Most executives who call me carry one worry underneath all the others. They are about to put real money into a business, and they wonder what happens to it when the economy turns.
It is a fair worry. It is also a question you can answer early, well before you sign anything.
Start With the Category, Then Look at the Brand
Every household runs an unwritten list of what gets cut first when money is tight and what gets protected. Your future customers already have that list. Your job is to learn where your business would sit on it.
A business on the protected side of that list still has slow quarters. It also keeps a floor underneath it.
A Lesson From a Guest on My Podcast
Drew McWilliams came on my show to talk about the preschool company he and his wife built from a single school into a network awarded across seventeen states.
Two details stayed with me. They opened their first location in 2007. They opened their second in 2009, in the middle of the financial crisis, when the people closest to them thought the timing was reckless. Both locations were profitable in their first year.
His explanation was simple. Families trim vacations, restaurant meals, and entertainment during hard years. They protect their children’s education. He had picked a category with a floor under it, and the floor held.
The Model Itself Can Remove Risk
The second thing he shared is worth more to a buyer than any income claim.
His insurance costs run a fraction of what comparable operators pay. Three deliberate design choices explain it. He serves walking, talking children rather than infants. Families handle meals at home, which keeps food service out of the business. Parents handle transportation, which keeps a vehicle fleet out of it.
Each choice removed a whole category of liability from the operation. The result shows up every year in a lower fixed cost and a smaller risk surface.
Most buyers evaluate a franchise by what it earns. The sharper question is what the model has already designed out.
Questions That Show You How a Model Handles Pressure
Ask these of the franchisor. Then ask the same questions of three existing owners.
- Which of your costs stay fixed, and which move with volume?
- What did unit revenue do in 2008, in 2020, and over the last twelve months?
- Which parts of the operation carry the most liability, and how does the model limit them?
- How much working capital does a typical owner need before the business covers itself?
- Which customers keep buying when their budget tightens?
The answers tell you far more about the next ten years than a top-line average ever will.
What This Means for Your Decision
A business people need holds up better than a business people enjoy. That single filter clears a surprising number of options off a list, and it does the work early, before you have spent months in discovery.
Look for demand that stays. Look for a model that has already removed the expensive risks. Then look at the brand.
If you are weighing a franchise and want a clear read on how it would hold up through a slow stretch, that is a good place to start a conversation.