In the early months of the recession, companies took major action to reduce their costs, often in the form of large-scale redundancies. Now, for most companies, the focus is keeping the pressure on the business to keep the costs down.
The main way to keep a business or a franchise network running at the lowest cost possible is to streamline all expenses so that you’re not paying unnecessary amounts. It is important to look at every area of your spending in order to ascertain if there’s anything extra you could cut out. For example, are you paying for ‘luxuries’ for your staff, like expensive coffee?
It can be very productive to communicate with your staff and franchisees about the costs you’re having to cut. Employees know that when times are hard their jobs are at risk, so they can be very helpful in coming up with new strategies to combat expenses. By creating a cost-saving ‘culture’ within the network, you can ensure that every level of the business is focused on keeping the expenses from piling up, from your franchisees’ employees to your head office team. By encouraging your franchisees to keep their own costs down, you can generate more profit from your network.
When you’re looking at reducing your costs, it is important to make sure that you are getting value for money with everything that you buy. If you’re paying a higher price, are you getting a higher quality product or service? Shop the market and make sure you’re really getting what you pay for.
As a franchise network, it is necessary to remember that the market is constantly changing, so you will constantly need to review every level of your expenditure so that you can keep running at maximum efficiency.
Tags: business planning, economy, finance, franchise, franchise business, franchise development, Franchise Finance, franchise growth, franchise information, franchise success, franchise tips, franchising in the uk, recession, steve jones, uk economy
Today I’m looking at what’s going on in the business world and how it might affect the franchise industry.
5 million people are paid less than the living wage
The ‘living wage’ is the basic amount that a person needs to earn to comfortably get by – in the UK at the moment this is calculated as £7.20 per hour, or £8.30 if you live in London. According to a survey by consultancy firm KPMG, one in five working adults in the UK are earning less than this amount. Advocates of the living wage, including London mayor Borris Johnson, claim that employees who earn the living wage, as opposed to the minimum wage of £6.19, are happier and better workers. KPMG state that as part of their research, they ‘have found that the improved motivation and performance, and the lower leaver and absentee rate amongst staff in receipt of a living wage means that the cost is offset and paying it is the right thing for our business.’
So, what does this mean for franchising? Those people who aren’t in receipt of a living wage are less likely to be able to scrape together the capital to pay a franchise fee, so they’re unlikely franchisees. Would you, as a franchisor, implement the living page for your employees and employees of your franchisees? It might mean higher costs to start with, but according to advocates, this can be offset by better employee results.
Work barely worthwhile for second earners because of childcare
So, you’re a two parent family with two children. Both of you work, and you both earn £22,000 per year. Strangely, due to a mixture of benefits, childcare costs, and taxes, you can end up only £4,000 better off than a similar family earning £20,000 less. The Resolution Foundation’s Counting the Costs of Childcare report shows that increasingly it pays to have one parent at home while the other works.
Franchising can offer ways around this – couples can, for instance, purchase a franchise together and work around their family commitments together. Alternatively, some franchises even offer the opportunity to take your child with you. One example of this is The Creation Station, who state that some of their franchisees bring their children to classes so that they can spend more time together. As the parents affected by this issue are generally of middle-income (earning between £17k and £42k) they would be in a resonable position to secure capital for investing in a franchise.
The economy’s on the rise!
According to Charlie Bean, deputy governor of the Bank of England, there is ‘reason for some optimism’ after recent GDP figures showed the economy grew 1.0% between July and December. We are taking his advice and not getting too excited, however, due to the possible ‘false positive’ induced by the fantastic success of the Olympics over the Summer.
Franchising has continued to thrive in spite of the recession, so there’s probably room for a spot of back-patting in the industry with news of national economic growth. Hopefully the growth will continue, and the economic climate will carry on improving.
Times are hard here in the UK, with the economy growing one minute and shrinking the next. High unemployment figures reflect the nation’s struggle to get by, and it is a difficult road back into work with dozens of people applying for any one vacancy.
Although it all may seem doom and gloom, one industry that has flourished amidst the chaos has been franchising. People in secure jobs are significantly less likely to throw them away and seize the franchise opportunity and the inherent risks, whereas it may be argued that people who are unemployed have less to lose. Redundancy payments can provide some of the starting capital necessary to buy your own franchise, and the lack of employment can provide suitable motivation for those who would have liked to purchase a franchise before but were too comfortable in their jobs.
A franchise can help you break into business without being completely on your own. In purchasing a franchise from a range of franchising opportunities you are getting a proven business formula, along with all the training and support to get your business up and running.
If you’re unemployed at the moment, it is a good time to sit back and take stock of your life and where you want your career to go. Do you want to go back to the comfort of a salaried job, or do you have a passion that you want to bring to your own business? Perhaps you’ve always fancied starting your own beauty business or wanted to do your own web design? As long as you’re enthusiastic and willing to put in long hours and hard work, a franchise could be for you, allowing you to get back into work without the endless chain of Job Centre visits and interviews. There are even some low cost franchises out there that may be ideal for someone who is facing the financial struggles of unemployment.
Banks are inclined to look favourably on first time business people wanting to buy their own franchise. With as many as 9 out of 10 franchises running profitable businesses, it pays for banks to take an interest. Franchises are substantially lower risk than original businesses, although it is always worth noting that no new business is completely without risk.
With all this in mind, could buying a franchise be right for you?