If you’re relatively risk-averse and contemplating buying a franchise, you may want to look for a recession-resistant franchise. Although the U.S. is currently in the midst of the longest economic expansion in our history, experts say there are warning signs that the next recession may be on its way. Though no business is 100% recession-proof, it’s a wise move to look for a franchise that produces good results even in bad market conditions. Here are some examples:
Necessity vs. Luxury
When looking for a recession-resistant franchise, look at businesses that provides a necessary product or service. Consider, as an example, a hair salon. Regardless of the state of the economy, hair grows and most people like to keep theirs to a particular length. Thus, the demand for haircuts usually survives a downturn. Tax preparation services are another example of recession-resistant services. We all need to file a tax return each year, and many people find the process too complicated to do themselves. Lastly, child care is a necessary service in all economic conditions. Quality providers frequently operate at near-capacity in all market conditions.
Lower price tag
Most consumers decrease their spending patterns during a downturn. For this reason, lower-priced and fast-food restaurants will often thrive at the expense of more upscale, expensive establishments. Decreased spending patterns also benefit companies that sell discounted or used items (such as clothes, sports equipment, etc.) as an alternative to buying new items from a full-priced retailer.
Services paid for by insurance companies
Businesses that provide services that are covered or reimbursable by insurance frequently survive a recession. For example, when a pipe bursts and floods your basement, you’ll search for professional services to restore your space. If your car is damaged in an accident, you’ll want it fixed. In both cases, insurance will likely pay for at least part of the cost of these services. And for that reason, demand for such services will usually continue through a downturn.
Rapidly growing demand
Demographic or other trends can increase demand for particular services. Businesses providing such services often do very well even in tough times. Take, for example, the senior care industry. As Baby Boomers age, senior-care franchises seem to be growing in number and doing very well. Outplacement agencies for people who have been downsized are also expanding from growing demand.
The great escape
Businesses that offer entertainment or another “escape” from the daily grind may do well in grim times. Examples include movies, game/sport arcades, treats, or other indulgences. On the flip side, however, decreased consumer spending can affect these categories. Be sure to consider past and present industry fluctuations before making an investment decision.
Child- and pet-related services
In good times and bad, people spend money providing for cherished members of the family: kids and pets. Child-related franchises include supplemental education/tutoring and enrichment classes for art, music, and sports. In the pet sector, groomers and sellers of boutique accessories will likely flourish even during economic recessions.
There are many other examples of businesses that can thrive through fluctuations in the economy. A FranChoice franchise consultant can steer you in the right direction if you’re looking for a recession-resistant franchise. Our seasoned professionals have an especially good grasp on which industries and companies are faring the best. Their services are free and often save you time by helping you narrow your search.
No matter how you decide to research franchise opportunities, it’s essential to be thorough. Take all the time you need to ensure that you find a franchise that thrives during tough times. Then you’ll be one of the few who are happy with the economy during a recovery period.