Coronavirus Could Sock The Franchising Industry Hard, Potentially Closing Up To 30,000 Units

How hard will the franchising industry be hit the coronavirus pandemic? Up to 30,000 franchises could be closed.

The new analysis is from FRANdata, a highly regarded franchise advisory firm that closely tracks the industry across the country. The franchise sector that could be impacted the most by COVID-19 is restaurants, with an estimated unit loss of 7,800 and 173,000 job losses possibly tied to shutdowns.

The next hardest hit sector is the popular personal services, which include a wide mix of services like health and fitness, education, and beauty salons. The estimated unit and job loss there respectively is 7,300 and 81,000. The personal services sector has been the industry’s fastest-growing franchise business line in recent years and is projected to retain that title this year.

Another franchising category that could be hammered is retail food, products, and services, where the unit loss is estimated at 5,200 and associated job loss at 58,000.

Additionally, the 30,000 unit loss estimate could be a moving target given how things are changing moment to moment in this business climate due to the coronavirus epidemic.

In the black community, the analysis perhaps may be telling to black franchisees as many have franchises in businesses FRANdata examined. Those categories include lodging, restaurants, personal services, residential & commercial services, business services, real estate, and retail food, products, and services.

Take the restaurant industry for instance. Many black franchisees are heavily involved in that business, operating brands that offer hamburgers, pizza, chicken, and other food items.

When it comes to opening a business, franchising is where many African Americans make money. The number of black-owned franchises rose briskly to 8% in 2012 from 4.4% in 2007, research by the International Franchise Association (IFA) revealed, Black Enterprise reported in 2018.

Blacks had the biggest gain in the percentage of businesses run as a franchise within the minority, ethnic, and gender groups. Those black-owned firms grew to 4.8% in 2012, up roughly 66% from 2.9% from 2007.

In an informational letter issued this week, FRANdata CEO Darrell Johnson stated the franchise community could lose as many as 30,000 units in the near term unless swift actions are taken by multiple parties. He added, “We have been working closely with the International Franchise Association to try to improve the relief packages from Congress and the president. We also are hearing and evaluating how franchisors, suppliers, and lenders are adjusting.”

Johnson emphasized that his firm is here for franchising—as the coronavirus lingers. He said never has it been more important to understand what is going on, what it means, and what you should be expecting and doing. “To help you, we are going to start sending out information every few days on what we know is happening and what we think it means for franchising.” For more details on FRANdata, go to www.frandata.com.

The IFA, the industry’s largest trade group, is providing ample information specifically related to the coronavirus on its website.