Franchising expected to bounce back quickly
Mar. 7—The number of small businesses failures in 2020 has yet to be calculated, but two months into the new year the havoc that the coronavirus pandemic wreaked on small business franchises has become clear.
According to a report prepared by FranData for the International Franchise Association, the number of business franchises declined 2.6 percent last year following two years of steady growth.
Approximately 20,000 franchises went out of business and took 900,000 jobs with them.
But the good news is that franchising is expected to bounce back quickly. FranData projects that 26,000 new franchises will open this year and create 800,000 new jobs with most of the gains coming in retail, food, and service industries.
"When I think about Toledo, the things I think about are exciting. There's some real growth happening," said Tracy Rickman, Toledo market consultant for FranNet, a consulting service that matches would-be franchisees with franchise opportunities that best fit their skills and interests.
Ms. Rickman, who lives in Perrysburg, said that despite the pandemic, the Toledo franchising scene stayed fairly steady in 2020 with entrepreneurs ready to invest and start their own businesses that ranged from quick-service restaurants to port-a-john rentals.
"I think the reality is that when the pandemic hit, franchises — because they have that infrastructure built into their system — were able to pivot," Ms. Rickman said.
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"I always think it's a good time to start a franchise. I mean, yes, I have drank the kool-aid," she said.
But during the pandemic, "a lot of people were downsized and there wasn't an opportunity to get another job because nobody was hiring," Ms. Rickman said.
Yes, a franchise is a sizable investment in time and money, but those who dared became their boss and controlled their own fate, she said. "A franchise is about as turnkey as a business can be — which is why they continued to thrive during a pandemic."
Caren Beckett, who with her husband, Craig, owns seven Sylvan Learning tutoring franchises, including one in Holland plus two satellite offices in the Toledo metro area, said the franchising system provided by Sylvan acted like a supportive family during 2020 and helped the couple better adapt their business to virtual tutoring, rather than their preferred in-person learning environment, during the pandemic.
"We've been at this for 20 years, but 2020 was very different to say the least. There were definitely a lot of adjustments we had to make because of (Gov. Mike DeWine's) lockdown and such," Mrs. Beckett said. "But we had really strong franchise backing that let us adapt quickly and continue our teaching. It really helped."
Mrs. Beckett said she also got support from other Sylvan franchisees nationwide, exchanging tips on how to better serve clients and manage business expenses during the pandemic.
"We have such great franchise relationships with other franchisees," she said. "We had calls with friends that we were able to bounce ideas off of and ask 'What are you doing to get through this?'"
Still, Mrs. Becket said she was unsure whether she would have attempted to start a new franchise last year even though she is very experienced in doing so. Sylvan Learning charges a $24,000 franchise fee, but the cost of starting up a franchise can range from $70,000 to $163,000 all-in.
"I don't know, I really don't know," she said. "I know there have been multiple Sylvan centers across the U.S. that were opened because of the need. But it would have been a tough decision. ...There were so many unknowns I'd have had to think very hard about it."
Foregoing his Culver's restaurant, which is under construction now in Holland, never crossed franchisee Ben Galaviz's mind last year despite the pandemic and Culver's $55,000 franchise fee. It costs another $2 million to $4 million to construct a restaurant that meets Culver's requirements.
"We weren't afraid of continuing to move forward," said Mr. Galaviz, who lives in The Dells, Wis. "What we got frustrated about is how Covid delayed us with everything. The builders, the inspectors and everybody is working out of their houses these days. What used to be a one week thing now takes three weeks," he added.
Before the pandemic, Mr. Galaviz had hoped to open his Culver's in the Spring Meadows Shopping Center last year. He was to be part of the Culver's April franchise class.
But that got pushed back to July and now his restaurant won't be open until this June.
"It's a really nice spot. We've been looking in the Toledo area for about 2 years and we're looking at some other areas too," he said. "Culver's last year was rated the No. 1 burger in the quick-service world. So we're excited. This can't come soon enough."
Ms. Rickman said part of what goes into a successful franchise is finding the right one for each would-be franchisee, which is what FranNet tries to achieve.
"We have an assessment tool, which is proprietary. But it creates a personality profile and looks at values and motives," she said.
Just because someone likes ice cream, Ms. Rickman said, doesn't mean they should invest in a Dairy Queen franchise.
"We all think of the food franchise, but those can be well over a million dollar investment," she said. "The thing is, there are so many franchises that are $100,000 all-in and that includes working capital. And some are $50,000 or below."
"We like to sit down with a person and create a business model that asks what does the perfect business look like for you?" Ms. Rickman said.
It might be one that involves sales of business-to-business. Or it might be an outfront business selling ice cream, she said.
"Look at me," said Ms. Rickman, who originally was a trained chemist. "If you would have told me 15 years ago that I'd own my own business doing this, I would not have believed you."
