The Brexit result was unexpected and took financial and political leaders by surprise. We can already see the impact on financial markets and their volatility and the impact on exchange rates in Britain, Europe and around the world.The British Prime Minister has already resigned and the British Opposition is in disarray. What relevance is all of his to global franchise activity?How will this impact global and domestic franchising?
Will Brexit damage franchise growth?
In economies like the US and Australia franchising will, in my view, be relatively insulated from substantial economic turmoil as each of these economies are in reasonable shape. Asia is also somewhat isolated from the EU turmoil.
However, fear of Brexit fallout will mean many decisions will be put on hold as people see the future value of their investments may be in question and are waiting for a sign of stability. This will not come soon and so those considering franchising their businesses or those considering buying a franchise will be influenced by these uncertain times.
I see that decision making around EU commercial matters will be slow and those who are not confident will simply put off decisions and decide to do nothing. The Northern Summer is upon us so many in Europe will simply go on holidays and hope things are better in the Fall.
As the impact of Brexit on global markets will be uncertain and Britain will not appoint a new Prime Minister until August, the question of when Brexit will commence is up in the air and how the British exit from the EU will play out may not be clarified until 2017 and this uncertainty will effect consumer confidence and employment opportunities.
This will mean that franchisors and their franchisees who are not committed to growth and who do not have a compelling offer to their consumers and prospective franchisees, and who do not have their strategy, structure, business and economic model fully developed or articulated will find that this post-Brexit period to be very challenging.
During times of uncertainty, fear and doubt will override logic.
The result will be that only the best prepared and marketed franchise companies will enjoy growth. The good news is that many franchisors will decide to do nothing and this will leave opportunities to those franchisors who have a longer term view of their business, are prepared to invest in growth, and have a business model that can perform in a downturn or even a recession.
One thing is for sure.
Brexit will depress interest rates around the world leaving cash earning virtually nothing and inflation will actually diminish the value of cash holdings of those who continue to hold cash. In fact we see on the horizon that banks in some markets will actually charge depositors to hold cash!!!
The smart money will be channelled into profit making enterprises and so the opportunity for franchisors with a viable business model and the marketing and branding strategies to spend on establish new units and advertise and promote single unit and Master franchise opportunities in their markets across the world will continue to grow.
And Brexit will mean those interested in selling their franchise or the whole network will enjoy strong buyer demand.
Rod Young | DC Strategy