Think it’s the Wrong Time to Buy a Food Franchise? Think Again!

Think it’s the Wrong Time to Buy a Food Franchise? Think Again!

You’re probably tired of reading this in every single article on the internet, but 2020 has been one crazy year. The COVID-19 pandemic required a number of restaurants, bars, and other public gathering spaces to shut down back in March, with a number of businesses being forced to close their doors permanently. 

Eight months later, we still have yet to get back to normal life as we knew it in the “Before Times,” and business has slowed way down for restaurants, who are operating on a limited basis with takeout, delivery, and minimal dine-in service, though this has been significantly reduced as a result of social distancing guidelines.

Sounds like a pretty terrible time for an investor to add a restaurant franchise to their portfolio, right? Actually, for franchise investors who are looking at the bigger picture, there may never have been a better time in history to start a food service business than right now!

…Wait, what?

It’s true, according to franchise industry expert and Raintree CEO Brent Dowling. In a recent LinkedIn piece, Dowling explained why savvy franchise investors should strike now while the iron is hot, and how this dumpster fire of a year may have actually created the perfect storm for an entrepreneur to get a new business off the ground.

One Restaurant’s Failure is Another Food Franchise Owner’s Fortune

Food Franchise Founder Matteo Rachocki

Matteo Rachocki, co-Founder of Raintree partner brand Voodoo Brewery, is optimistic about the future of his beer and food franchise.

Though it sounds depressing to say so, the rash of restaurants and retail businesses that have been forced to close permanently may actually be good news for budding entrepreneurs, in that prime real estate is now more affordable than it has been in over a decade, a phenomenon Dowling has witnessed firsthand through the eyes of Raintree’s restaurant partner brands’ newest Franchise Owners.  

“For the folks we’ve placed into a restaurant franchise in the last couple months, the feedback has been excellent. The common sentiment is ‘We’re getting ‘A’ real estate sites for ’B’ or even ‘C’ pricing,’” he reports. “Throw on top of that the fact the we are seeing historically low interest rates on small business loans, and you have the perfect storm for business owners over the next 10 years.”

Additionally, all signs are already beginning to point to the fact that we may be in for a wave of post-pandemic consumer spending once we’re able to get down to business as usual. Food franchises such as McDonald’s (MCD) have already seen an uptick in sales, with 3.5 out of 5 McDonald’s Franchise Owners reporting higher sales and overall optimism about their 6-month business outlook, which is nearing an all-time high from February 2004. 

Similarly, Jill Nelson, Dunkin Brands’ VP of Marketing Strategy reported to CNBC that the beloved donut-and-coffee franchise is seeing the impact of people “treating themselves” to food and beverages they can’t replicate at home. 

And, as Dowling pointed out in his LinkedIn piece, “that’s just the opportunity we see from a consumer standpoint to see the bigger picture. As a business owner, the opportunity is perhaps even greater.”

Dowling listed what he perceived to be the top four factors indicating a roaring post-COVID comeback for franchise sales, particularly in the food service, retail, or experiential sectors. These factors include:

  • Pent-up consumer demand
  • Access to prime real estate 
  • “Cheap money”
  • Lack of competition due to closures of mom-and-pop businesses

Playing the Food Franchise Long Game

By thinking long-term, Dowling asserts, business owners who invest now can capitalize on future franchise success.

“You buy a franchise agreement as a 10 year-plus investment (that can be renewed for decades after that if successful),” he says, adding that “(m)ost franchises take at least 2-3 years to mature to desired profitability levels.” 

For a franchise investor looking to play the long game, this translates to historically-cheap commercial real estate prices now, due to restaurants and retail shops that have unfortunately gone out of business in recent months, with a higher potential for ROI once the world gets back to normal and people start spending like they did pre-pandemic. 

“By many accounts, we will likely see a ‘return to normal,’ whether that means an effective vaccine or not, in 1-2 years,” Dowling points out. “Some say a heck of a lot sooner.”

It’s true- with this week’s reports of Pfizer’s highly-encouraging vaccine breakthrough dominating the news, it looks like we may finally be seeing some light at the end of this long, dark tunnel, and top scientists indicate that we may be anticipating a return to pre-pandemic life within a year. 

Which brings us to our next point- after a year of sitting at home, doing nothing, seeing nobody, and going nowhere, it seems likely that people will be turning out in droves to get out and spend money on sorely-missed activities like dining out as soon as the vaccine makes it possible to do so. Dowling agrees, noting that the recent surge in home services businesses may level off as soon as staying home is no longer the only available option. 

He asks, “When the world opens up, do we think people are going to want to continue to invest in their homes at the rate they are now? Or do you think any disposable income might be redirected to other options that were not really options during a pandemic?”

For Food Franchise Owners, the Future is Bright!

So, what’s the bottom line? While service franchises, such as painting, flooring, and other skills-based businesses, may look tempting now- particularly since they’ve been largely untouched by the pandemic and are in fact seeing a surge in business- food and retail franchises may be a savvy investor’s best bet in the long run. 

