Rising Interest Rates and the Effects on Franchising

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While rising interest rates are usually viewed with negativity, it is not all doom and gloom when it comes to rising interest rates and its effect on franchising.

While rising interest rates are usually viewed with negativity, it is not all doom and gloom when the Federal Reserve gradually increase the base rate. And while many businesses might shudder at the thought of incremental rises across the coming 12 to 24 months, what it really needs is for business owners to be aware of what is happening in the economy and understand what this means for franchising and for their industry in particular.

The Sign of a Healthier Market

Rising interest rates are usually the response to a rising market. As the economy improves, interest rates increase. When the economy is in decline, interest rates reduce. There is much talk of the Federal Reserve increasing interest rates because economists have seen improvements in the economy.

Lenders Become More Flexible

One thing that happens as interest rates rise is lending becomes a little easier. As every entrepreneur and business owner knows, one of the most difficult aspects of owning your own business is being able to generate the finance necessary to get off the ground.

While this does mean that repayments of a loan are higher because interest rates are higher, lenders are more flexible on their lending terms during periods of rising interest rates. When we consider that current interest rates have been at an all-time low, the Federal Reserve raising interest rates should not create too much deterrence when it comes to sourcing financing.

Adapt Quickly

Those franchises that can adapt quickly to market changes set themselves up to successfully ride through any difficulties that might arise within a rising interest rate economy. Now is not the time to pull back on marketing or advertising. Instead, ensure marketing and advertising is targeted to the right products and services and to the right customer market.

Instead of expanding and hiring, this might be the time to strategically plan for the future, consolidate and focus on strengthening your team.

Necessities Remain in Demand

In an upturned market, buyers have more confidence. However, while interest rates are on the rise, consumers tend to be a little more conservative. In this type of economy value for money and high-quality service is what draws customers. The necessities will always be in demand, so it pays to stick to what you do, and do it well.
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