What tariffs may mean for your franchise
US business owners that import or export goods abroad...
US business owners that import or export goods abroad could soon see their import costs rise and their overseas business drop as new tariffs come into effect. Goods imported from China will now attract a 20% tariff, while goods from Canada and Mexico may cost business owners 25% in tariffs. What are your options?
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Raise your prices
The simplest solution is to increase prices on these overseas-sourced goods by 25% to counteract your own cost increases. However, this option is likely to be very unpalatable for your customers, who may choose to boycott those goods and potentially even your business. It is important to remember that the average citizen does not have unlimited funds and will need to prioritize their spending to ensure that they live within their means.
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Explore options for domestic sourcing
In some cases, you may be able to source the same or similar goods from domestic sources. Perhaps you had previously discounted local suppliers based on cost, but these tariffs may now make their offering seem like a worthwhile investment. Always remember that if you are contractually required to source your goods from a specific supplier, you will need to seek specific legal advice to either modify or break that contract based on these unexpected external forces.
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Modify your offering
It may be possible for you to modify your offering to avoid the need to import certain goods into the country without causing your customers to become dissatisfied. Perhaps you could offer an alternative product that performs the same function but is made by a different manufacturer or operates in a slightly different manner. Again, if you are likely to need to renegotiate contracts in order to modify your offering, you should seek legal advice.
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Cash in insurance policies
If you have a business insurance policy that will pay out in the event of external market forces or regulatory changes materially impacting your business, now is the time to cash these in and use the money to either renegotiate new contracts or fund the increased costs that your business is experiencing. If you do not have this type of insurance policy, speak to your franchisor to determine whether they have suitable insurance for the brand as a whole that may help you weather this storm.
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Stay calm
It is easy to become overwhelmed when events like this threaten the viability of your business, but it is important to stay calm, communicate clearly and stay on top of the latest developments. Your franchisor and local business advisors will do their best to keep you in business if you let them.
