MSNBC published an interesting article stating that Franchisors in the US are now cutting thier Franchise Fees to create incentives to attract investment (see the article here: http://www.msnbc.msn.com/id/28071010/).
This is a positive reaction to hard economic times and thankfully, contrary to something I see all too often with franchise systems, that the Franchisor literally prices themselves out of, what could be, a very lucrative business scheme for all concerned.
As the Franchisor is going to be sharing in the profitability of any new Franchisee is is important that all Franchisor's literally create the "recipes for success" in all their Franchisees. In hard economic times this includes:
1. Lower front end costs - Franchisors should consider lowering initial franchise fees to attract new investment.
2. Find cheaper subsitutes (and suppliers) - Ofter Franchisors, before they were Franchisors, know of a cheaper way to do things, there is always way to be a 'little leaner' without sacrificing too much quality. Chances are the Franchisor knows of these 'shortcuts' because they had to take them in the 'early days' when they were just a single store front.
3. Delay Franchisee Incorporation - Often you cannot deduct business losses of a corporation from your other personal income. Delaying incorporation assures that, if there are few hard years, you will at least have the benefit of a personal deduction and reduces the administrative, legal and accounting expenses associated with incorporation.
4. Eliminate Guess Work and get new Employees up to Speed - Have an up to date procedure manual to increase the efficiency of employees. A recession means that there should be lots of people willing to work, but being able to training he effectively and quickly is a key to profitability.
5. Use your Buying Power - All Franchise systems have buying power, the Franchisor and Franchisee should leverage this advantage in tough economic times.
