To say the last 12 months have been challenging for businesses, particularly small enterprises, would be an understatement – but there is confidence to be found in some sectors. Those expanding to sell franchises look to benefit from a stabilising economic climate and inspired entrepreneurs who are ready to take the next step.
A boom in franchise businesses.
Franchisors can expect to see a boom in franchise enquiries and sales over the next year or so; and some market analysts are predicting it to be as important as a ‘once in a lifetime’ opportunity for some. The worldwide franchise market is already increasing as countries begin to emerge from their various and continued coronavirus restrictions, and this is only expected to continue on a positive curve.
Indeed the positive societal and economic factors that see the franchise industry tend to succeed are certainly in place right now. Known in the business as the ‘triple witching’ effect, the three primary factors for franchise growth are:
- High levels of unemployment at the top end of the salary market – as this talent pool are most likely to have business management skills;
- Ready access to debt capital at low interest rates;
- Individual access to substantial savings (in the form of home equity, retirement accounts and personal savings).
What’s more, there are several other factors that will grant those looking to set up and establish a franchise business a positive experience. Commercial real estate is currently more readily available than in previous years due to existing tenants having needed to vacate, and often at considerably lower rental rates than were available pre-pandemic. An influx of displaced workers across all industries provides a large talent pool to aid staffing, and politicians continue to discuss and concoct stimulus packages for small businesses – once these emerge, they will hopefully be of benefit too!
Franchising; The safer alternative to starting a business.
In a March 2020 online survey (remember then? Right at the beginning of the Covid-19 pandemic, when things were looking very uncertain!), FranConnect, a franchise management platform, found that two thirds of franchisors were actively moving forward with franchise sales – despite the difficult climate. Surveying almost 250 franchisor brands to best quantify the impact of the pandemic on business, they found that 86% of those in business services and 89% in commercial and residential services were and intended to continue with their franchising efforts.
Indeed franchising has demonstrated its resilience in weathering storms before – and those in the industry have full faith in it to survive and thrive. Catherine Monson, Chair of the International Franchise Association (IFA) and CEO of FASTSIGNS International Inc, says “Through recessions, natural disasters, and other widespread crises, we’ve continued to see the resiliency of the franchise business model and the benefits of being in business for yourself, but not by yourself. Franchisors and franchisees have benefited greatly from sharing best practices with each other, enabling them to endure the crisis. Although our community has never seen anything like COVID-19, I have no doubt we will come out stronger having been through this together.”
Franchising and the network!
Media coverage of the pandemic has highlighted the importance of franchised businesses in the economy in a positive manner – and the good news has been very well received in a sea of panic and the technical reporting of difficult issues. Consumers feel confident walking into and working with a business with a proven track record; in terms of safety, quality control standards, staff training and consistency of product. Indeed reputed brand names provide just the degree of certainty consumers and entrepreneurs need emerging from a time of unprecedented uncertainty.
Of course, some sectors have been impacted more by coronavirus and its associated restrictions, lockdowns and shutdowns more than others. President of Franchise Operations at FranConnect, Keith Gerson commented “Based on our survey results, COVID-19 has had the most significant impact on the restaurant industry and personal services segment, so it’s not surprising to see franchisors scaling back or temporarily ceasing their franchise sales programs. However, other segments that haven’t seen nearly the same degree of revenue decline are continuing their recruitment efforts. Historically, when unemployment begins to grow, many franchisors see increased interest in their franchise opportunity. Many may want the security of being their own bosses.”
Personal services brands are amongst the most negatively impacted by mandated closures (62% of FranConnect’s survey respondents in this sector had seen over half or all of their locations closed), followed by 59% of full service restaurants (for many of whom a takeaway or limited service simply wouldn’t have been a possibility).
Those businesses who did see their locations close are hopeful for the future, however; with 48% anticipating full re-opening within the next two months and 67% expecting system sales recovery within the next six months. 38% of franchisors are continuing to extend royalty support and reduction across their system; and those in affected industries are more likely to do so.
How has this impacted Refresh?
For Refresh, the COVID period has provided a unique opportunity; customers have spent a lot of time in their homes considering the improvements they would like to see realised, the shift to home working has seen a boom in renovations to enable space in the home specifically for this purpose and of course the imposed restrictions on leisure spending have meant that these customers have built up savings in order to act upon these renovation dreams. If anything is for sure in these unsure times, it’s that things are, finally, looking up. Industry experts are optimistic in their predictions and franchisors are seeing proactive interest in new business. Although for most Covid-19 has been hugely impactful in terms of priorities, career and outlook, for many it has also presented new opportunities and inspiration – and from this we are beginning to see true entrepreneurship flourish.
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If you're ready to learn more about the Refresh Renovations business model, and want to take the first steps to starting a franchise business - Join us on one of our Discovery Days!