In order to attract and assist franchisees, some systems are cutting franchise fees and other costs–sometimes by as much as two-thirds.
Previously few recessions, franchises fared well–even thrived–as ex-corporate workers sought more autonomy and personal reward than their previous jobs offered. But this downturn feels markedly different, and prospective franchisees as if you are understandably wary of rushing right into a long-term investment.
Many franchisors have noted this difference. Some are responding with pr announcements that sound almost zealously optimistic, if tinged with fear–proclaiming that their systems are "booming in the slow economy," their industry is "recession resistant" and/or their franchisees are continuing to "prosper in these uncertain times." But just how much of this is semi-desperate spin and just how much is reality?
If you are tapping your precious savings, limited severance packages and restricted usage of credit to get a franchise, you want support, not spin. Thankfully, some franchisors are dishing out a lot more than smooth words–they’re providing sharp incentives.
Pet Butler, for just one, is cutting its franchise fee by two-thirds, to significantly less than $10,000, and is even accepting credit card payments for the franchise fee. Also, they’ve temporarily eliminated the required minimum marketing requirements, that used to be $30,000 in a franchisee’s first year and $24,000 every year thereafter. Now, franchisees still need to pay minimum marketing fees, but no more need to make these additional investments.
According to recent reports, a few pizza franchises are also upgrading their game by decreasing their costs. Papa John’s has decreased the cost of cheese it supplies to franchisees, lowering food costs by 1.4 percent. The franchise in addition has absorbed higher charges for diesel fuel for food deliveries to franchisees plus some commodity charges for dough and other ingredients. It has provided about $4 million of targeted royalty relief and marketing support to franchisees this season. And in another helpful move, Papa John’s will lend financial assistance in some instances where underperforming franchise units are used in new or existing franchisees. Domino’s Pizza, meanwhile, is allowing a few of its struggling franchisees to defer payments to the franchisor.
If you’re a fantastic candidate who doesn’t eventually have the savings or credit to get a franchise, Snap-on Tools might be able to will give you "gateway" franchise for less than $17,000 to $25,000. In addition they offer financing directly through the franchise.
Will more franchisors start decreasing franchise fees and operating costs? Do you want to see all good franchisors come to aid from credit-crunched but otherwise qualified and success-driven franchisees? That remains to be observed. For the time being, as you start your franchise search in this economy, don’t just ask you skill for franchisors–ask what they are able to do for you personally.
https://yatto.ru readers: How did you finance your franchise? In this tight credit market, franchisees must be more creative than ever before in financing their franchise. What’s the most creative approach you took to find franchise funding, or what’s the most creative financing story you’ve heard from another franchisee?
E-mail your stories to
[email protected]://yatto.ru. Then check back again to this column; within an upcoming month, we’ll reveal the most creative financing stories of the bunch.
Janean Chun is articles editor at
Entrepreneur, where she’s been within the franchising beat for a lot more than 15 years. She could be reached at [email protected]://yatto.ru.