A combination of the Covid-19 pandemic and government policies mixed with rampant Congressional overspending and a turbulent war in Ukraine have contributed to the formation of an upcoming recession. In fact, we may already be in it. Typically defined as two consecutive quarters of negative economic growth, a recession spells tough times for businesses.
Fortunately, recessions are not the be-all and end-all, especially for businesses that know how to weather the storm, make appropriate cuts, and scale their operations pragmatically. Franchisees are no different. The less money there is for families to spend on outings, the less income franchisees can expect to see filling the till. All is not lost, however. Here’s how to handle a recession properly, and navigate the storm back into prosperous territory.
THE TRUTH ABOUT FRANCHISES DURING A RECESSION
Believe it or not, many franchises managed to pull through recessions with flying colours, and some even prospered. Restaurant franchises in particular are a good bet, since a good brand name is synonymous with comfort food. Plus, they give families a chance to get their minds off of the stress of a turbulent economic period, which is always a good thing. During the artificially created recession during the Covid-19 pandemic, restaurant franchises essentially learned how to reinvent the wheel with concepts such as door-stop delivery and touchless pickups.
This created a habit among the populace that nudged them firmly in the direction of online ordering apps, which continues to this day. Never forget that even during rocky economic times, people still intend to get out of the house once in a while, or at least order from their favorite restaurants to soothe their nerves. Being a franchisee during a recession period does not mean that your tables and seats will gather dust, while cobwebs form on your front door. Rather, they are remarkably resilient.
COST-EFFECTIVE PROS OF A RECESSION
Recessions hit nearly everyone equally, including you as a franchise owner. However, it’s important to remember how the markets play out during a recession period, and how they can create advantages for you to capitalize on. First, if you were planning to break ground on a new franchise location before the recession hit, don’t hit pause. When the real estate market contracts, the commercial side stalls, and that means lower prices for brick-and-mortar franchise locations.
Second, recessions always lead to higher levels of unemployment, which is a big problem. Not only can you help alleviate these levels by hiring, but you can also do so at a lower wage. The objective is not to short-change potential employees, but to correctly identify the need to hire staff, while balancing the added costs wrought on franchise owners during a recession period. There is plenty of time to reward hard-working employees when the markets have stabilized, and the recession has run its course. For now, your objective should be to keep costs down.
RECONNECT WITH YOUR PATRONS
Everyone has to deal with the fallout of a recession, whether rich, poor, or middle class. As a franchise owner, you can turn this to your advantage by reconnecting with your patrons in the form of excellent service, and fantastic promotions. Community-driven events are always a big hit with the local populace, since they reinstill old-fashioned values of togetherness and camaraderie. Consider sponsoring local events to get your franchise location into the headlines, while stressing the importance of coming together during a rough economic period.
Remember that the loss of even a single star on Google ratings is enough to trigger a precipitous drop in earnings, and it’s even worse during a recession. Be sure to double down on all the great things your franchise model has to offer. Service should be triple-A at all times, your food should be out of this world, and your atmosphere should be happy and upbeat. Make your patrons feel wonderful, show them a great time, fill their bellies with your best offerings, and you won’t have to worry about losing your customer base.
CUT COSTS WISELY
Cost-cutting measures are advisable during prosperous and terrible economic times, but they’re vital during a recession. Don’t wait for one to strike the economy, however. Rather, be proactive, and constantly on the lookout for areas where you can cut costs effectively, without harming day-to-day operations. Invest in your employees so that they are motivated to exceed standards and go the extra mile. Meanwhile, try to source ingredients and other items from cheaper sources, even if the differences seem negligible. They will add up considerably over time.
The franchisee who can cut costs like a wise sage will outperform their competition by a large margin. Even better, they’ll be in a stronger position to ward off the effects of a recession. A penny saved is a penny earned, and the more money sitting in the bank, the more padding you’ll have to wade through the turmoil of a recession and emerge in a stronger position once the storm has passed.
CONCLUSION
Like it or not, a recession is all but inevitable at this point, but that’s no reason to pack it in. Clever and adaptable franchisees who stick to the above tips will be able to endure everything a recession has to throw at them, and then some. Don’t believe economists with rose-tinted glasses who claim a recession isn’t going to happen. Rather, batten down your proverbial hatches and board up your fiscal windows early, so you can beat the onslaught. You’ve got this!
St. Louis Bar & Grill understands how recessions affect restaurant franchises, and we’ve been around long enough to experience a few of them in our time. Rest assured, franchisees who are interested in joining our family will be able to survive and thrive in equal measure, paving the way to expand their portfolios throughout the next decade, and beyond. Contact us today to learn more!
