Buying and selling seems to be on the increase

Before you get into the nuts and bolts of this blog I have to say it’s based on gut feel; I have no real evidence for what I’m about to say.

Perhaps you know something different and would like to comment with your viewpoint?

Anyway, before you decide, this is what I think.

Franchising is at a bit of a cross roads and I think we’re seeing different things beginning to emerge.

Right now it feels, across the franchise industry, that franchisors are finding it more and more difficult to recruit franchisees.  Unlike at the beginning of the recession when there were a ton of redundancies and franchisors’ pipelines were bulging (remember, though, with the Credit Crunch, potential franchisees were getting stuck in the pipeline and not necessarily following the process all the way through) we are now seeing a drop in the number of potential franchisees coming into the market place.

As the recession (allegedly) draws to a conclusion people are preferring to sit tight; waiting to see what happens next.  Rather than rock the boat in terms of resigning they are consolidating their position with their employers.

Add to this the fact that firms will naturally retain their talent, the entrants to the franchise market might not be the right sort of people in any case.

Of course, these things always work in cycles and, eventually, things will correct themselves.  Potential franchisees will be attracted back to the market place in due course.  ‘Due course’ in this case, I believe, could be anywhere from 2 to 5 years… and that’s a long time to wait if you are a franchisor.

However, there is an upside.

I get the sense that there is a strong trade at the moment in existing franchise businesses.  Certainly with the clients we work with it seems as though a fair proportion of the people we train are taking over existing franchise businesses by buying out the franchisee.  Or they are joining the business by buying a proportion of the shares.

Either way, franchisors are starting to embrace this new trade.  After all, any franchisor worth their salt will have clauses about sales of the business, fees for new entrants and training costs for people joining existing franchisees.

But there is another upside, apart from the buying and selling of these businesses.  And that is the strengthening of the franchisor’s network.  They can vet the new person coming in, choosing a new franchisee who better fits their current ethos.

It’s also fair to say that franchisees who sell are probably selling because they’re retiring or not enjoying it anymore.  Therefore, growth and royalty have usually stalled.  It’s rare that a new franchisee will buy a business and not want to kick start growth again.

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