It’s difficult to remember this at times, but the COVID-19 pandemic won’t last forever. Things will someday be back to normal, and it’s beginning to look like that is going to happen sooner rather than later. By taking a look at the bigger picture and seeing the overwhelming, unmet need there will be for restaurants and retail stores post-pandemic, a franchise investor can easily score a business deal of a lifetime now and look forward to amazing profitability potential when we are once again able to resume life as we know it.

Introducing November’s Consultant of the Month: Carl Grossman!

Introducing November’s Consultant of the Month: Carl Grossman!

Over his past 5 years as a Franchise Consultant, Carl Grossman has developed a deep knowledge and insight into this industry. From his mindset, his motivation, his intentions, and his passion, it is clear to see why he is in Business Alliance Inc.’s President’s Circle (meaning he is in the top 10% of all Certified Franchise Consultants in the network!) With an innate love for guiding others to become the best version of themselves, Carl’s genuine approach to consulting shines through with each client. 

So, where did Carl’s journey begin?

Carl’s Road to Franchise Consulting

Carl spent his formative years performing turnarounds for large companies. In other words, he went into companies that were struggling and repaired them. He experienced great success with this business and became highly skilled at going into distressed situations to provide guidance and resolution to get companies back on their feet.

During the financial crisis of 2008, the concept of turnarounds started dying down as private equities took over. No one wanted to fix anything anymore. Everyone was just looking for the next billion-dollar start-up. 

“Two million miles and two million hotel rooms later, I decided I wasn’t going to do it anymore,” Carl said. He spent a year trying to buy a business but had no luck. When he stumbled into an old friend and explained his situation, his friend suggested he look into franchise consulting. Carl was immediately intrigued. He began conducting some research, specifically on Business Alliance, Inc. Coming from a job where he was constantly on the road, he was drawn to the idea that franchise consulting would allow him to work on his own time and from wherever he wanted. The more he learned about franchising, the more fascinated he became. In 2015, he joined BAI and the rest is history!

What Does Carl Love Most About Franchise Consulting?
Mentoring and Relationships

Carl loves working with people who are in a career transition for any reason, whether because they are tired of working for someone else, approaching retirement, seeking diversification within their portfolio…whatever the case may be. As a former corporate CEO, he has a unique perspective he can bring to his clients, and as a lifelong mentor, consulting is another avenue for him to practice mentoring individuals. He builds meaningful relationships with his clients, getting to know them on a deeper level so he can guide them in the right direction that will benefit them the most in the long run. While some people may be hesitant to have someone they do not know holding their hand through the discovery process, Carl has not found much resistance at all. This is likely due much in part to his genuine interest in getting to know his clients, making them feel like a friend from the first call.

Speaking of the first call, this will always be one of Carl’s favorite parts of the business. “I still love it! I love getting on that first call with them and getting them excited about their path,” Carl explains. 

Community

In addition to the relationships he has made with his clients, Carl has come to love the community he has built with other Consultants and the entire BAI organization. He was asked to be a part of BAI’s inaugural group, which he willingly accepted. He appreciates the fact that they consistently ask for feedback, and much of what is suggested is not only taken into consideration but adopted and implemented. 

He loves working with other consultants, bouncing ideas off of one another, and helping each other. He has found that they are all facing similar struggles and are happy to share how they have overcome them in the past. They are not in competition with one another – they are on the same team and share similar goals and interests, which is another refreshing and unique aspect of being a Franchise Consultant.

franchise consultant Carl GrossmanWhat is Carl’s #1 Tip For Consultants?

BE INVOLVED AND EDUCATED FROM THE BEGINNING TO THE END, AND BEYOND!

Carl emphasizes that this is a partnership business, so it is extremely important to be there as a partner to your client as well as to the Franchisor from beginning to end.

Carl is highly invested in the success of his clients from the very start. Once he passes them on to a Franchisor, he is very involved as they move through the education process. He is always on the first call because this can oftentimes be very overwhelming to candidates as they are presented with a great deal of new information. He makes the introduction of his client to the Franchisor, then mutes himself, and is a fly on the wall for the remainder of the conversation.

This not only gives him a sneak peek into a brand’s process and educates him on the brand, but he also calls his client immediately after to go over anything they did not understand, answer any questions, and ease any stress. He then circles that feedback right back to the Franchisor. “I learn so much about the brand with every call I am on,” Carl said.The more educated I am on the brand, the more I can help.”

Carl does not limit himself to being on the initial call. He continues to be there for every step of the process. He will often perform an FDD review with his client before the brand does, just to prepare them for the call since this can be quite a daunting document. He is there to prepare for validation calls, evaluate the Discovery Day, and, of course, when it comes to decision time, he is there as moral support.

Not only that, but Carl continues to keep in touch with his clients after they have been awarded a franchise, and considers many of them lifelong friends. Beyond that, he also gets firsthand validation on the concept that he can speak to when presenting the brand later down the line. 

Congratulations, Carl, on being Raintree’s November Consultant of the Month! We look forward to our continued partnership as we change lives together one franchise at a time!