If you’ve been on the lookout for a franchise to invest in, the COVID-19 pandemic may have put a pause on your plans. There’s a lot of fear and uncertainty circulating within the economy, but fortunately, it does not necessarily mean that you need to put your plans on hold.
There are several industries that continue to thrive during this strange time of social distancing. Some needs don’t go away, even when there is a global pandemic, but even some non-essential services (fitness studios like CITYROW, for example) have found creative ways to adapt their services to the current climate.
A number of resources exist for small business owners to receive aid and secure loans. Financial incentives have been put in place to help bolster the economy, and some franchisors are currently offering a discounted franchise fee.
While this is by no means an easy situation for anyone, there is some light at the end of the tunnel, and experts predict that the economic impact will not be as severe as the recession of 2008.
Franchising During COVID-19: The Outlook
Franchise Insights has put together an analysis of how different industries within the franchising world have been affected, pointing out an uneven distribution in inquiries into franchise opportunities (see the full break down).
Some industries, such as staffing and personnel, real estate, and cleaning and maintenance have experienced an uptick in franchising interest, where personal services, child care, and restaurants have had significantly less franchise interest than normal. Others, like health and fitness, are experiencing little change in franchise development.
According to a buyer sentiment survey conducted between March 17-19, 2020, 55% of aspiring franchise owners agreed that now is a good time to start a franchise business. A majority of those interviewed said they were actually more likely to start a business now than three months ago. Approximately 56% believe business outlook will improve over the next three months (with 20% expecting it to worsen and 14% not sure).
How Are Current Franchisees Being Supported?
Proposed legislation in response to COVID-19 includes the Immediate Measures to Protect Against COVID-19 Threats for Small Businesses Act, or IMPACT for Small Businesses Act. This bill increases 7(a) lending ($50 billion in 2020), waives upfront guaranty fees, increases loan guarantee to 90% for certain loan types, increases the maximum loan amount, and allows for more flexibility with Economic Injury Disaster Loans (EIDLs).
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed on 3/27/2020, was created with the intention of providing liquidity and financial relief to business owners through the implementation of several programs:
- Paycheck protection program
- EIDL loan advance
- SBA Express Bridge Loans
- SBA Debt Relief
- Counseling and other resources
- No early withdrawal penalties for 401K/IRA distributions
- Delayed loan repayment
What This Means For You
Prospective franchisees who have done their due diligence and decided to move forward with their investment can benefit from several other financial incentives of franchising in this unusual period of time, including:
- Lower interest rates
- Higher loan approval rates
- Lower cash on hand needed for Small Business Administration (SBA) loans
The benefits of being a part of a franchise system vs. being an independent business owner include:
- A clear roadmap and support system
- A proven concept
- Brand awareness
- A shorter path to profitability
- Easier access to funding compared to independent start-ups
- Business training
- The support of a franchise community
- Territory protection
- Marketing assistance
- Potential for multi-unit ownership
You don’t have to be an expert at all of these things; that’s where the franchisor’s industry knowledge and business expertise come into play. As a franchisee, you’ll save countless resources, hours, and energy trying to do everything yourself.
Just be sure to:
- Be smart about your investment and do your due diligence
- Go with a proven concept that has a strong plan of action for dealing with business interruptions
- Take advantage of financial incentives offered by the SBA
Plan for the Future!
You should always be planning for your future, and current times are no exception. Whether you choose to purchase a franchise or not, you’ll want to make an informed, well thought out decision that will help you achieve your goals and come back strong from this economic downturn.
Contact us to find a franchise opportunity that will work for you. Whether you are ready to invest now or just want to explore opportunities, we’ll guide you through the process and make sure you feel comfortable and supported at every step!
- 10 Ways Investing in a Fitness Franchise Strengthens Entrepreneurs’ Chances of Success
- Coronavirus Relief Bills: Requirements and Opportunities for Franchise Businesses
- Franchising Moves Forward Despite Challenge of COVID-19 Pandemic
- Buyer Sentiment Survey: Franchise Inquirers Looking Past Pandemic Effects – UPDATED 3/26/20
- Coronavirus: Unemployment claims caused by COVID-19 crisis, by state
- Coronavirus Drives More Interest in Some Franchise Categories, Less in Others
- Coronavirus Update: Long-Term Economic Impact Forecast to Be Less Than 2008 Recession