The pandemic wreaked havoc on the economy and small businesses. But one segment of the restaurant industry has seen an increase in activity: franchising.
“We’re on an upward trend that is going to continue until we get a little further down the road,” says Mark Siebert, franchising expert and CEO of Chicago-based consultancy iFranchise. “I think the trend will continue until unemployment goes down and prime locations and landlords start getting scarcer. Franchising will be one of the main drivers of the economy for the next two to three years.”
That increase in franchise activity means franchisors have an important decision to make as they look to grow: who they should partner with to drive that franchise growth.
Where to look
The pandemic has stolen opportunities for potential franchisees and franchisors to meet each other in person. Trade shows, one of the major drivers of franchise leads, have gone by the wayside for the foreseeable future.
“If you’re not going to hold a major trade show or a foodservice show, you have to find other ways to get those leads,” Siebert says.
To do this, companies have had to get creative. Saladworks, for example, took to social media and public relations campaigns. But its restaurant success—including double-digit growth the last three years—also spoke for itself, and many potential franchisees went directly to the company.
“You had more people looking for something else to do, whether they had free time from furloughs or temporary layoffs, trying to figure out their next move,” says Eric Lavinder, Saladworks’ chief development officer. He adds that Saladworks’ commitment to nontraditional spaces, including grocery stores, ghost kitchens, universities, and airports, made it more appealing for some franchisees.
Who to look for
As franchise demand is heightened, franchisors are able to be more selective. Still, the ideal franchisee in a post-pandemic restaurant landscape shares similar qualifications to franchisees in any other scenario. The choice really depends upon the franchisor and what its needs are.
“It is not one-size-fits all other than to say that the franchisor is always going to look for someone who is adequately capitalized, highly motivated, and will follow the rules of the system,” Siebert says.
Lavinder says he believes the funnel for the preferred franchise partner has widened since the pandemic. For Saladworks, it’s a three-step process, which includes being financially qualified, having some sort of business ownership experience, and having owned a franchise or worked in a restaurant. Once those criteria are met, then it becomes about the soft skills. “That is the hardest part. You can’t teach someone to be happy, to smile, to want to be around people,” he says. “Those are the traits we look for.”
Still, Lavinder believes that his company was a bit stricter with applicants this past year. “During a normal non-pandemic year, the people reaching out to you know what they want,” he says. “During the pandemic, you had people who had been in industries that didn’t align with the restaurant or franchise, so you had to spend more time with them to make sure they will be a good franchisee.”
Plus, as the pandemic wore on, banks became stricter with financial requirements, and potential franchise leads had to meet more financial thresholds. “We really care about franchisees and having them be successful,” Lavinder says. “If you put more qualifications in play, it forces better outcomes, but you can’t be too strict. It’s always a fine balance.”
Angel Velazquez, who opened the first Jersey Mike’s in California and now owns 15 locations while also serving as an area director overseeing 137 stores, says potential franchisees should also do their homework before franchising a concept. “Visit stores. Visit owners. Find out what they like about the franchisor and what they don’t like,” he says. “If there is one thing they should be looking for, it is the overall communication and support they get from the franchisor.”
How to help them
Getting support from the franchisor is key for anyone looking to get into franchising, particularly in an uncertain economy with a devastating pandemic circulating. Velazquez says the support he received from Jersey Mike’s corporate right after COVID-19 arrived was critical.
“The office started talking about, ‘What can we do for the franchisees to help them out?’” he says. “The communication between franchisor and franchisee was pretty much seamless.” He adds that the company held weekly webinars to make sure everyone was on the same page.
The relationship between franchisor and franchisee is fundamental to a franchise’s success, especially so in a crisis.
“When a system is under stress and when it needs to make changes to the way it does field supervisory visits and … outdoor dining and supply chain matters, there’s a real need for communication just based on the amount of change going on,” Siebert says.
He believes the surge in franchise demand will last for two to three years. And if franchisors can find the right franchise partners, they should be confident in their growth potential.
“I’ve been through a couple of recessions so far, and I’ve seen franchise growth,” he says. He adds that this recession has had the rare and potent combination of high unemployment, high asset values, low lending rates, government stimulus, and an opportunistic market for developers. “I’m waiting to see if it has had the kind of effect that I think it will.”