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Listen to the news these days, read the newspaper or scroll through the headlines on your phone and it’s all doom and gloom. Inflation is up, the economy is in recession and times are tough. But where others see disaster, I see opportunity.
Instead of panicking, smart investors and entrepreneurs invest in a falling market when prices are low and the likelihood of future returns is high.
Risk tolerant people understand that the economy is cyclical and that if you have the means to buy during a recession, you can benefit greatly. Whether you own a franchise or are considering becoming a franchisee, here are five reasons to be optimistic about the current situation.
Related: The Top 5 Popular Franchise Categories for 2023, According to an Industry Expert
Property
In difficult times, companies go under. This leads to real estate opportunities on several fronts. First, there are more spaces open for conversions. A conversion can save hundreds of thousands of dollars over a new build.
A falling market also means that landlords are in a negotiating mood. In order for a developer to continue receiving funding, their current properties must maintain a certain occupancy rate. Now is the time for new franchisees and franchisees with existing leases to negotiate concessions and better terms.
Related: A billionaire who operates more than 2,400 franchises knows that these types of franchisees make the most money
Labor
2021 47.8 million workers quit their jobs, with the hospitality workers leading the exodus with a seven percent quit rate. Historically, during a recession, workers seek security and are less likely to quit their jobs. The recession will slow down the staff revolving door that so many restaurateurs have struggled with over the past two years.
It also means that with companies closing, now is the time to find top talent looking for a new opportunity.
Customer Acquisition
In difficult times, companies are the first to retreat to marketing, and that is exactly the wrong thing to do. Now is the time to double down on marketing and see big payoffs. Since it is cheaper to retain a customer than to gain a new one, a declining economy is the time to promote your existing guests to entice them to come in. If you run a restaurant, the good thing is that everyone has to eat, regardless of the economy. Give your current customers reasons to visit you, such as a new menu item, targeted LTO or special offer.
When competitors go out of business, it’s time to capitalize by turning their customers into yours. Create a competitor’s campaign in Google Ads using their keywords and URLs and direct their customers to a landing page with a targeted promotion, such as a free drink or BOGO. Advertise on social media using location and demographic filters. Monitor competitor social accounts and respond to posts suggesting your company as a consumer alternative.
Related: The Hottest Franchise Trends for 2023
Supplier Relations
While supply chain issues persist, a down economy means merchants are more aware of retaining their existing customers. Now is the time to strengthen relationships with suppliers and negotiate better rates. During the pandemic, we saw that companies with strong supplier relationships were better able to handle supply chain disruptions because they knew in advance they were coming.
Related: Use this checklist to avoid buying a ‘Zombie’ franchise
Food costs
Food costs have skyrocketed since the pandemic. Now there is finally good news. This is according to a November report of Maloni Intelligence, wholesale food costs are falling. Last year, a pound of chicken breast cost $1,907, and in October 2022, $1,177. A case of Haas avocados cost $41,721 last year and $27,243 last month.
No matter what the economy does, smart entrepreneurs can make money, and franchising is one of the safest ways to do it. Historically, the stock market returns eight percent a year. Multi-unit restaurant franchises can easily achieve ROI of 40-50% per year. The key right now is to manage cash flow, capitalize on opportunities, and get ready to reap the rewards when the natural economic cycle turns into an upside.
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