Why Interest in Franchising Grows During Recessions


By Casey Crail

On the surface, it may seem counter-intuitive that demand for franchise opportunities is strong during recessionary periods—if unemployment is high, who would risk their life’s savings on a business? Believe it or not, a healthy number will make the jump to business ownership during a recession because the economy, however scary, creates the perfect environment for entrepreneurship: weakened job security, lower interest rates, less competition, and more risk-tolerance.

Franchisors understand that one of the most attractive points to franchise ownership is the prospect of “being your own boss.” Understandably so. The thought of working for yourself, setting your own schedule, and being responsible for your own success strikes a chord with most motivated individuals. During times of stability, like we saw at the beginning of 2020, this siren call of self-reliance is drowned out by job security. Why leave a job that promises wage growth and career advancement? Take that stability away and the attractiveness of franchise ownership shines bright. When change is thrust upon us all, self-starters will blaze their own trail.

During most recessions, those who turn toward business ownership often find a favorable lending environment. Traditionally, funding is the biggest hurdle for those considering business ownership, which is why over 70% of business start-ups are self-funded. But savings can get people only so far, especially when it comes to opening a brick-and-mortar concept. During recessions, expanded SBA funding and lower interest rates often mean the funding hurdle is lowered.
Inevitably, struggling brands meet their demise during economic downturns. Recessions of the past claimed national brands such Linens ‘n Things, CompUSA, and Mervyn’s (remember them?) and shuttered the doors of many more local businesses. For consumers, this means fewer options. For those thinking about business ownership, this mean more opportunity as competition wanes.

Recessions have a way of causing change for everyone–even those most adverse to it. Some will thrive with change, often entrepreneurial types, since they are more willing to take on risk. And why not? They have less to lose. Walking away from a career, taking on debt, moving where opportunity exists, joining a new industry–these are all more likely to happen during a recession. And as we know from economics, with risk comes reward.
At C Squared Social, we help franchisors find those motivated people looking for a change during this economic downturn. They are out there. We’re ready to help them find you!

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