The article below was kindly written for us by Shell LiveWIRE member Anthony O'Flynn, Marketing Executive for MyDestination.com.
Franchising in an economic downturn
If you pick up any newspaper today, you’ll no doubt find a story on the state of the economy, notably what a bad state it’s in. You could be forgiven for thinking that now is not the best time to expand your business and take risks in this uncertain economic climate. Furthermore, it has been well publicised that raising finance is increasingly difficult, with banks reluctant to lend and venture capitalists being more cautious with their investments.
At My Destination, we have seen continued growth throughout this period of recession and economic instability. We’ve been able to raise finance, grow the team, open a new office and are well on our way to becoming a leading travel brand. All this has been done through our business model: Franchising.
During economic periods like we are experiencing at the moment, many people are looking for a new opportunity in light of job insecurity, but do not have the capability to start their own business. Franchising can be a great way to run your own business, without having to go to banks or seek investment. Instead, you pay a fee to buy a franchise and you automatically become part of a successful business and have access to a support structure, with help provided in developing your franchise.
Support for franchisees
At My Destination, new franchisees are given assistance in creating their website and developing a social media strategy, as well as advice on how to make best use of advertising, marketing and revenue generation. Forums are provided on the admin system so that franchisees can communicate common issues and help each other. This level of support when joining a franchise negates the issue of lack of experience or know-how when starting a business from scratch. The risk of the business failing is significantly reduced, due to the level of support provided by a franchise network, meaning that in a time when financial risk is key in business decisions, franchising can provide a hugely safe financial option.
Raising capital is the biggest headache the majority of entrepreneurs have when starting and growing a business, as the financial climate has led to a severe lack of investment opportunities. Franchising your business can be an excellent means of gaining finance, not only through the sales of franchises, but also by allowing franchisees to buy into the business.
At My Destination, we successfully managed to raise £1.5 million last year, solely through our franchisees. Not only did this allow us to grow our business, but also meant we kept the equity of the business in the hands of people we know and trust, and who have the best interest of the business as a whole at heart. Often, when relying on finance from private investors, there can be conflicts of interests, with the investor only interested in yielding a profit. Raising finance through a franchise network provides a structure whereby the investors are in actual fact your employees, who of course want revenue generation, but also for the business to grow through the investment they have made.
Starting your own business is a hugely daunting prospect, with so many different considerations needed to be taken into account; the recession and subsequent troubled economic landscape has made this prospect even more daunting. Franchising really does represent an opportunity to be your own boss, and develop a successful and profitable business without the stresses and strains associated with starting a business in an economic downturn.
MyDestination.com is a network of travel websites, providing locally based information for travellers and tourists, trusted by over 10 million travellers a year.