With all the trouble the pandemic has given the restaurant industry these past couple months, you might be surprised to hear that restaurant franchising opportunities have never been stronger. There are brands that are outpacing the overall industry. From an interview with Restaurant Business Magazine, Bruster’s Real Ice Cream reported selling 18 franchise agreements this year and now has 56 stores under construction or in development out of their 200 units (1). Up-and-coming restaurants like Fajita Pete recently announced it will triple locations from their new franchise deals (2). The fast-casual brand Dave’s Hot Chicken has now more than 200 units committed despite its franchise initiative being just launched in October 2019 (3). “When the pandemic hit just a few short months after we launched the franchising initiative, we weren’t positive how it would affect our franchise growth, but we were pleasantly surprised,” said Shannon Swenson, Vice President of Franchising for Dave’s Hot Chicken (3).
According to Jonathan Maze, Restaurant Business Editor-in-Chief, what we’re seeing in the franchising side of the business is not altogether unexpected (1). “Nothing fuels franchise sales quite like a recession, as unemployed workers look for their next career and frequently take a stab at buying into a restaurant or other business to become their own boss,” he said in a recent Restaurant Business article (1). As COVID-19 has dramatically upended employment, more people are making big decisions and considering entrepreneurship as an option. But is mid-pandemic even a good time to buy a franchise? There are a couple of reasons why we can say yes, it is.
Whether you’ve just lost your job or in jeopardy of losing one, finding a new position can be a challenging task. According to Don Daszkowski of the Forbes Business Council, “the competition [for jobs] will likely be fierce” (4). The unemployment rate for the industry is at an all-time high. According to the U.S. Department of Labor, 20.5 million people abruptly lost jobs in April alone. “Your employment may not be stable,” said Daszkowski. That’s why many people will be using this time to reassess their options.
There are good reasons why buying a franchise is better than starting a business from scratch. The latter is riskier and requires the owner to build the foundations from the ground up. “With a franchise, you have the security of a proven concept. The franchisor already went through the pains of trial and error and the expense of branding, marketing and putting systems in place,” says Daskowski (4). Of course, no success is guaranteed and your homework will be to do your research—it’ll go a long way to helping you make an educated decision about which concept will come out strong after the pandemic.
BETTER REAL ESTATE
According to a recent Yelp Report, permanent closures continue to increase across all industries—with the restaurant industry now reflecting the highest total business closures (5). The report shows that as of July 10, there have been 26,160 total restaurant closures, with 15,770 (60%) now permanently closed.
Moreover, other restaurants have shifted their operating models, converting to ghost kitchens, curbside pickup and online ordering, and as a result, there have been more sites available across the US—not only in retail strip malls, warehouses, but also office complex-type spaces (1). “Because restaurants are closing, there are locations we can go in,” said Jim Sahene, CEO of Bruster’s Ice Cream in an interview with RestaurantBusines.com. “End caps, drive-thru, freestanding building. More sites will become available” (1).
With more restaurants feeling increased pressure from further lockdowns and another wave of businesses expected to close in the coming months, the market has become favorable for brands that have been waiting to take advantage of a better real estate market. The same benefit would apply to new franchise buyers.
“Buyers are seeing this as a huge opportunity,” said Jackie Lobdell, VP of Franchise Development with Slim Chickens, a fast-casual restaurant chain that has greatly exceeded franchise growth since the pandemic (6). “Those who are able are taking advantage of the open real estate.”
Thanks to the Coronavirus Relief Funding options (such as the CARES Act), starting or expanding your business has become more feasible with loans guaranteed by the Small Business Administration (7). 2020 and 2021 will be optimal years to take advantage of low interest rates and better deals with the franchisors.
In addition to funding, Daszkowski says new types of resources have recently cropped up online for potential buyers to explore and educate themselves on franchising opportunities—virtual tradeshows, magazines and franchise portals, you name it (4). Franchising has become a popular subject in recent months, and there’s never been a time where so many people could connect and learn the ins and outs of franchising, all in the comfort of their homes.
There are blog posts like ours, too, that discuss trending topics and cover important factors that make concepts recession- and pandemic-resistant. That’s why we recommend you take some time to do research and figure out what kind of franchise would you like to own. Would you make a great franchisee? How much can you invest, or how you will finance the franchise? There are plenty of affordable franchises that you can start with, and if you need more assistance, hiring a consultant can help guide you to make a decision by pinpointing brands that interest you, as well as directing you to financing options you may not know about (6).
The next 18 months are a great time to buy a franchise, but having said that, buying a franchise does not come with a guarantee of success. Like any business venture, becoming a franchisee is hard work, and you’ll need to invest your time, commitment and energy to make it successful. But if you’ve previously considered buying a franchise and have a vision for yourself to become your own boss while still belonging in a larger network, this is an optimal time to figure out your financials, do research, and invest in something new for yourself.
*Special thanks to Jackie Lobdell, Vice President of Franchise Development with Slim Chickens, for providing her expert insights