As we turn the page and begin another year, it’s common to break out the crystal ball and make projections. The franchising industry is no different, which is why FranNet’s franchise consultants have done some recent research in several different areas to piece together insight on what entrepreneurs can expect. It’s part of our effort to provide our clients with the resources they need to make informed decisions. At the moment, it’s a little difficult to see things without factoring in the possibility of a recession – an economic downturn that’s been part of the conversation for over a year now. Though inflation remains historically high, the rate has steadily dropped for the past few consecutive months and the unemployment rate continues to break all-time records – in a positive way.
Regardless of what the economy will, or won’t, do in the coming months, we know from experience that franchising happens to be one business category that will always offer a stable platform for entrepreneurs who wish to become their own boss. In the meantime, here are four franchising trends to watch for in 2023.
Lending/Access to Capital
The Fed’s attempt to break inflation’s stranglehold on our economy led to a total of seven consecutive interest rate hikes so far, and the first rate hike of 2023 – another quarter-point increase – appears imminent. As interest rates rise, it tends to tighten the overall lending market, which could make things tougher to secure the capital necessary to fund the purchase of a franchise. But as FranNet consultants always counsel our clients, be sure to review all of your options in finding the right financing solution.
Recession-Resistant Business Models
Whenever the economy experiences a downturn, the franchise industry reminds candidates that there are numerous recession-resistant business models to choose from among the thousands of concepts on the market. The best definition of a recession-resistant franchise opportunity includes those with a value proposition based on needs, not wants. As in, you may want to remodel your kitchen, but you’ll always need a haircut. FranNet’s franchise consultants would be happy to introduce you to several brands that meet the definition of recession-resistant.
Franchisor Incentives
Franchisee candidates aren’t the only ones who can read the handwriting on the wall. Facing the possibility of a recession is also on the minds of many franchisors, as they look to create new opportunities to build short and long-term value. A select few have begun tinkering with their business models with programs that could incentivize growth. These include consolidating royalties and even rebates for owners who don’t reach specific sales-oriented benchmarks. Those who build shared risk into their franchise opportunities could end up appealing to more candidates, becoming an attractive choice in a competitive marketplace.
Strong Categories
According to several different sources, a few franchise categories are expected to continue outperforming in their efforts to expand and attract new ownership. A few examples include franchisors in the Home Services, Wellness, Self-care, and Food Service categories. As the demographics in the U.S. continue to change, these industries stand to gain. It should also come as no surprise that each of these examples are well positioned as recession-resistant franchise opportunities.
As usual with predictions of any kind, the outlook for franchising trends is a mixed bag. But there are still a couple of near-term updates to round out our expectations. The franchise industry eagerly awaits their biggest trade show event of the year – the International Franchise Association’s (IFA) annual convention, which runs from Feb. 26 to March 1. Right around this same time frame, we can expect the release of IFA and FRANdata’s annual Franchising Economic Outlook report. This report includes an industry specific breakdown of forecasts, trends, several growth indicators, and a macroeconomic outlook. FranNet intends to keep you posted on both of these items in an effort to keep you as informed as possible.
Let’s Chat!
FranNet is standing by to help you navigate your own personal entrepreneurial journey. Getting started is simple and involves setting up a no-cost, no-obligation appointment with one of our qualified FranNet representatives. Not yet sure what type of business you were meant to own? That’s fine, too – you simply need to reach out and speak with one of our qualified franchise experts today! Together, we can find a business opportunity that aligns with your lifestyle and income-oriented goals.