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Research Reveals Why Franchisees Succeed During Economic Downturns

From 2010 to 2012, an Australian based research report covered how successful and unsuccessful small businesses, both inside and outside of franchising, made their mark on the industry.  The research report, conducted by the Asia-Pacific Center for Franchising Excellence of Griffith University, focuses on how businesses handled difficult economic times and the factors that may have contributed to their survival.

The report revealed that franchisees and independent small business operators were both affected by economic downturns in a similar manner, and that the primary factors affecting success were more critically focused on the way individuals managed their situation.  Thus the personality of business operators figured highly in their success, from level of motivation to willingness and ability to adapt.  Having more freedom to acknowledge changing circumstances and act accordingly to them allows business operators to adapt to developing economic pressures or changes, which is an absolute benefit.

Franchisees thus find themselves in a particularly advantageous position if their franchise system allows for and promotes open discussion, involvement, feedback, and engagement.  Policies that permit franchisee adjustments to changing circumstances, while respecting the brand and concept, boost chances of success during trials.  The report also highlights higher success rates with franchisees working as sole operators, rather than within a partnership arrangement that may stifle their ability to adapt.  Those enjoying greater balance between secular and personal pursuits were also successful.  Freedom to enjoy life and the fruit of one’s own labors certainly figures into a healthy business psychology, allowing business operators to recharge their batteries.

As may naturally affect the health of a business, debt levels and access to credit both figured into successful businesses, and franchisees and independent business operators with lower debt levels and lower credit access actually appeared more successful according to the report.  This certainly calls for consideration when examining the perpetual cry for greater credit access, which actually can weigh heavy on unsuspecting business operators after acquiring cash, only to find out changing economic situations alter their ability to repay.  The focus of the report in this case is on prudence.  Franchisees may find greater success when they borrow only what they need and aim to minimize debt levels as much as possible as they enter their chosen franchise concept.

Based in Australia, this report may call attention to both geographically specific and universal trends concerning business operation success rates.  Thus certain trends may be unique to Australia’s business climate during 2010-2012 and certain trends may be universally experienced in other countries such as the United States.  Wherever the franchise industry operates there is always the potential that studies such as this reveal inclinations affecting the industry as a whole, and these revelations can benefit how potential franchisees and franchisors approach business development and daily operations.

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