Sunday, August 14, 2005

Somebody Has To Say It...

When someone decides that it's time for him to take charge of his future and invest in a franchise, many hours are spent trying to select the best franchise system. Naturally this is a critical process and one that we devote hundreds of pages to on The Franchise Doctor's website.

However, until now, no one in the franchising industry seems to be addressing a very real factor that should be reviewed by each and every franchise buyer and their advisers. That factor is the impact that future terrorist acts may have upon a franchise system and the unit owned by the investor.

In June 2005, Senator Richard Lugar, Chairman of the Senate Foreign Relations Committee released The Lugar Survey On Proliferation Threats and Responses. This forty-four page report was compiled from surveys submitted to hundreds of experts on national security, both in the US, and around the world.

A chilling summary of this report states, "the odds of some type of Weapons of Mass Destruction attack occurring during the next decade are extremely high." In addition, "the survey responses suggest that the estimated risk of a WMD attack over five years is as high as 50%. Over ten years this risk expands to as much as 70%." (For the full report.)

Of course, these words seemed too prophetic to the residents of London during the month of July.

If you're evaluating an industry in which to purchase a franchise, you would be wise to evaluate the probable impact of another terrorist attack on US soil. Naturally, the city where you locate may also have an effect on your risk. Many businesses, from restaurants to dry cleaners to printers were adversely impacted by the 9/11 attacks in Manhattan. Even a year or two later when things seemed to have returned to "normal," there is less a need for many services in the immediate area of the World Trade Center towers due to their loss and the decrease in workday traffic.

Using the past to predict the future, we can surmise that the public will be less eager to fly, travel outside the US, visit major cities, utilize mass transportation, or even dine out depending on the nature of the attack.

Before you invest you should carefully evaluate the potential impact of another terrorist attack. If your business relies on travel, tourism, or entertainment you may decide to reevaluate your focus.

Most Americans tend to stay near home when safety is an issue. This can improve performance for businesses that serve their local communities compared with those who capitalize on tourists and business travelers. In addition, those offering home services may benefit from this phenomenon known as "cacooning."

After you and your advisors evaluate how you feel another terrorist attack could impact a franchise system that you are evaluating, you should ask the representatives of the franchise system point-blank how they anticipate such an event will change the sales growth curve of franchises in their system.

With all the variables that you must judge when choosing how to plan your business future, it's frustrating to have to add another layer of uncertainty. However, to fail to do so, would be foolhardy.