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.
In a recent BBC report, official unemployment figures have shown a fall of 51,000 in the three months to April 2012. This will be encouraging news to many that are still struggling to find work in an economy that is still battling to keep its head above water.
Many people have been looking to starting their own business after experiencing a job market which averages 23 applicants for every job available. With this kind of competition its no surprise that many are frustrated and are considering other avenues such as self employment and starting their own business. But starting you own business from scratch in difficult economic conditions can be quite a challenge.
Franchising might provide some hope for those stuck in the unemployment trap and looking for a way out. At the launch of Big Society Capital in April 2012, the PM, David Cameron, commended the work of FranchisingWorks, an innovative social enterprise that tackles unemployment by helping create new businesses and jobs through franchising. This kind of acknowledgement from the figureheads in the government along initiates such as the recently announced young peoples business start up loan scheme and with the governments commitment to supporting franchising as a route back into work, is great news for franchising as a whole.
If you would like to know more about starting a franchise, read our 10 Franchise Tips series and then begin by researching from over 100 franchises we currently have a available from our franchise directory.