Why a 2024 Recession Could Be a Win for Franchisees and Franchisors

As whispers of a 2024 recession grow louder, it’s not all gloom and doom for the franchise world. In fact, this could be a golden opportunity in disguise. Here’s the scoop on why a downturn might turn out to be a silver lining for savvy players in the franchise game and real estate space.

Real estate deals galore?

Let’s face it, nobody likes the word “recession.” But for those with an eye for opportunity, a downturn means real estate deals that could be too good to pass up. Lower property costs are a game-changer for franchisees looking to expand or enter a market, while the increase in available space at lower rates serves up the perfect opportunity to negotiate a rent reduction or other more favorable lease terms with your current landlord(s).

Staying savvy is more important than ever

Knowledge is power, especially when it comes to real estate policies and market dynamics. For franchisees, understanding the ins and outs of regional real estate policies and trends can be the difference between making a savvy investment and missing the boat. Stay sharp, stay informed, and use free resources to your advantage. Brokers are your friends!

Marketing: your secret weapon

When belts tighten, the first casualty often is the marketing budget. Big mistake. Staying visible and proactive in your marketing efforts during a recession is like planting a flag in the sand. It shows you’re resilient, confident, and not going away. This kind of attitude doesn’t just keep your current customers loyal – it attracts new ones who are impressed by your grit.

The soft landing scenario

2024 is not about a crash. It’s about a soft landing, a slowdown that’s more of a pause than a full stop. For franchisees, this is the time to strike, to make those calculated moves while others are still hesitating. Retail may have been throttled during the pandemic, but it has largely since recovered.

“Part of that is because the pandemic finally cleared off a lot of the dead weight, old, outdated, enclosed malls and leftover Kmarts,” says John Chang, National Director of Research and Advisory Services for Marcus & Millichap. “The other factor driving retail strong results is the record retail sales achieved over the past 18 months or so, with grocery and necessity retail centers delivering particularly strong results.”

Advantages and innovation in a tight market

Recruitment, reduced rent, prime locations – these are the franchisee’s trifecta in a recession. With a higher supply of quality workers, the ability to renegotiate leases, and access to locations that were once unattainable, franchisees are in a unique position to grow. Necessity breeds innovation, and a recession is the mother of necessity. Franchisees who can adapt, streamline their processes, and find new ways to thrive in tough times are the ones who will come out on top. It’s about evolving, not just surviving.

Smarter buying decisions

Recessions are nature’s way of pruning the industry and reminds us (and vendors) of the value of every dollar. For franchisees, this means getting better deals from suppliers and honing their purchasing decisions. No supplier wants to lose clients to competitors, especially during a downturn, so it’s your job to weaponize that leverage to negotiate the best deals, from inventory to technology.

Embrace the challenge!

A 2024 recession might not be the end of the world for franchisees and franchisors. In fact, it might just be the push the industry needs. With the right mindset, strategies, and a bit of resilience, this could be the perfect storm for growth and innovation. When the economy rebounds, those who made the smart moves during the downturn will be the ones leading the charge.

Jason Fefer is an Associate Director of Marcus & Millichap’s Net Leased Property Group on a large team alongside his partners Robert Narchi and Tyler Bindi. They structure sale-leasebacks and negotiate leases on behalf of some of the largest franchisees across all sectors including the restaurant, automotive, and retail space. He can be reached at 818-669-2388 or jason.fefer@marcusmillichap.com.