Why 2021 Is the Year of the Franchise

While the COVID-19 pandemic dealt a blow to many industries, the franchise industry is benefitting from both its economic impact and the profound changes it brought to the employer/employee relationship.

After more than a year of experiencing the freedom and flexibility of working from home — not to mention rehabbing their homes or buying new ones to accommodate home offices — employees are not eager to go back to the office or to add commute time and extra expenses to their day.

Many of them aren’t able to go back to the office. A record number of Americans migrated to warmer, less expensive places during the pandemic, with the promise that WFH would be permanent. Others have young children who are not yet back to school full-time, elderly parents who are now living with them or health concerns of their own as the virus continues to mutate.

As a result, the franchise industry is experiencing a huge influx of new prospects.

According to the International Franchise Association, more than 26,000 franchised locations will be added in 2021, projecting franchise employment to grow by more than 10% to nearly 8.3 million workers. 

Here are the factors driving the trend:

The COVID Recession

While unemployment numbers have improved since the early days of pandemic lockdown, there are still nearly 9 million Americans without a job. With management and industry experience — especially within the still hard-hit restaurant industry — many of them are flooding the franchise market and driving sales. 

Easy Money

When the last major market downturn occurred back in 2008, franchises performed well, even though financing was difficult to secure. This time it’s different. Interest rates are still at near historic lows, and capital is easy to come by. Americans are wealthier this time around too, thanks to the booming stock market and real estate market, both of which have significantly increased their portfolios. In addition, the CARES Act freed up retirement account money, allowing investors to now draw up to $100,000 from their IRAs and 401(k)s without penalty.

Plentiful Commercial Real Estate Inventory

With a high number of small businesses shut down as a result of the pandemic — more than 100,000 closures in the restaurant industry alone — not to mention a plethora of vacated offices, prime commercial real estate across the country is now sitting vacant. Not only will franchisees who need a brick and mortar location find a large number of choices in desirable areas, they’ll be able to take advantage of bargain basement prices that will in turn make it easier to secure bank financing.

The Great Resignation

Even in the midst of high unemployment, Americans are quitting their jobs in record numbers. According to the Department of Labor, more than four million Americans quit their jobs in April 2021, the highest number on record since 2000. Clearly, the pandemic has caused many workers to reassess their priorities. For a growing number of them, that means finding a job that works for them, not the other way around.