The COVID-19 Crisis is new for all of us including, of course, entrepreneurs who are interested in pursuing their dreams of acquiring and operating their own franchise business.
Should the situation we’re in affect how you explore your next steps?
There’s ample reason why it will influence your search. What’s more, the Franchise Brokers Association (FBA) offers some practical advice on the topic in their article, Should I Buy a Franchise During the Coronavirus?, excerpts of which are quoted below.
1. Keep looking for franchise opportunities
If you’re seeking to start a new franchise, you can be sure that franchising organizations are still actively seeking entrepreneurs to join their networks.
Alternatively, if you’re considering the purchase of an existing franchise, there will always be a certain percentage of owners that is anticipating retiring.
We can also assume there’s a sizeable group of franchisees for which the pandemic will have been one crisis too many—leading them to want to sell sooner rather than later.
So, keep looking. The FBA notes, “There’s still a multitude of franchise opportunities up for grabs.”
2. Make the most of any downtime
If the pandemic has resulted in extra hours for you to pursue your goal of franchise business ownership, the FBA recommends that you make the most of any spare time.
Use it to research your opportunities and narrow in on the promise of a new life with new independence as the new owner of a franchise business.
“Perhaps the smartest move you can make is to formulate several backup plans and explore your options before resting on a final decision.”
Launching a new franchise location with a proven business concept and a team of experienced home office professionals is an attractive route for many.
You might also explore the possibility of buying an existing franchise from a retiring owner. Unlike a start-up, you’d “hit the ground running” with an established book of business and stream of revenue.
Yet another choice offered by some franchisors is purchasing an independent business in the same industry and rebranding it as a new franchise location. Again, you’d start with an established list of customers and an immediate source of revenue but under the banner of a national brand name.
3. Take advantage of available financing
You might think that in times of economic uncertainty your franchise financing options would be limited. On the contrary, the blog points out that now may be a prime time to secure any funding you might need.
“The situation is not as bleak as it might look. For example, portfolio loans are taking an emergence. These are security backed lines of credits where you can use your stock portfolio as collateral and borrow funds against that.
“Additionally, the zero percent interest rate from the FED is encouraging banks to keep lending loans, and this is good news for new ventures and prospective franchisees.”
4. Be prepared if dealing with bankers
While credit may be more available than you think, gaining approval for a loan to acquire your franchise could be more exacting than expected.
“Banks are adopting a more aggressive screening approach that involves performing background checks on the borrowers before they lend any money. So, when you request a loan, you can expect questions about your timing, your landlords, and your business skills and expertise in general.”
5. Lean toward an essential business
While many (but not all) businesses are now reopening, some never closed. The FBA suggests that these opportunities should be at the top of your list if you’re interested in opening a franchise business.
“Due to the COVID-19 Pandemic, right now the most viable option for those still looking to purchase a franchise is to choose one that’s considered an essential business.”
Essential industries vary by state or province but as a rule include communications, critical retail (e.g., grocery stores), critical trades (e.g., electricians) and energy. Food production, healthcare, government, transportation and water are also considered essential.
