Franchised businesses on a per unit basis experienced, on average, 19% decline in revenue, totaling more than $185 billion loss of franchise output (sales).
As of August 2020, FRANdata estimated the GDP contribution of the overall franchised businesses to be $445.1 billion, contracting by 6%, compared to $473.4 billion total GDP in 2019. However, the GDP contribution to the total US nominal GDP will remain unchanged at 3%.
With all different industries of franchising being affected by the COVID-19 pandemic, the hospitality and restaurant industries have faced the greatest negative impact, followed by personal services and retail. The commercial and residential services industry has fared better than other industries in the franchising market, especially for the home services sectors, mirroring the increasing needs of cleaning services and surge in construction permit and new home sales.
• States that were negatively affected by COVID-19 were most concentrated in the Northeast and West Coast, including New York, New Jersey, California and Washington, etc.; states that encountered the least negative impact from COVID were found in the Midwest-to-Western states, such as Idaho, Utah, and Iowa, etc.
Franchised businesses are expected to outperform independently operated local businesses during the pandemic because of the support from the franchisor and benefits and resources received from the community. Our analysis shows that 26% of franchises have regained their normal level of operations or were minimally affected by the pandemic.
FRANdata remains committed to responding to the needs of our franchisor clients. We are ready to help with understanding where an industry is headed, what regions in the US will continue to be hard hit and how franchisors can support their franchisees with access to timely information, relief aid or financing. We help support our clients with timely solutions that help them adjust, react swiftly and bounce back from any setback.
Uncertainty does not mean accepting risks. At FRANdata we are leveraging more than 30 years experience with analyzing the franchise environment to understand how the current pandemic will affect the performance of each brand in a lender’s franchise portfolio. There will be franchises that win and those who will be crushed by the economic weight of the pandemic. Now is the time to test the bench strength of your portfolio and avoid costly surprises.
The world has changed but that does not mean there are no opportunities to explore. If you are selling into franchising, we can tell you who could be buying your solution right now and who would be next in line as they emerge from the pandemic ready to grow — information that takes time and experience you may not have to uncover on your own. Franchisors continue to need vendors they can trust to deliver the change they need. But with higher stakes than before and less time or leeway for mistakes, knowing what Franchisors care about before the first call means more success for your company and better chances that your pitch will resonate.
The rapid spread of the COVID-19 pandemic
has dramatically and adversely effected nearly every aspect of American life, especially small business. In past recessions, the franchise business model has proven to be resilient and a leading expansion method coming out of economic downturns. COVID-19 has posed unprecedented challenges to the franchising community, but franchisors and franchisees have responded quickly and carefully to minimize losses.
94% of Franchises are looking to invest in marketing or
technology within the next 3-6 months in support of their franchisees and the changing business
environment. Most brands are optimistic, with 58% expecting system-wide revenues to increase over the next 90 days with less than half
saying that employment will remain steady for the rest of the year.
FRANdata CEO, Darrell Johnson, speaks with Paul Rocchio from the IFA about the latest insights about the ongoing COVID-19 pandemic.
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