A new wave of franchise owners is expected in 2023
Those with an entrepreneurial spirit often seek to indulge their passion through business ownership. Franchising can be very promising for those who haven’t started a business. But, it is important to look before you leap. Do your due diligence and compare opportunities before making an investment. Your new business should ignite your passion and fit your skills, interests, lifestyle, and financial goals.
During the 2008 recession and the 2020 Covid-19 pandemic, many employees experienced layoffs or chose to leave corporate America to start their own businesses. Combining their corporate backgrounds and professional skills with a franchise’s proven system and support proved to be a winning combination for many. Entrepreneurship comes with some risks, particularly when facing a possible recession. However, in 2023, a new wave of eager franchisees is expected to capitalize on exciting new business opportunities.1
Finding the best recession-proof franchise for You
Hundreds of franchises claim to be “the best.” So, how can you weed through the noise to find the right franchise fit for you? Franchise Business Review surveyed 36,460 franchise owners representing over 365 leading franchise brands to determine the award winners on our 2023 Top Recession-Proof Franchises list. The franchises on this year’s list not only have outstanding franchisee satisfaction ratings, as reported by the franchise owners themselves, but they also demonstrate a strong potential to outperform their competitors during challenging economic times.
Explore recession-proof franchises by category:
A Due Diligence Checklist
Our recession-proof list is a great place to start your exploration into franchising! Here are some key things to focus on during your research when comparing franchise opportunities, speaking with franchise owners, and interviewing the franchisor.
Profitability and bench strength
More aspiring entrepreneurs are looking for resilient business opportunities that offer substantial returns. If you are interested in buying a business, the profitability potential of that business is likely one of your greatest concerns. Estimating a business’s financial potential can be nuanced. Luckily, there are resources to turn to for evidence of past profits that can help you forecast your profit potential: Inspect item 19 of the Franchise Disclosure Document (FDD) closely and speak with other franchise owners about how long it took to become profitable and their long-term profitability.
Although labor shortages and supply chain challenges continue to impact the profit margins of many businesses, a franchisor may be able to negotiate better prices for supplies and materials due to their larger purchasing power and established vendor relationships. This strengthens the entire system and can help lower costs and increase profit margins for franchise owners.
In-demand products and services
Franchising has historically performed well across all sectors despite economic volatility. However, some tend to be more recession-resistant than others. “Franchises in the need-to-have, rather than the nice-to-have, segments are more likely to fare well during a recession,” said Eric Stites, CEO of Franchise Business Review. “The products and services consumers are less likely to cut back on during a downturn include childcare, education, elder services, pet services, home repair, business services—even restaurant franchises. Americans love to dine out. That’s not going to change anytime soon. In response to prior recessions and the pandemic, many restaurants developed new models to serve diners better thanks to delivery, curbside pickup, and additional drive-through capacities. Look for a franchise that offers in-demand products or services that can be agile and innovative in response to changing market conditions.”
Franchisor guidance and support
One of the biggest reasons people turn to franchising rather than “going it alone” is the stability a franchise system can offer. Most franchisors provide training and ongoing support to their franchisees. Franchisor support can be especially valuable during an economic downturn when business owners may need to adapt their operations to changing market conditions. Ask franchise owners about the initial and ongoing training and support provided, and if they can rely on their franchisors for guidance and support during challenging times. When speaking with the franchisor, ask for examples of their responsiveness to unanticipated market changes, supply chain challenges, and other hurdles and how they support franchise owners during challenging economic times.
We invite you to explore the award-winning franchises on our Top Recession-Proof Franchises list as part of your due diligence.
1Forbes: Franchising Trends To Be On The Lookout For In 2023