Multi-Unit, Multi-Brand Owners Reflect on Lessons Learned During Challenging Times
Inflation is rising at a historic rate, gas prices peaked at more than $5 a gallon, the Federal Reserve is raising interest rates, real estate is in high demand, a national labor shortage persists and whispers of a bear market and recession loom.
Sounds like a great time to open a franchise, right?
With the traumatic wounds of The Great Recession still fresh in the collective conscious, the headlines we are bombarded with every day are enough to raise your blood pressure and make you fret about what’s next for the franchise business market. Welcome to the world’s largest craps table we call the global economy.
While it might seem that any deviation from a booming economy might be negative, it’s actually quite the opposite in the franchise world. Businesses can thrive and grow in recessions or other economic downturns. Much like a craps table, while the global economy runs hot and cold, people and business owners still make money. The key to thriving in a challenging economy is knowing how to position yourself and your business.
For René Tirado and his business partners, Jim and Connie Weaver, they know what it’s like to operate and thrive in tough times. They are celebrating their 20th back-to-school season with Plato’s Closet and their upcoming ninth Christmas with Hand & Stone Massage and Facial Spa.
Starting a business never comes without risks but becoming an owner of multi-brand and multi-unit franchises isn’t for everyone. Each presents a number of different challenges that Tirado has had to navigate through the years. As the market fluctuates, so must business owners. But there are ways to prepare your business for more challenging times.
How to Recession-Proof Your Franchise During an Economic Downturns:
- Take Stock of Your Market Position
- Listen to your customers
- Focus on service
- Employee satisfaction is important
Take Stock of Your Market Position
When Tirado and the Weavers entered the market with their first Plato’s Closet in 2001, they couldn’t foresee the economic collapse that began in 2007. Coincidentally, it turned out to be good for business.
As the economy’s drop was felt more broadly and gas prices increased, so too did their business. It’s something they paid attention to in the years that followed, and it’s an ongoing trend. When prices go up for goods and gas, business at the gently used clothing retailer improves.
Something else that has driven some of their business decisions is that they don’t try to compete with the internet. Instead, Plato’s Closet thrives on goods that may have been internet purchases but that teens quickly outgrew. In the case of Hand & Stone, it offers in-person services a computer can’t provide.
Listen to your customers
A business’s customer base is the financial lifeblood that determines the success of any owner, regardless of brand. While business in recent years may have surged because of a booming economy regardless of what an owner did, challenging years force owners to be more strategic.
Listening to your customers can help, whether in good or bad times. Owners must focus on what is really important.
“We need to stay on top of our inventory – if it wasn’t selling, get rid of it,” Tirado says. “Turn and burn. We want to get it in today and sell it as quick as it can. Customers will tell you that if you’re listening. We want to know that. If it’s something that has been sitting for three months, discount it, sell it and make room to buy something that people like better.”
Focus on service
While business might not boom as much as it has coming down from the post-pandemic high, slower times allow you to look for process improvements in your business.
Many businesses are focused on the customer experience from beginning to end. If you aren’t able to deliver, don’t expect repeat business.
For Tirado and the Weavers, Hand & Stone’s business model relies heavily on a membership base that needs available reservations to keep continuity of service. If that doesn’t exist, it won’t be good for business.
“We remind our employees that they need to give a wow factor,” Tirado says. “We want them to remember and return time and again.”
Word travels fast in the age of Google reviews and social media. If you can’t cut it, everyone will know and choose a competitor who can deliver on a promise.
Employee satisfaction is important
Price increases, supply chain issues and changing medical guidelines have all been challenging. But keeping good employees should be a focus for any owner in a challenging market.
“It’s been challenging – since COVID, everyone has had significant price increases in supplies,” Tirado says. “Linen, equipment, gels – no matter what it is, it’s gone up in price.”
Although the increase in prices were a hit to his budget, Tirado has increased the pay for his employees in both brands and focused on the benefits offered to employees. If they didn’t have enough staff to open the doors, they weren’t going to make money anyhow, he says.
“We need to make sure to take care of our employees,” Tirado says. “That’s something COVID taught me.”