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What Franchisors Should Expect From The Economy This Election Year
FRANdata CEO gives advice on how franchisors should shift their strategy in 2016.
In order to help franchisors prepare for the economy in the upcoming election year, brands must look at what happens historically. This economic research can help predict how franchisors should aim to grow their business in the year ahead.
According to the Federal Reserve, the average growth of election cycles from the past 50 to 60 years has seen the first year of a presidency having the most economic growth. In the second year, that growth starts to wane, and by the fourth year growth has slowed down.
In addition to what history has indicated, we must consider looking at the economic landscape in terms of if this is a normal election year, or if there are factors that make 2016 different. To find that out, there are a few indicators to examine.
Darrel Johnson, CEO of FRANdata, explained that it is unlikely at this point in the election cycle that Congress will do anything significant to change the slow growth. A new monetary policy that would stimulate the economy also looks like an improbable solution.
"The Federal Reserve has done everything they can, and domestically there is nothing that will drive growth," said Johnson.
During this time of year, it’s also important to look at the international community. According to Johnson, China and India’s economies are not strong enough factors to grow the economy any faster than 2 to 3 percent GDP growth.
“There is no single indicator that suggests we will have any faster growth in 2016 from an economic or historical perspective,” said Johnson.
What does this mean for franchisors when we are in a period of sluggish economic growth? "From a franchise’s perspective, you go from a growth model to a market share model," said Johnson.
In a battle for sales, franchisors should look to stand out competitively rather than gain customers in new markets since the year will be a slower year for development. Focusing on what makes your business unique and differentiating your business from competitors will be the name of the game in 2016.
Franchisors should start to put more emphasis on their marketing strategy and franchisee development to gain market share.
Although, Johnson mentions that there are exceptions—that this can differ by sector. In 2016, with more baby boomers starting to stay at home, there is a much larger need for home care. Fitness trends for millennials are increasing in the broader fitness area as well. This type of sector growth can often be driven by specific demographics.
“Focusing on market share and operating efficiency is how most franchises are going to win in 2016,” said Johnson.
According to Johnson, franchising is a very adaptable type of business model, which works in franchisors favor when it comes to uncertain economic growth.
Shifting to the correct strategy next year will be key for franchisors to grow their businesses in a tough year economically.
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