One of the top franchise growth questions we’ve been getting at Raintree over the past few months is, “We’re in the middle of a pandemic- is now really a great time to franchise?”
And people are always shocked when we answer with a resounding “YES!”
We get it- on the surface, 2020 seems like it would be a difficult year for Franchisors to concentrate on driving franchise growth, especially since many businesses have fallen victim to COVID-19 and have been forced to lay off employees or shut down completely. However, this economic uncertainty is precisely why Franchisors are currently seeing a massive increase in inquiries from prospective Franchise Owners.
As people find themselves out of a job due to a COVID-19-related layoff or company shutdown, they are looking for new career opportunities that put them in greater control of their own financial destiny. For these people. the prospect of business ownership through franchising means an exciting opportunity to take their income into their own hands. This significant upswing in franchise inquiries over the past quarter leads some industry experts to predict a banner year for franchise growth in 2021.
Raintree CEO Brent Dowling was one of several experts in franchise development who weighed in on the subject in a recent article in the Denver Business Journal, joining Raintree clients Seth Larsen of Cheba Hut and Michael Haith of Teriyaki Madness to discuss the highly promising future of franchising in a post-COVID world.
First and foremost, it’s important to remember that not all businesses have taken a severe hit as a result of COVID-19, and, in fact, companies in some industries are currently reporting higher-than-average revenue for the second quarter of 2020. A brand’s success under these circumstances is largely dependent upon its ability to pivot its existing business model to meet the new demands of consumers and comply with state safety recommendations and requirements.
As a company that already made 65% of its revenue from off-site sales pre-pandemic, Teriyaki Madness was already extremely well-positioned to offer no-contact service, which Haith says has led to booming business. In addition to third-party sales that have increased by 8% since the onset of the coronavirus pandemic, Teriyaki Madness has added eight locations since mid-May.
Haith said because Teriyaki Madness was already positioned well to offer no-contact service, sales have “absolutely soared,” adding, “Our franchisees are super happy, so they’re telling all their friends. We’re built for the future.”
Seth Larsen, Chief Relationship Officer of the Cheba Hut sub franchise, echoes Haith’s statements, citing a 15% to 20% increase in franchise inquiries along with the grand opening of three new locations during the pandemic, ‘Now that’s hustling for Cheba Hut.”
Additionally, while the unprecedented nature of COVID-19 has caused casual dining restaurant franchise sales to slow in the first part of 2020, a number of franchise development experts believe that 2021 will bring a huge pendulum swing as consumers flock to their favorite restaurants in a flurry of excitement to return to normal activity. “The world’s going to come back to normal,” Dowling points out. “People are going to want to come back to restaurants. We have a long list of folks lined up to buy.” In the meantime, says Dowling, the abundance of affordable prime real estate as other businesses are forced to close, along with interest rates at historical lows, makes right now the optimal time to invest in a restaurant franchise.
Of course, restaurant franchises don’t just spring up overnight- since it often takes a minimum of six to nine months to complete the buildout of a new franchise location, Dowling notes that people are looking to buy now in order to be ready by the anticipated boom in 2021.
The bottom line is this: we are in the middle of a very different type of situation than you’d expect in a ‘normal’ recession. The stock market is doing well and home values are steady, meaning that people are still able to secure the necessary funding to invest in a franchise. On top of that, money is cheap- low interest rates make it easy and affordable to borrow money. Add in the high unemployment rates among wealthier people who meet the net worth and liquid capital requirements for a new franchise agreement, and it’s suddenly a perfect storm of opportunity for franchise growth, particularly for businesses that have continued to do well during the pandemic.
In addition to QSR and fast-casual restaurant concepts that were able to seamlessly pivot to contact-free service, takeout, and delivery, service-based, largely virtual franchise businesses are also seeing a bump in interest from investors. For example, Raintree partner brand Footprints Floors is part of the recession-resilient Home Services industry and keeps overhead costs low by not having brick and mortar locations- two factors that are quite enticing for a prospective Franchise Owner.
In the months since the onset of COVID-19, Raintree has continued to research the best ways to position our partner brands for franchise growth. Through exhaustive industry research and tireless commitment to fine-tuning our strategies, we can confidently say that we are ready to take our brands to new heights as we prepare for the promise of what 2021 brings.
Struggling to hit your franchise growth goals? Don’t rely solely on outdated, outbound marketing channels or franchise brokers as your primary way of selling franchises.
Raintree has built a comprehensive franchise development program that ensures all our brands generate leads from a wide variety of channels and platforms, resulting in more qualified candidates and lower recruitment costs. Learn more at raintreesales.com.
Franchising provides benefits to both the Franchise Owner and the Franchisor. If you have a robust business model and are considering expanding, you may be interested in learning about the advantages of a franchise.
Franchise Owners are required to invest their money to fund the new endeavor and to manage the associated risk. Franchisors, on the other hand, require very little out-of-pocket investment, which frees up your cash. And that’s always a positive! Also, because your investment is insignificant compared to that of the Franchise Owner, your investment is substantial. You reap the benefits without assuming the associated financial risk.
2. Reduced Contingency Liability
It is generally the Franchise Owner’s responsibility to sign leases, acquire financing, and perform additional tasks that involve risk. Therefore, the franchisor can enjoy the benefit of expansion with limited direct and contingent liability. The same is often true with the vicarious liability that comes with employee issues that put the business at risk for sexual harassment, workplace injuries, EEOC violations, and more.
3. Lean Start-Up to Scale-Up
Scaling up is achieved far faster and without the expensive capital investment on the franchiser’s part due to the Franchise Owners’ ownership and accountability. Your company expands without the increased overhead costs of additional employee hires and the other expenditures previously discussed. Also, Franchise Owners tend to operate at more significant profit margins for those that are Franchise Owner-controlled as opposed to company-controlled. Franchise Owners who invest their own money and assume a more significant risk are more motivated to engage and put forth the effort required to achieve success. The same remains valid with international expansion.
