The question, what are the best franchise resales to buy in a slow economy, is posed often by potential buyers of franchise businesses. Although there are some slight differences between independent businesses and franchise re-sales during a recession, the fundamentals are basically the same.
For instance, if all factors of individual management are equal, what matters mostly is the industry within which the franchise conducts business. If the industry suffers during an economic slowdown, so do most of those franchises associated with it. This has been seen with some gourmet coffee shops such as Dunkin Donuts and even some Starbucks. During tough economies many people are just not as eager to pay five or ten dollars for a cup of coffee. Pizza Hut and a number of other fast-food franchises have also had to shut down a number of units. Bennigans went completely bankrupt. The market became saturated with too many of these optional retail and high-priced restaurant units during a thriving economy, only to find that sales were not as robust when the recession set in.
So what are the industries that sustain revenues and, in some cases, thrive during downturns? Well, car dealerships that sell new vehicles usually do not. But auto repair shops have generally done well. When people begin tightening their belts, they pass on buying new vehicles and opt for better maintenance to protect the investment they have already made in their automobiles.
Similar to car maintenance and repair stores, home maintenance and repair stores also do well. Ace Hardware, for example, has shown good performance with solid growth over the past few years. People are choosing to improve their existing homes rather than purchasing new ones. Home Depot and Ace both have stellar customer service which helps to set them apart from many of their competitors. A company like Ace might be an opportunity for a buyer of a re-sale, because a failing store is likely a result of bad seller management. The primary concerns for a buyer of a franchise such as Ace would be location and actual consumer demographics and traffic.
Another industry that has performed well is health care and definitely senior, in-home care. Senior Helpers is a benchmark example of a company that has done well as far back as 2008, because they refrained from overbuilding and taking on too much debt during stronger economic times. Those solid fundamentals have been helping that franchise to grow during tough times.
Grocery stores and discount dollar stores also do well. Consumers turn to less-costly groceries to replace visits to bar and grill establishments when times are tough. More people have been preparing meals at home the past few years, even for social gatherings. Smart purchases keep the wallet a little fatter, and food is a need, not a want. This applies equally to franchises, such as the Dollar Tree, that sell basic staples. This little giant has done so well, with a 12.5% annual growth rate, that it has begun selling groceries in new stores, such as butter, hot dogs, and pizzas, all for a dollar a piece. During this recession, Dollar Tree stores have been popping up on every corner within the regions it has a presence. A Dollar Tree re-sale would be the exact type of business for a possible turnaround.
There are hundreds of individual franchises, way too many to list for the scope of this article. More importantly, the key is the industry, assuming the buyer does the normal due diligence of any specific franchise, its location, and its brand reputation. If these fundamentals are properly dissected, the industries involving conservative decisions to purchase goods that save money might provide lucrative opportunities in franchise re-sales. Customers put off buying new cars, new clothes, and visit restaurants less frequently. They also hire accountants to save taxes, and they sell their homes to get out from under burdensome mortgages. Accounting and real estate franchises, the companies with solid brand reliability, also provide good re-sale buys.
Therefore, it is not just the individual franchise on re-sale to which the buyer must pay attention, but also the overall industry with which it belongs for overall success.