Apr 16, 2021 - Blog, Coronavirus, Franchise Articles by |

FranConnect, a well-known franchise management software provider, recently released a report detailing the economic impacts of the COVID-19 pandemic on the franchise industry. The report is available for download, and the International Franchise Association (IFA) has summarized some notable data from the report on its website. Here, franchise attorney Jeffrey M. Goldstein shares his thoughts on some of the key figures and what they might mean for current and prospective franchisees.

Notable Statistics from FranConnect’s 2021 Franchise Sales Index Report

As you might expect, the COVID-19 pandemic has taken a significant toll on the franchise industry. From the number of inquiries from new prospective franchisees to the number of days from inquiry to signing, virtually all aspects of the industry have been affected. This, of course, is to say nothing of the economic impact of the pandemic on existing franchisees, which we discussed in February.

Here are some of the most notable statistics from FranConnect’s 2021 Franchise Sales Index Report:

  • 36 Percent – Among “Enterprise” franchise brands, leads from new prospective franchisees were down 36 percent in 2020.
  • 29 Percent – Total new franchise sales were down nearly 29 percent in 2020. Notably, however, FranConnect and the IFA report that two key sectors—retail food and commercial and residential services—actually saw increases in new franchise sales last year.
  • 200 Percent – FranConnect and the IFA report that the time from a prospective franchisee’s initial inquiry to the date of signing the franchise agreement more than doubled in 2020.

Given the unprecedented impacts of the COVID-19 pandemic, particularly in the early stages, these numbers are not entirely unexpected. Forecasts for 2021 show the franchise industry starting to rebound, with momentum from this rebound carrying into 2022.

Key Takeaways for Current and Prospective Franchisees

As a current or prospective franchisee, what do these numbers mean for you? If you are thinking about buying a franchise, you may need to be prepared for the process to take a bit longer than usual. Some franchisors still have backlogs—although many are also anxious to make up for low sales figures in 2020.

As an existing franchisee, slow growth can impact what you can expect from your franchisor. While franchisors shouldn’t rely on initial franchise fees to finance their day-to-day operations, some do. Additionally, if your franchisor was relying on new sales to finance system updates, these plans may have been put on hold as well. There is also a chance that you could see less support as your franchisor focuses more of its efforts on sales.

Whether you are thinking about buying a franchise or you are currently a franchise owner, it will be important to pay attention to how your franchisor (or potential franchisor) is responding to the pandemic. While the pandemic will eventually be over, what franchisors do now could have lasting consequences for their systems in the future.

Contact Franchise Attorney Jeffrey M. Goldstein

Are you thinking about buying a franchise? Are you facing challenges with your franchisor? If so, franchise attorney Jeffrey M. Goldstein can help you make smart decisions. For a free, no-obligation consultation call 202-293-3947 or get in touch online today.

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