Entrepreneur: What Will Franchising Look Like After the Recession?

As businesses across the country remain closed two months after the World Health Organization designated the coronavirus crisis a pandemic, leaders from virtually every industry are wondering what their marketplace will look like when social distancing orders are relaxed and businesses begin to reopen.

For franchise brands, the future may be brighter than some would expect.

Writing for Entrepreneur, franchise consultant Mark Siebert said franchise sales are poised for a substantial rebound, and “given an extended, months-long lead-to-sale timeframe,” development teams should begin focusing on lead generation now.

According to Siebert, franchise sales are driven primarily by three factors: people, capital and resources, each of which has been boosted by circumstances surrounding the coronavirus crisis.

Unemployment, Siebert says, “often spurs people to take the leap into becoming their own boss.” Given the historic unemployment numbers reported for April, franchise brands are primed for a dramatic influx in inquiries.

Low-cost capital, too, is more readily available than perhaps ever before, thanks to various incentives and stimulus programs from the Small Business Administration. As for resources, Siebert says the collapse of many businesses across segments throughout this crisis will provide leverage to those who survive to negotiate with landlords and vendors, resulting in favorable new contracts for franchisors and franchisees alike.

Savvy entrepreneurs will see this as an ideal time to start a new business, leveraging the special post-shutdown concessions, pricing and terms that suppliers are no doubt going to be offering. And perhaps most importantly, there will be increased availability of labor for the franchise location due to hourly and other employees who are looking for work, answering the employment shortage that many businesses felt pre-COVID.

Still, there are some potential hurdles ahead for franchisors, Siebert warns. The post-COVID landscape will be different, and those changes may inevitably favor some business models over others.

For some businesses, this new normal may impact the underlying business economics of the model itself. And for those businesses, the difficult-but-wise choice will be to remain on the sidelines while adapting to the new world order. For those businesses that continue to prosper, it will be more important than ever to maintain the integrity of the franchise candidate evaluation and sales processes in the face of increased demand. It will be critical not only to ensure buyers are well-capitalized but that they are a good fit for the franchise brand and system in terms of experience, skills, philosophy and expansion goals. 

There is a good chance that franchise businesses will come out of this crisis as the dominant model for small business ownership, and franchisors would do well to start preparing their brand for growth now.

Read the full article at entrepreneur.com.