Following earlier franchise market assessment, leading franchise consultants see opportunity ahead specifically for foodservice franchises
July 22, 2020 – HOMEWOOD, ILLINOIS. Franchise sales in the restaurant franchise sector are poised to explode according to franchise industry veterans. “It is tragic, but we have seen unprecedented restaurant closures in the last four months, many of which will be permanent,” Mark Siebert, CEO of franchise consulting firm iFranchise Group, recently noted, “But this tragedy will create a tremendous franchise sales opportunity for restaurants who have weathered this storm by early 2021.”
While the exact number of permanent closures will not be known for months and estimates vary widely, Yelp research has indicated that the number might be as high as 53%, whereas the National Restaurant Association’s research puts permanent closures as low as 3%. “The exact number will almost certainly be somewhere in the middle,” according to Siebert, “but with 660,000 restaurants in the U.S., we will likely see over 100,000 empty shells where restaurants once stood. And restaurants who are ready to expand will likely find numerous qualified buyers who are eager to take advantage of the opportunity to open in prime locations for less.”
Siebert went on to explain that the large number of closed restaurant locations around the country will provide surviving concepts with numerous opportunities for expansion in prime locations with substantially reduced investments and occupancy costs. These opportunities will also come at a time when the number of displaced restaurant executives, including those with capital to invest, is at an all-time high and interest rates are at an all-time low. “Once an effective vaccine is found, we anticipate that demand for dining out will quickly return to pre-COVID levels, providing those restaurants that survive a unique opportunity for growth,” Siebert stated.
“Obviously, to be able to franchise, the restaurant must be able to thrive in whatever market conditions are at the time,” said iFranchise Group President Dave Hood. Now more than ever, any franchise expansion plan should be subjected to detailed analysis and financial modeling to ensure that it works for both the franchisor and the franchisee.
The consultants added that those looking to take advantage of the opportunity in the marketplace need to start with an analysis of whether the restaurant remains franchisable in current market conditions. And until a vaccine is in place, it will be more important than ever to identify ways to increase opportunities for delivery and to-go orders to help maximize revenues. Sanitation and food safety have never been more important. Franchisors must be able to document policies and practices for sanitizing, social distancing, contactless service, use of protective gear and guest communications.
“When you consider that it typically takes at least four months just to get the needed franchise documentation in place, those likely to be taking advantage of the market in 2021 will be those who are preparing for that growth now,” Hood concluded. “It has been inspirational to see the resilience of the restaurant operators over the past few months, although certainly not a surprise. In our franchise consulting practice, we have consistently seen the perseverance and creativity of entrepreneurs everywhere, and we expect this will continue in the months ahead as the restaurant franchise sector sees a marked uptick in activity.”
About iFranchise Group: iFranchise Group offers the skills of the nation’s top franchise experts in strategic planning, operations training and documentation, franchise marketing and sales, and best practices for emerging and established franchise companies worldwide.