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Are some franchises “recession-proof?”

On Behalf of | Nov 16, 2022 | Franchise Law

Operating a business during an economic downturn can be an uneasy situation. Politicians, economists and consumer experts disagree about whether the United States is currently in a recession. But there is no doubt that inflation and rising interest rates are affecting all sectors of the economy.

What does this uncertainty mean for those who want to become a franchisee? The answer for those with the capital may be to pursue franchises considered “recession-proof.” Many of these companies operate in industries providing essential services and products and succeed, regardless of the economic climate.

Industries that thrive during times of economic challenges

While no single business is guaranteed success, some industries seem to thrive during recessions. People have been willing to pay for these goods and services even when money is tight:

  • Repair services
  • Business consulting
  • In-home senior care
  • Cleaning services
  • Food and beverage
  • Information technology or IT

Franchisees can benefit not only from these enterprises being recession-resistant but also reap the rewards from various types of support from franchisors. Instead of starting from scratch, you buy a proven model that includes operating details, training and marketing plans developed and tested by franchisors.

How much capital must you have?

Many believe they need hundreds of thousands of dollars to buy a franchise. That may be true for some options, such as quick-service restaurants or massage therapy businesses. As reported by CNBC, the average initial investment to open a franchise is $250,000, not including real estate.

But there are other more affordable options for prospective franchisees; some you can buy well under the average. Many are in industries considered recession-proof. Entrepreneur Magazine has a list of 24 top-ranked franchises for under $25,000. Rising interest rates may make these businesses desirable for those with less cash on hand.

Research and review are critical

Besides the price tag, it is essential to do extensive research about franchise options. There are many questions to ask yourself. What are your personal goals? What role do you want to play? What type of commitment are you willing to make? What kind of business do you want?

Once you figure that out, it’s time to choose a specific franchise. Here is where it is advisable to consult with an attorney focusing exclusively on franchise law. Experienced franchisee lawyers provide extensive reviews of all documents, identify red flags, and when necessary, can negotiate terms that protect you legally and financially.