When times are economically hard for people and companies, they may increase credit buying in order to sustain their current lifestyle and spending habits. However, that frequently leads to families feeling overextended and maybe even unable to meet their debt obligations. That’s when many turn to stricter budgetary measures and cutting costs. This lessening of buying and economic activity is felt in the market – and a recession may be the result.
A recession is when people and companies spend and invest less. The economy slows down and families start “tightening their belts” – an old saying that refers to less food on the table. Companies may react by laying off employees, causing an increase in unemployment. Overall, a recession causes turmoil in the marketplace that reflects especially poorly for small to medium sized businesses.
These economic cycles will always come and go because they are triggered by a variety of market conditions, politics, pandemics and more. As an entrepreneur deciding on a franchise, you’ll want to look for businesses that are recession proof.
Understanding Recession-Proof Industries
Depending on the industry you choose, deciding to go into business for yourself will take forethought, planning and a realistic understanding of your local market, as well as the overall economic market. If you’ve got a skill set that lends itself to certain types of industries, you’ll want to narrow the field down to those fields that will still be in demand – even in a recession or other market crisis.
What is a Recession Proof Franchise?
A recession resistant franchise is simply one that people will still need and want when money is tighter than normal. Consumer demand for the product or service remains intact during times of economic and market uncertainty. This is one the easy franchises to open as a first-time business owner.
Examples of Industries that Typically Withstand Economic Hardships
There are many different types of industries still necessary and viable during a recession. As residents of a highly-developed country, most Americans are dependent on certain businesses even when they are prioritizing savings over spending. As a smart entrepreneur thinking about opening a franchise in your area, you’ll want to match your skills with one of these types of endeavors.
Examples of Recession-Proof Business
Even in a recession, most people still need to shop for groceries at a grocery store. Although many of us would love to grow our own food, it isn’t viable for the majority. If your septic system or pipes become clogged, you’ll most likely need help with that from a professional. You may not be planning to buy a new car during a recession, which is why it is even more important to get yours serviced and repaired when necessary. Unless you are a mechanic, that task will fall to your favorite shop.
Here are some examples of available industry franchises you can consider recession proof companies.
Essential Services
Even when times are hard, there are products and services people still need. These “essential services” will always be necessary and can ride out economic ups and downs easier than other industries. These are some of the best small recession resistant franchises and there are plenty to choose from, including:
- Insurance: People always need insurance. Without the risk and financial loss protection offered by insurance, the world would be much more affected during a marketplace flux. In your area, people may need car insurance just to remain legal on the road.
- Childcare: Childcare services will always be needed by working families, recession or no.
- Plumbing: It’s not only a high-paying franchise option, it’s an essential service that will be needed even during hard times.
Affordable Luxuries
Just because times are hard and there are budget restrictions in place, it shouldn’t mean the absolute elimination of the occasional treat. In a recession, people may seriously cut back on their self-indulgences, but may splurge now and then. Some of the options for these franchise ideas include:
- Specialty Coffee: Coffee lovers may start brewing a little more at home, but an infrequent stop by their local coffee shop is not out of the question.
- Chocolate: Sure, shoppers can always grab a candy bar at the checkout counter in the grocery store, but when it comes to those special moments, such as Valentine’s Day, handmade chocolates are the best way to go.
- Ice Cream: An ice cream franchise will survive most market ups and downs, simply because an ice cream cone is an affordable treat everyone in the family can enjoy.
Counter-Cyclical Industries
Counter-cyclical industries are the unicorn during a recession. These are businesses where demand for their products and services actually goes up when the market is unsettled. Here are a few franchise opportunities in the counter-cyclical field:
- Discount Stores: When consumers are feeling the pinch in their bank accounts, sales at discount stores tend to soar. Many of the current ones offer every from food to clothing to household necessities, such as pet food and laundry detergent.
- Auto Parts: People who are trying to stretch their bucks may be tempted to try small, but necessary, car repairs at home, increasing the profits for auto parts stores.
- Fast Food: Popular in both economic upswings and downturns, fast food may become a cheaper alternative for families with children.
As you know, the economy is up or its down – or its sitting somewhere in the middle waiting to go up or down. As a potential franchise owner, learning which businesses are successful in all economic settings is invaluable.
Qualities of Recession-Proof Franchises
Choosing the franchise that matches your skill set, as well as offering a stable path towards success, takes time and research. You may have all the perfect qualities to take care of pre-school aged children. Perhaps you are really good at helping people understand difficult but necessary concepts and have a desire to help. These ideals are a good place to begin, but you also need to put an emphasis on choosing a franchisor with a proven track record of successful franchisees. Here are a few important things to look for in a potential partner:
- Recurring Revenue Model: The recurring revenue model means you’ll have a stable stream of income with regular billing cycles. This model also helps you build the necessary relationships with your customers.
- Low Discretionary Spending: Your franchise model should require you to spend little on “wants” and focus more on “needs” and “debt reduction”. After establishing a successful model, your discretionary spending may increase.
- Strong Brand Recognition: Look for franchise opportunities with strong brand recognition. After all, you don’t want to invent the wheel. You want to find a partner that has already done that and done such a good job of it, their name is well known and respected.
Factors to Consider when Choosing a Franchise
In addition the above items you need to check off your franchise research list, there may be other matters to explore. For example, many franchise operators need special certifications and licensing. It wouldn’t hurt to line up some preliminary financing options and use trusted friends, family and business people to help you decide on an appropriate course of action.
It’s critical to find a franchise partner that offers opportunities at a financial level you feel comfortable with, as well as remaining a viable and involved partner with plenty of training and ingoing support. Take a look around and decide what type of franchise is best for your small town. Here are a few things to consider:
- Initial Investment Requirements: How much is the initial investment requirement for your target franchises? Sometimes the cheapest is not always best. Remember, you want to open a business with an already established and trusted brand.
- Franchise Fees and Ongoing Operational Costs: How much are the franchise fees and ongoing operational costs, such as utilities, equipment and health insurance. Look for a franchisor who will help you map these costs out.
- Franchisor Training and Support: You want to be your own boss and opening a franchise can make that dream come true. But you also want and need ongoing training and support in your new endeavor, so choose a partner who is known for supporting its franchisees.
Benefits of Investing in a Recession-Proof Franchise
The benefits of investing in recession-proof businesses mainly consists of owning and operating a business with services and products that are always in demand, regardless of the economy. You’ll be able to build your company with long-term customers who don’t come and go, but stick with you as long as you offer them a good deal.
Challenges and Considerations of Franchise Investing
Although it is considerably easier to open a franchise than build a new business from the ground up, there are challenges some entrepreneurs like yourself may face. Common franchise problems can include working with an already established brand with strict controls, the employee turnover issues that plague all small companies and remaining up to date on legal compliance.
Guide to Choosing Recession-Proof Franchises and Investing Wisely
Ranked as the “number one” in personal lines in the United States, Freeway Insurance is an award-winning franchise opportunity in a recession-proof industry. If you are a self-starter, hard worker and want to help your community, a Freeway Insurance franchise may be right for you. Known for serving non-standard markets, this may be the perfect choice for your demographic and geographical location. Franchisees receive plenty of ongoing training and support.
If you decide an insurance franchise is worth looking into, fill out this form so we can follow up with you or give us a call at 877-822-3024.
