In a post-pandemic world, there are newly-important considerations for aspiring franchise owners
All things considered, the franchise industry is in better shape in 2021 than it could have been. Back in February, in fact, CNBC reported projections for the rebound of franchise businesses suggesting that if COVID could be kept under control, added locations would entirely offset the losses of 2020. COVID hasn’t been kept entirely under control, which means these projections may ultimately prove to have been a touch too optimistic. Nevertheless, the industry is in a better state than many would have predicted a year ago.
Even if this is the case though, it doesn’t mean things haven’t changed. In a post-pandemic world — or one moving in that direction at any rate — there are newly-important considerations for aspiring franchise owners. Here, we look at 5 things to consider before buying a franchise after a pandemic.
1. Franchise startup fees add up
It’s a given that opening a franchise location involves a lot of different fees, but in light of COVID, it’s important to think about this in more detail. Potential buyers should understand all the startup fees when buying a franchise. Fortunately, every franchisor is obligated to outline these in item 7 of their Financial Disclosure Document (FDD). But you do have to read it! Pay careful attention and make sure you understand.
There are legal and accounting fees, working capital, build-out costs, supplies, inventory, personal expenses throughout the process, and the franchise fee itself. Altogether these make for a lot of demands, and those demands can be harder to meet in the aftermath of the financial stress of COVID. This doesn’t mean it’s not possible to open a franchise, but it’s more important than ever for you to budget carefully and thoroughly if you’re considering doing so.
2. Business skill is more necessary than ever
Although the franchisor will train you to run the day-to-day operations, management experience and business acumen definitely help new franchisees hit the ground running. But it’s not a stretch to say that many franchise owners essentially develop business and leadership skills as they go. Today, however, with the added complications brought about by COVID (managing inconsistent workforces, maintaining healthy conditions, handling volatile finances, etc.), franchise owners would do well to educate themselves before getting started. Fortunately, the rise in digital education offerings with specific regard to business practice has made this perfectly feasible. Also, many universities offer a variety of programs in franchising.
3. Franchisors must be reliable
To some extent, the reliability of a franchisor should always be a core requirement for anyone considering buying a franchise. In light of the pandemic, however, it is especially important to understand how the franchisor performed in 2020 and into 2021. If the franchisor demonstrated indecision, an inability to adapt, or inconsistency with health and safety measures, it may be time to look elsewhere. On the other hand, brands that were able to pivot, gave extra support to franchisees, and were resilient through the pandemic should be put at the top of the list.
4. Hiring may be a challenge
It’s also important to keep in mind that hiring may be more challenging in certain ways. On the one hand, a lot of people lost work in 2020, or even entered the workforce for the first time without many opportunities to choose from. This in theory means that there should be strong talent pools for franchise owners to recruit from. On the other hand, budgets can be tight, conditions can be unpredictable, and finding the right employees under uncertain circumstances is no easy feat. A FranchiseWire article explored these topics more extensively, and made the particularly important point that emphasizing workplace flexibility and safety will be crucial. But even with certain concessions, recruiting and hiring may be more challenging now than in the past.
5. Public health remains a concern
Finally, public health needs to remain a chief consideration as well. While COVID-19 is more under control now than this time last year, proper precautions are extremely important, variants and unvaccinated populations are of concern, and businesses are not yet able to operate as if all is normal. This is the case for all franchise owners, but it’s worth thinking about carefully before buying a franchise of your own, because it will certainly impact the process.
Hopefully, this has helped to clarify the state of franchise opportunities during what we hope are the latter stages of the pandemic. There are many opportunities out there for new franchise owners today, but to succeed, they’ll need to consider these additional factors on top of the usual challenges.