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Has Coronavirus Killed the Appeal of Franchising…Or Made it Stronger?

When the pandemic first struck in early 2020, there were waves of businesses unable to pay rent, purchase supplies, or make a profit. The sudden increase in bankruptcies has a lot of small business owners concerned. However, the future for franchise owners isn't quite as grim as it might seem. If you're considering a franchise, it's important to understand the impact of COVID.

COVID's Effect on Franchises

The pandemic has greatly altered just about every aspect of life. Everyday activities, like meeting friends for a cup of coffee or dropping by a restaurant for lunch, might not be possible now. This has definitely resulted in a big change to the franchise industry. In 2020 alone, over 110,000 eating and drinking establishments ended up closing.[2] Furthermore, unemployment statistics show that roughly 18% of the nation's labor force is out of work.

With these concerning statistics, it's no surprise that franchise investors feel nervous. While most franchisors are still operating at normal capacity, some have temporarily postponed new business development. Other franchisors have had to start offering incentives because there are fewer franchise candidates available.[1]

Franchise Experts Say Now Is a Good Time to Invest

Things might look like they're slowing down; however, we must consider the alternative. We are here to give you some insider information on how the major franchisors are running. Most of the big companies have made some changes, like being more flexible about how long a business has to open and switching to virtual discovery days. However, they're still planning on growing and developing new businesses at the same rate. Over 80% of franchise owners surveyed say they will be going ahead with their current plans.[1]

Now is actually an ideal time for investment because the franchise market is so stable. With big franchises almost guaranteed to bounce back, investors may want to take advantage of current market uncertainty. As financial giant Warren Buffet says, an uncertain market is the best time to invest. Prices are lower, so you have to expend less capital to get involved in a franchise.[1] In fact, the slightly lower volume of customers can give you time to get everything set up, so you're able to be fully operational right when everything gets back to normal.

Barista Woman Wearing Protection Face Mask Turning Open Sign Board on Glass Door in Modern Coffee Shop

Franchises May Be More Stable During COVID

There are a few reasons that franchises are particularly equipped to withstand COVID turmoil. In general, franchises have less risk than independent businesses. When you start franchising, you have access to tried-and-true products, massive marketing campaigns, and plenty of brand recognition. Most consumers are feeling fairly cautious at the moment, so a reliable and recognizable franchise is likely to appeal to them.

Furthermore, many franchises run with a "fast food" model, which means COVID regulations are less likely to affect them. They have a level of security and predictability that makes them a safer bet in the current climate. 

Running a Franchise During COVID

The coronavirus pandemic definitely has not killed the franchise industry, but this does not mean things are foolproof. Just like always, investors still need to do their research. They need to do due diligence, interview many franchisors, and carefully examine detailed Profit & Loss statements. 

The good news? Now is a great time to get all this legwork out of the way. Many potential franchisors are working from home or have lost their old job opportunities, so they have more time on their hands. 

The pandemic is an excellent opportunity to carefully consider your career goals and create a detailed plan for achieving your business dreams. Are you interested in learning more about franchises? Our team is here to help! Contact us at Franchise Resales to get more information.

 

Reference section:

[1] https://www.entrepreneur.com/article/350233

[2] https://fortune.com/2021/01/26/restaurants-bars-closed-2020-jobs-lost-how-many-have-closed-us-covid-pandemic-stimulus-unemployment/ 

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