The International Franchise Association (IFA) recently released its Annual Economic Outlook Report for 2021. As summarized on the IFA’s website, “The report offers an in-depth look into franchising’s growth trend following the economic fallout due to the COVID-19 pandemic . . . . [T]he report forecasts positive growth expected for franchise businesses in 2021, provided continued federal support, and suggests the potential to reach pre-pandemic levels of economic output by the end of the year.” Here, franchisee attorney Jeffrey M. Goldstein takes a look at some of the key data from the report.
1. FRANdata Anticipates Strong Resurgence in Franchise Openings
Much of the information contained in the IFA’s report was provided by FRANdata. According to FRANdata, while the number of franchised establishments dropped by approximately 20,000 in 2020, nearly 30,000 are expected to open in 2021. This would represent a 3.5 percent growth and would put the total number of franchised outlets at around 780,000—above the total of 773,603 at the end of 2019.
2. FRANdata Expects Franchise Output to Increase Significantly As Well
While franchise output grew just 5.5 percent in 2018 and just 3.6 percent in 2019, FRANdata is anticipating a substantial 16.4 percent increase in 2021. This largely represents a bounce back from the 14.9 percent lost due to the COVID-19 pandemic in 2020 and would put total output for 2021 close to the 2019 total ($780 billion versus $787.5 billion).
3. The Franchise Industry’s Success in 2021 is Hugely Dependent on Our Ability to Control the Pandemic
As you might expect, these positive projections are based on the assumption that we will largely be able to gain control of the COVID-19 pandemic in 2021 through vaccination, masking, social distancing and herd immunity. If we are not able to gain control of the pandemic, FRANdata’s projections are far less favorable. In the words of the IFA:
“Assuming progress is made with controlling the pandemic, the recovery will be continuing . . . with the US economy entering 2022 in a stronger position than it was at the end of 2019. . . . Alternatively, if there is no control of the pandemic, that would mean a slowdown of the progress by more than 3%, translating to more than 20,000 unopened franchise units and 800,000 jobs not created.”
4. The Largest Growth is Anticipated in the Restaurant Sector
Due in large part to the devastating impact of the COVID-19 pandemic on all types of restaurants, FRANdata is forecasting the largest growth in the restaurant sector. While quick-service restaurants experienced a 6.7 percent loss in total outlets in 2020, FRANdata expects a 4.1 percent increase in 2021. Likewise, FRANdata sees full-service restaurants rebounding from a 14.8 percent loss in 2020 to an increase by 6.2 percent in 2021.
There are many other interesting insights in the IFA’s Annual Economic Outlook Report, and the full report is worth a read. You can access it here: Economic Outlook for Franchising.
Contact National Franchisee Lawyer Jeffrey M. Goldstein
Are you thinking about buying a franchise in 2021? Or, is your franchise continuing to struggle due to the economic impacts of COVID-19? For a free and confidential consultation with national franchisee lawyer Jeffrey M. Goldstein, call 202-293-3947 or contact the Goldstein Law Firm online today.