How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
When something as unprecedented as the COVID-19 happens, it has
an impact on multiple areas of life. So, as a prospective
franchisee, it's definitely worth taking the time to see how the
pandemic has impacted the franchise industry as a whole and what
this may mean for everyone involved in the future.
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New categories drawing strong interest
As expected, there are some new winners emerging based on the
shifts in consumer habits and the perceptions of franchisees when
it comes to recession resilience. While research shows that the
interest from prospective buyers in franchising still remains
strong, their attention has shifted. The pet category, for example,
is now seeing more interest because people are perceiving their
services as essential. Other areas that are becoming increasingly
popular among potential franchisees include education, business
services, financial services, cleaning and computer services.
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Models are starting to change
With lending tightening and leases looking very unappealing to
potential franchisees right now, brands that have lower perceived
risk are becoming increasingly appealing. It's too early to say
just what the outcome will be, but it's already clear that more
brands are going to add mobile options and offer more accessible
entry models, such as reduced franchise fees.
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Momentum is dwindling for some brands
As franchisors have had to cut back to conserve cash, many laid off marketing and sales teams. This will make it tougher for these brands to rebuild their momentum. It does, however, create an opportunity for brands focused on handling lead generation for other businesses, marketing consultants, franchise development consultants and franchise brokers.
One thing to keep in mind is that this pandemic may mask some
weaker franchise models. A brand with the outward appearance of
health could, in fact, be struggling on the inside. If a brand
struggled to get units open pre-pandemic, had unit agreements fall
through, had high levels of owner turnover and unit closures or
poor satisfaction scores from customers, it's a sign that there are
problems behind the scenes. However, with the pandemic effectively
putting many things on pause, these same franchisors could now have
a plan in place to correct whatever is ailing their system. If you
noticed some or all of these signs in the brand you're considering
prior to the pandemic, this is an area where deeper research will be needed before you make a
final decision.
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