Blue Rock Search

Is Now a Good Time to Buy a Franchise?

At the beginning of 2023, economic stresses were everywhere. Inflation was still high, as were fears of a recession, and it seemed like nearly everyone was playing it safe and waiting to see what was coming next. Now, with more than half of the year over, the economy is looking quite a bit different. Jobs are still being added but at slightly more stable rates. Inflation has plummeted, and economists are cautiously optimistic that we’ll be able to avoid a recession altogether.

For those in the franchise industry, a more settled economy means one question is on many people’s minds: is it a good time to buy a franchise?

Continued Growth and Stability

According to an annual survey by the International Franchise Association, franchising has seen a robust rebound over the last few years, with noticeable growth every year since 2021. In 2023, growth is projected to continue at a rate of just under 2 percent, with projections estimating 805,436 franchises by the end of the year, employing nearly 8.7 million people and accounting for over $521 billion in gross domestic product. These strong numbers alone certainly paint a picture of a growing, welcoming franchise industry.

The rising interest in franchising is also the result of other cultural and economic shifts that have resulted over the last several years. 83% of people said the pandemic accelerated their plans to start their own businesses, and that trend has continued past the “peak” pandemic years. One of the enduring appeals of franchising for many small business owners is the idea of combining a degree of localized, individual control (and profit) with the benefits, brand recognition, and support of a well-known brand. Research from the International Franchise Association and FRANdata found that 50% of franchisees said they were better able to navigate inflation and other pandemic-era business challenges because of the support provided by their franchise networks.

With growth – but not enormous risk – on the mind, franchising seems like a natural fit for many entrepreneurs in today’s marketplace. This franchise enthusiasm, however, does come with some caveats.

 

Increased Scrutiny on Franchising

For individual would-be franchise owners, the market is actually looking better than ever. For companies looking for franchisees, however, there’s more competition to deal with.

“The number of brands that franchisees are considering right now has been reduced,” Joe Malmuth, chief franchising officer at Batteries Plus, told Entrepreneur. “They used to look at three or four; now they’re looking at one or two. And it’s not the same mix they used to consider. They’re very focused on fast food, but only with drive-thru. It’s home services, but it has to be essential services. Franchise candidates are looking for stable things.”

Today’s franchisees may feel like it’s a good time to buy a franchise, but they’re being more selective than they previously were. These individuals are less likely to be big risk-takers; instead, they view franchising as something more resilient and secure – or perhaps even a way of hedging bets in case of other economic pressures. Some franchisees are even looking to buy a franchise without leaving their days jobs yet.

At the same time, waves of new legislation have been introduced across the country, potentially reshaping the franchiser-franchisee relationship. This perspective means that companies need to revamp their approach to franchise sales.

When discussing with potential franchisees, be prepared to answer questions about topics such as:

  • Disclosures of business risks
  • Cost-raising measures such as required vendors or new fees
  • How the brand has dealt with and/or fared in challenging economic situations
  • How the brand has incorporated flexibility and/or adapted to recent changes

The current business landscape can be a very promising one for franchises, but, like so many other sectors, its evolution over the last few years requires a slightly new approach. As companies work with franchisees, it’s important to focus on building a relationship of mutual trust, support, and flexibility in order to continue the growth and positive presence of franchises in communities across the country.

 

About the Author

Nancy Estep-Critchett is a founding Partner of Blue Rock Search, with oversight of the Franchise Practice. She has 30 years of successful working experience as a business advisor and executive recruiter in the franchising space. Nancy has built solid relationships which have spanned decades with industry professionals and internationally recognized brands.

Are you looking for top talent in franchising?

Contact us to learn more about how we can deliver the talent you need to succeed. Our systems, processes, and tools are designed to flex to the unique needs and expectations of any search.

Are you a professional looking for a new opportunity?

Contact us to discuss your career options or browse our open positions.

Scroll to Top