The Economy – How It Is Playing Out for the Franchise World

Just like the rest of the world, 2020 was a challenging year for the franchise world. As the economy begins to shift back towards normal (or, at least, a new normal), franchises are poised to apply the lessons of the past year to move forward, stronger than ever. Franchises may be tackling some of the same challenges as other businesses, but it’s equally important to understand the unique position of franchising in this economy.

 

“Franchising is an interesting animal when it comes to surviving economic downturns,” explains Nancy Estep-Critchett, Franchise Practice Leader at Blue Rock Search. “Historically, franchisors do better when there’s an economic downturn. When people are losing their jobs, franchise sales go through the roof.”

 

The International Franchise Association (IFA) also reports that franchising could rebound significantly if three major factors are present:

  1. Continued and accelerating vaccine rollout
  2. Reopening of schools
  3. Steps taken to support small businesses and maintain economic growth.

Fortunately, most areas of franchising are projected to see growth in 2021 and beyond – possibly enough to help return the US economy to the same or higher levels than late 2019 pre-COVID. Certain areas, such as restaurants and hospitality, have taken a bigger hit than others, such as real estate, but they’re all on the road to recovery. Some industries, however, are seeing even bigger booms.

 

“The industries that were launched because of COVID have continued to grow, such as commercial cleaning or specialized disinfecting and cleaning companies… They’ve added whole new revenue lines, so their employees are earning bonuses because revenue is up,” notes Estep-Critchett. The downside for companies who are in the midst of talent searches? “Everyone is staying put, so it’s been hard to ‘pluck’ people; it’s been very competitive!”

 

Two other industries are especially worth keeping an eye on, according Estep-Critchett: home health care and restaurants.

 

“The home health care was on a boom anyway because of the aging marketplace – it had a significant pop in interest [prior to COVID] … but at the same time, there’s a lot of pressure on those franchisees to find the help that’s going to actually go in and assist their client,” she explains. As a result, “franchisors are doing great, and franchisees are busy but their margins are slim right now.”

Meanwhile, restaurants have somewhat become the public face of franchise recovery. “Restaurants took a bit of a ding, but franchise owners do seem to have bounced back,” Estep-Critchett says – but it depends on their pre-pandemic performance and priorities. “If they were on top of technology that was coming in anyway, they did well and actually advanced during COVID. Those who were behind the eight-ball, they’re just getting up to speed now.”

 

Moving forward, franchisors should be taking the lessons of this past year to improve their businesses, get creative, and take the time to fix vulnerabilities now, rather than waiting for them to grow into major problems. One of the best investments to make? Investing in talent acquisition resources.

 

“It’s difficult as it is, the average-Joe franchisee really doesn’t know much about hiring, staffing, and attracting talent. That would be a great value-add for any franchisor that doesn’t have a robust talent acquisition resource and mechanism in place to train and assist franchisees with staffing,” says Estep-Critchett. It’s the perfect time to renew and revitalize the relationships between franchise owners and franchisees. Owners may want to emphasize that franchisees are valued and heard, while franchisees can be reminded of the value of being part of a franchise.

 

“If you are going to open a business in today’s climate, being connected with a franchisor and opening a franchise brand really gives you a step up because of the efficiency, connections, and infrastructure that already exists, instead of being an independent owner trying to do that on your own,” Estep-Critchett says.

 

Franchising is all about building relationships: between franchisors and franchisees, between businesses and communities, between management and employees. It’s important to listen to local voices as well as big-picture thinking in order to not only survive, but thrive. With strong relationships – both within the company and with customers – franchises can be a major part of the ongoing economic recovery, creativity, and new growth going forward!

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