4. Better Business Performance With Less Oversight
With the right onboarding and training process, Franchise Owner-owned units often perform better from a profit margin standpoint than company-owned. Still, they frequently have tighter operations and excellent quality control. This allows you to maximize your bandwidth and focus on other areas. Further, the franchisors tend to stay longer than those that run company-owned units.
5. Franchise Marketing and Brand Awareness
Franchise Owners often contribute to a common marketing and advertising fund over which the franchisor manages. This allows you to maintain control of the brand and increase awareness while leveraging Franchise Owner capital. You can direct the overall branding effort and watch your company grow without substantial investment, or you can pursue franchising with company-owned growth and combine strategies.
Business Opportunities Arising From the COVID-19 Pandemic
Recent changes in the economy and job market due to the COVID-19 pandemic present additional advantages of franchising. For instance, many people have lost jobs, or have quit or retire early because they want to be more in control; business ownership allows this. Some of these people have retirement accounts and other investments that provide the funds needed to pursue such an endeavor.
While it is true that some owners have gone out of business due to extended business closures, this creates more inventory in the commercial real estate market, which means there are deals. The Small Business Administration will want to support entrepreneurs to get the economy humming again, so incentives should be expected there. Besides, the pandemic breeds innovation as business models shift from in-person to mobile or incorporate activities such as curbside service. It is the perfect opportunity to take advantage of the unique opportunities that come with an unfortunate situation. Businesses such as pet care, education, and childcare are all positioned for disruption and innovation.
Business Growth Opportunities & Franchise Development with RainTree
The advantages of a franchise are numerous, and current events can actually contribute in a positive way. If you want to hear from some of our customers about their experience, you can do that here. If you are ready to take the next step, contact us. Let’s start a conversation about what makes sense for you.
After attending fitness classes at a mom-and-pop gym in her neighborhood, Lisa’s entrepreneurial itch started to kick in. At the time she was working as a full-time dental hygienist, but after attending the fitness classes, she couldn’t shake the idea that the unique business model was filling a void in her community.
After toying with the idea for a while and even with zero background in fitness, Lisa took the challenge head-on and started her own “boutique gym” in 2001. At that point in time, the concept of the boutique gym- or even the term “boutique gym” itself- was still largely unknown. Not only did Lisa face the challenge of business ownership head-on, but she also helped spearhead an industry that has grown by leaps and bounds over the past two decades.
Lisa’s gym did extremely well so it was only natural that a few years later she decided to franchise the company. At the time, the world of franchising was completely new to Lisa, so she started conducting her research and learning as much as she could about the industry. Her ongoing research led her to network with other franchising professionals and attend conferences. One of the first conferences she attended as a Franchisor was for the Franchise Brokers Association (FBA).
As Lisa began to learn more about franchise consulting, she became very drawn to it, realizing that consulting would allow her to do what she loves- help people find success as business owners by drawing upon her own experiences, triumphs, and mistakes as an entrepreneur.
Since selling her fitness company and becoming a Franchise Consultant, Lisa has helped over 100 individuals achieve their dream of business ownership. Not only has she helped people find the right business for them, but she has also helped steer people away when franchise opportunities didn’t seem like the best fit. She notes, “I’ve helped way more people than I’ve placed. The responsibility of business ownership simply isn’t for everyone.” This mindset highlights the level of integrity with which Lisa runs her business and her life.
Integrity is what makes Lisa enjoy everything about being a franchise consultant! Her favorite part of her job is meeting a new client and seeing his or her potential as a business owner. She loves to help people take control of their lives so they can finally take off those golden handcuffs!
Lisa loves helping people find options they never thought about or industries they aren’t familiar with but that would be the perfect complement to their skillset. One of her favorite placements that she highlights was helping a woman whose previous career had been planning golf tournaments to start a senior care placement business.
For Lisa, the most rewarding part of being a franchise consultant doesn’t come from the initial placement or even the commission check- it comes when her clients check in with her one or two years later and share their success story, telling her that she truly helped them change their lives for the better!
No matter what Lisa does, she says her nature has always been to “learn about it and then be the best at it,” which has driven her to not only learn about franchise consulting and different brands but also the franchising industry in general as an active member of the International Franchise Association (IFA).
Lisa’s Tips For Franchise Consultants
Never Forget the Importance of Your Role: Never take your role as a franchise consultant lightly- you are working with someone to change their entire life and sometimes the lives of their family members. Remember that this is a serious business and never underestimate the long term effects for someone who is making this decision. Lisa mentions that the last thing she ever wants to do is make money from someone else’s failure- “consultants have to sleep at night too!” Here Lisa references her personal mission statement of “Make it fun but keep it serious.”
Keep Learning: Lisa warns against keeping a shortlist of brands. She believes that as a franchise consultant you always need to be learning and keeping the portfolio of brands you work with open and dynamic. When she is looking for brands to present, Lisa primarily looks for concepts that have a strong management and support team- not necessarily large but singularly focused on the success of their Franchise Owners. She also likes working with brands that have partnered with development companies such as Raintree because they do the vetting for her and she knows it is a brand she can stand behind.
Work for You Commissions: Lisa understands how important it is to connect deeply with her clients in order to truly understand what industries and brands would be a good fit. She says that by the time she hands a client over to the sales team they are already halfway there in terms of understanding the brand and wanting to commit.
Congratulations, Lisa for being Raintree’s August Consultant of the Month! We look forward to continuing to work with you as you bring such a genuine and ethical approach to the industry.