According to the research of FRANCHISE SUCCESS magazine for 2010, franchising is resistant to the crisis while at the same time it offers great opportunities to the well organized networks. The champions in development are those companies that reorganized their network in time, leveraged their human resources, saw the opportunity in the crisis and invested in Multi Unit and Multi brand concepts.
During these past few years not only the Greek, but the international economy in general, is facing recession. This is due to lack of strategy, planning and willingness for finding solutions when the problems were still manageable. Regarding franchising in Greece, despite the crisis and the closure of several stores, franchise concepts managed to increase their market share by keeping their units operational.
Some of the challenges that franchising and networks in Greece have to face are the reduction of demand, the complete absence of financial stability, the redesigning of competition in each sector etc. These features have influenced the creation of new networks and concepts and affected the operation and development of the existing networks. Another crucial problem has been the difficulty in credit access and financing for new business. The requirements on behalf of the banks and the leasing companies prevent new entrepreneurs from investing in a new business. Also, the estimated period to achieve break even has increased and it is imperative for the entrepreneur to possess a great deal of capital of his own. In this environment that alternates dramatically, the change in consumer behavior is another critical factor that reduces the will for investing.
In this constantly changing environment, companies can take the advantage of the current situation and increase their market share. They can develop their network through several channels where franchising is really powerful, enhance their competitiveness and take the advantage of the redistribution of the market shares. Conversion Franchise is still one of the most reliable tools for development, especially in retail. Another valuable factor in the current situation is the increased number of professionals that want to start a new business instead of being employees. Franchise networks can take the advantage of those qualified, motivated and talented professionals and include them in their network with the right guidance and support.
It is obvious that franchising continues to constitute, under specific conditions, a tool for successful development. According to the research of FRANCHISE SUCCESS, in which the sample consisted of 450 brands (that equals to 16.856 units) for the decade 1999-2010, the number of franchise stores increases every year. What is affected by recession and instability is the rate and the percentage change of this increase. On the other hand, the number of company owned stores is reducing. This is due to reorganization of the networks, refranchising and of course due to new openings, which means that entrepreneurs continue investing on franchising despite the difficulties. Franchise systems with a strategic plan have invested on reorganization of their network, for instance they relocated company owned stores into central markets, while they enhanced their presence in the periphery with franchise stores operated by new franchisees or highly motivated managers who turned into franchisees. Multi unit franchisees play also an important role to the increasing of franchise stores.
According to the results of the research, after 2005 the relation between franchise stores and company owned stores is reverse. Every year franchise stores increase while company owned stores decrease. This shows that franchising is an important tool for development that if is used by companies correctly, then the development will be successful and the network profitable. This is why the indicators of mature and well organized networks are positive.
FRANCHISE SUCCESS also undertook a special research for the 1st semester of 2011. According to the sample and the results, there was an increase in the franchise units. This positive indicator gives the certainty that the increase will continue for the rest of the year. The importance of this increase is more obvious when compared to the progress of the independent stores, which is a negative progress.
In total, the increase of all the units was 0.1%. More specifically, the sectors that showed better performance were: Grocery Retailers (basically convenience stores) 1.35%, Clothing and shoes 5.29% and Services 3.36%. What is worth mentioning is the fact that in Grocery Retailers sector there was a significant reduction of company owned stores and a significant increase of franchise stores. This result is the perfect example to understand the importance of reorganization, strategic planning and market research during a period of crisis in order to render a network profitable.