In 2019, Profits Will Go Up, Just Not at the Same Pace as Last Year

The recession is coming – a recession is coming?

The signs are there. While it may not be the recession, there will be a recession. How do we know? Economists are forecasting 2019 to be a slowdown year. Tariffs, rising costs that are not off-set for cost of living increases, steel – and many more topics that help impact the overall economy are all showing the signs.

For franchising, though, this is your opportunity; don’t waste it.

Far too often, when the going gets “tough” for franchisors, they scale back their marketing efforts. Why do we do this? We are conditioned to hunker down when battling a decline. However, what triggers franchising growth is often against the traditional norm. Here’s what I would consider:

Shaky Job Security Equals More Buyers

Franchising is not triggered by a positive moment – most of the time. New franchisees (not business buyers who are multi-unit quickly scaling or multi-unit buyers of distressed units) are triggered by something perceived as negative. In a marketplace where access to capital is limited, this trigger could be created by layoffs, firings or deaths. Unlike the trigger moment of buying a home or buying a car, often times the trigger is life-altering.

However, many in franchise sales treat the buying journey like it is buying a car or a house.

Once you change your viewpoint on the trigger and start to identify the why behind buying a franchise, then you can adjust your franchise sales marketing to be compelling to the right audience.

The dip in 2019 won’t be drastic, predict many economists. It will be subtle. One cause for it will be the fact that businesses won’t make as much in 2019 as they did in 2018. If you aren’t growing, then a “you are dying” mentality will settle in, and businesses will look to cut excess fat. In moments like that, it is a numbers and paper game. Meaning, the easiest pathway will be cuts within middle management – those who are good, but not perceived to change the projectile of growth for the business.

When that happens, your ideal target comes out of the woods looking to go into business for themselves but not by themselves.

This can create a great moment for franchising.

And this time around, it may be greater than any time prior. Why? Brands spent the last five years spending a ton of money educating people that franchising exists. My prediction is that there are tons of people who have thought about franchising, but have not pulled the trigger. This means they are waiting – waiting for the right moment. 2019 could be it.

If There Are More Buyers, Spend More Dollars

In 2008, brands cut back. Some so much that they had to eventually turn out the lights. What did franchise brands do wrong in this moment? They didn’t understand the persona of the buyer (buying a life change, not a car) and didn’t save enough funds for a rainy day that is actually a very sunny moment for franchising.

I am starting to see brands scale back their spending now, but why? All indicators point toward spending more:

1. There are more franchise brands than ever. If you want the prospect to know your brand, then spend to make sure they know your brand.
2. Just because they don’t buy immediately doesn’t mean your money was wasted. This is not selling a widget, people, this is selling a huge life decision. Many of those in franchise sales have never bought a franchise. Why? It’s a huge life decision.
3. Other brands are slowing down their spending because they spent X and didn’t get Y. That’s your opportunity.
4. Access to data is incredible. You can figure out your exact persona. You can target like-minded individuals. You can track similar investment brands and market after they sold a location in a market. The data shows you the path.

Don’t Discount 2018 Activities as Lost Cause

Read point three above – “I spent X and didn’t get Y.” People don’t make a life decision on a whim. They need time to think. They need to talk with validators. Most franchisees are first time business owners. That’s a big freakin’ move.

Don’t discount what you spent in 2018. The buyer is taking more time than ever to decide. They are Googling your brand. They are talking with more people. Their job security makes it so they are not in a rush.

If you understand the marathon you are in, then, you have a better shot at winning.

It’s still the same reasons for the buyer, too. They must believe in your product. They must believe in your leadership. They must trust the investment and return. They must be able to open where they want. And your franchisees better validate.

If you have any dings on the above, increase your budget. Your cost per deal will go up. And, don’t rely on garbage average data (the average cost per deal is between $8,000 - $12,000). The true numbers are specific to your brand, and that average is for all brands – low investment to high. Your budget will need to reflect your standing in the marketplace.

You want to win on the next bump? Plan now and attack the marketplace hard, even if $$$ decrease. There is still access to capital and lines of credit. Make sure you have the access so that when the buyers start coming out of the woodwork, you can have enough money to spend educating them why your brand makes sense. And remember, perception is reality. If you are spending to put your brand everywhere when everyone else is scaling back, that perception will help make the prospect comfortable in their decision to buy your brand.