Notwithstanding the impact of the Covid-19 pandemic on small businesses, franchise business will have good growth in the months to come. This follows the emergence of several conditions that could support the growth of franchising.
According to Fran Data, franchised businesses in the U.S. will grow by 1.5 percent in 2020 and add 232,000 jobs in 2020. The GDP contribution of the franchise industry will also grow by 4.6 percent. It says pronounced franchise growth is expected in personal services, quick-service restaurants (QSR), and full-service restaurants.
Analysts see a “triple witching” effect that will combine some primary drivers.
The main factors that will grace the franchise market are joblessness at the top end of the salary market, the ready availability of debt capital at cheaper interest rates plus substantial savings such as home equity, retirement accounts, and personal savings.
Of course, many other factors that contribute to the success of small businesses also exist. One is the easy availability of commercial real estate in prime locations, at lower rents. Thanks to a good labor pool of displaced workers, staffing a franchise will be easier than in the past.
Many stimulus packages to revive small businesses will also come handy. Given the Coronavirus linked health concerns, consumers prefer walking into a business that is part of a larger network having quality control standards, trained staff, and consistency product quality.
Franchise ownership attractive
This will make franchise ownership attractive for qualified candidates because networks provide a degree of certainty after emerging from a time of unprecedented uncertainty. For companies to develop franchise programs, there is a gestation time of at least 4 months to get the needed documentation starting with the analysis of whether the business is fit enough for the franchise model.
How does it work
In franchising, the business owner, called as franchisor obtains distribution through affiliated dealers known as franchisees.
The franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing, and managing support in return for a monetary consideration.
In this business model, a franchisee pays an initial fee and royalties to a franchisor and gains access to the trademark, and other support from the franchisor along with the right to use the franchisor’s system of doing business to sell products or services.
The gains of franchises include more than a brand name. Others include escape from the rigors of a startup, unlike an entrepreneur who bites the pressure to start a business from scratch.
The straight induction into the system of operations and the training to franchisees avoid a lot of the mistakes that startup entrepreneurs commit. The franchisor has perfected the operations through trial and error and the vulnerability to failure is checked.
Many franchisors conduct market through market research before selling an outlet and that helps in tapping a stable demand for the product or service. The franchisor will also educate on the tips on prevailing competition and how to handle them with their branding efforts.
In franchising, many big brands have shown their prowess. They include McDonald’s, KFC, Pizza Hut, Burger King, Domino’s, Dunkin’s, InterContinental Hotels, Taco Bell, Hilton Hotels, Baskin-Robbins, and Wendy’s.