Hiring, Economy Top the List of Franchise Risks
There’s no such thing as a sure bet. Franchising, like any other business, comes with some risk. So, what are the concerns about franchising among franchise owners?
Curious Jane conducted a proprietary attitudinal segmentation study to learn more about the motivations of franchise owners. We surveyed more than 500 franchisees to better clarify the beliefs, perspectives, preferences, pain points and aspirations of franchise owners. The survey results have a 95% confidence level, a high level of confidence.
In the study, franchisees were asked to identify the riskiest aspects of owning a franchise business. Finding qualified employees and economic fluctuations tied for the top answer, with 53% of respondents citing those concerns. Franchisors need to be specific in talking with candidates about how they are helping franchisees meet these concerns head-on – whether through changing menu items or investing in new recruiting software or assets.
Also ranking among the riskiest aspects of owning a franchise were:
- 43% of franchisees said financial losses was one of the top risks.
- 31% said minimizing employee turnover was a top risk.
- 24% cited a lack of independence to make business decisions was a risk.
- 22% said changing consumer preferences was a risk.
But clearly, all of these were risks the franchise owners were willing to take.
Calculating the Risks
Business risks aren’t limited to those buying a franchise. Any business venture comes with elements of risk.
The top risks mentioned by franchise owners in the study seem as if they would be top of mind for any new business owner. The economy appears to have stabilized in recent months, but early in the year, worries about a possible recession looming were mentioned on every TV newscast. Likewise, the shortage of workers that has plagued restaurants, retail stores and more since the pandemic continues to receive a lot of press and remains painfully obvious to customers. Franchisors should address these concerns head-on and be specific about what they are doing to help franchisees meet challenges and reduce their risks.
New business owners aren’t the only ones calculating the risks and considering these challenges.
The same risk factors cropped up in other questions in the study. When franchisees were asked what might make them hesitate to open another franchise location:
- 43% cited difficulty in hiring or retaining quality employees.
- 28% said the current economic conditions.
What can franchisors do to allay candidates’ concerns about the risks of franchising?
Lowering the Risks
Although franchisors may not be able to shore up the economy or fix hiring issues by themselves, they can and must address franchise candidates’ concerns.
Discuss the economy and how it’s affecting your franchises’ bottom line with candidates. Be candid about costs that you can and cannot control. The rising cost of food certainly impacts the bottom line of a restaurant franchise, so what have you done to help? Have you found a less-expensive source for chicken or beef? Have you allowed franchises to limit their menus or to substitute items they can obtain locally for less? Have you found a less-expensive source for non-food products, such as cups, napkins and flatware?
And what are you doing to assist franchisees with hiring and retaining good employees? Do you use recruiting software? Do you provide digital assets so that franchisees can easily run local help-wanted ads? Do you have a culture that employees love? Do you have a training program that can help them advance their careers?
Since your franchisees are on the front lines, ask them what the riskiest aspects of your industry and business model are – and then solicit their input as you search for ways to reduce or eliminate the risk altogether.
Takeaway:
Knowledge is power. Better than anyone else, you should know where the risks are greatest in your industry or business model. If you identify any risky aspects of your particular industry or business model, you can not only work to reduce the risk but also address the risks openly with franchise candidates to allay their concerns.
