Business service franchises were hard hit during the recession. Will this franchise group make a comeback?
When economic times are bad and
businesses, especially small businesses need competent advice
the opposite usually happens. They cut back expenses and are
reluctant to use these types of services. Larger companies have
the organization and structure where technology and increased
productivity can deliver savings. Small businesses tend to
operate more hand to mouth and have less opportunity for
increasing productivity. Itís difficult for a franchisee that
provides consulting services to obtain an engagement with larger
companies. As a result, franchisees that provide consulting and
business coaching services find it very difficult to land
engagements with large or medium size companies and as a result
must target smaller businesses. The same can be said for other
franchises in the business service sector that includes;
advertising and training services, signage production franchises
and business coaching and consulting. This result is that these
franchises tend to be more directly affected during economic
A review of business service
franchises during the past 3 years found that the 4 major
franchise segments, business coaching, consulting, signage and
advertising franchises had negative growth of 4%. However, as
the economy rebounds there should be improved growth for these
franchises. According to Sageworks, which provides software and
consulting services to private business, small-business company
sales fell 3.8% on average in the first 10 months of 2009 and
the trend continued for another 2 years. This hurts business
services franchise concepts.
How Small Business Owners React:
- The majority of small business owners react with a
survival mentality during hard economic times. Faced with
declining revenues and profits most small business owners
will reduce marketing activities when the correct approach
should be to increase advertising and marketing activities.
- There will be an effort to protect cash flow. This means
cutting back on staff and reducing other expenses.
Investments in technology and coaching that have the
potential to improve operations and increase productivity
will be curtailed which is the opposite of what should be
- Training programs for the small business staff by third
parties will be postponed or cancelled.
- Improvements to plant and equipment will be halted.
Franchisees in the signage business can be hard pressed to
successfully market their products and services.
The end result is that some franchisees may be forced to
reduce their staff and scale back their marketing activities.
The Good News:
As the economy continues to rebound so
too should franchisees in the B2B area as well. According to
analysts at William Blair the small consulting industry is
supposed to grow by 5.9% through 2016. Many corporations are
turning to small consulting firms to outsource some of their
functions or to fix some of their problems. The vicious circle
described above should turn positive as small business owners
generate more revenues and transition from a survival mentality
to a growth strategy. Franchisees ranging from business coaching
to producing signage and promotional materials should see
© 2013 FranchiseKnowHow, LLC
Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at