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Although franchising is one of the sectors that has shown resilience and continues to grow in this
Tough economic environment, the sector is not without risk for franchisees and franchisors.

Franchise systems are based on a proven model that can be successfully replicated; these types of

Businesses are often considered less risky by entrepreneurs. The reality is that no franchise is

Immune to tough economic conditions – levels of success vary depending on the concept,

Strength of the brand, management and the industry.

For example, fast-food and restaurant franchises are currently outperforming their peers due to

The viability of the businesses and increased demand.

There are quite a few challenges that franchise owners should take into consideration during

These tough times.

• Rising costs.
Development of a business through franchising has an final goal; better financial prospects.
However, attain that goal takes time, tolerance and facing obstacles such as rising costs
mostly in the initial stages of expansion. This is one of the biggest fears facing the franchising
industry. Consumers already under pressure due to shrinking disposable income, it will be difficult
for Franchises to pass on these costs to them. Furthermore, increasing electricity costs, interest rates,
salaries, transport and maintenance costs Are putting more damage on the bottom line of franchises.

• Falling staff morale – when business conditions are not great, some franchises can often
not. Job security issues are also heightened during this time as some employees may
Fear losing their jobs. Management teams are an important part of building an organization.
In the successful running of a franchise business, the empire builders need to trust their
teams and hand over tasks. Growing and developing is as important for the franchisor as it
is for the business. Motivating staff and constantly updating them on how the business is doing is
extremely Important since quality customer service goes a long way during this time.

• Bad debts –
Simply, a bad debt is when one of your customers doesn’t pay your bill. A doubtful debt is when you
think a customer might not pay a bad debt is when they definitely would not pay, for example they
clash the bill or they have gone out of business.

Bad debts are bad news for business because they mean your business has less cash than you
designed for, and may not be able to afford to pay its own bills. In the worst case set-up, bad debts
can make you go out of business, too.