HOW TO OVERCOME AN INDUSTRY-WIDE SALES SLUMP: Tips for franchisors and franchisees on what your franchise can do to survive an industry downturn.

Author:Dunaway, Craig
 
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All industries go through a cyclical period in which sales are robust or other periods in which sales are lower. Franchises are no exception. For example, the restaurant industry has experienced stagnant sales, with most sales growth coming from price increases (inflation) alone. Therefore, it's important for both franchisors and franchisees to know what steps to take to survive an industry downturn.

From a franchisor perspective, it is your job to provide your franchisees with the tools they need to succeed. During a sales slump, this means you should provide both the support and factual information franchisees need to weather lower sales until the industry rebounds while preserving your brand and identity.

Franchisors:

Don't change your brand.

While every brand must remain relevant to consumers by adapting to changing consumer habits, an industry downturn is not necessarily the best time to make major changes to your brand. Don't jump on the bandwagon with the latest fads by adding new products or services that don't fit with your brand's overall strategy. It confuses guests, frustrates franchisees if not well thought out, and may have the exact opposite effect versus what you were trying to accomplish.

Avoid the temptation to cut costs by lowering quality. During the economic downturn in 2008, a well-respected hamburger chain decreased the size of their burgers to counteract the rising price of the meat. The customer was getting less product for the same cost, which seemed illogical at the time and now. If they were offering a quality product that tasted great, the consumer would have understood and been willing to pay the premium price.

Don't cut back on personnel or training either--customers will not expect less or tolerate worse service just because your industry is slumping and you're having difficulties hiring, training or retaining employees.

Similarly, if your brand has not historically discounted, a sales slump is not the time to start offering heavy discounts. You want to reach customers, but not at the expense of lowering your standards and prices by sending a message that conflicts with your brand strategy. You are planning on weathering the downturn, and any major changes you make to the brand during it will have to be dealt with once the industry rebounds.

Be transparent with franchisees.

Reassuring your franchisees with consistent and candid communication is a requirement during an industry downturn. Franchisees will want...

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