category, subject to the ability to trade at full capacity, depending on the level of lockdown experienced.
Home Services – For those who are not inclined to DIY or who try DIY without much success, home services could be a category that is well supported by the consumer. Plumbing, pest control and building repair services fall into this category.
Mobile services – The lockdown has led to the proliferation of shopping applications and personal shopping services. A word of caution here would be to consider the long-term potential of these services when the virus is contained and people return to “normal”. However, many scenario planners believe that this event will change consumer behaviour considerably. Mobile services could also include personal and pet grooming at home or other personal services. Consumers may get used to this convenience and continue to support such services.
Education – Homeschooling or facilitation thereof is a headache for many parents. Although children will return to school, there will be a substantial backlog of studying and a deficit that will be difficult to recover. Tutoring and other educational support franchises could be in high demand. However, for the short term it will be critical for these types of franchises to invest in online platforms.