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Covid-19 was a stress test for every facet of the restaurant business. Almost four in ten U.S. restaurants are currently closed, and many will be permanently closed due to the pandemic.
However, the industry's setbacks in the past year should not serve as a warning, but as a guideline. The restaurant franchises that weathered the storm – those with the strongest customer bases, the best food, and the most effective technology – are here to stay.
Related: A digital revolution is coming to franchising. These franchises are well prepared for what's next
While seeing restaurants permanently close their doors is daunting, I am encouraged by the resilience and innovation of the industry over the past year. Market demand is another source of optimism. The reality of the current situation is that we have the same number of people evaluating food options every day as we did before the pandemic. It's no surprise that fast-paced casual and QSR brands are seeing a surge in sales at a time when the industry as a whole is struggling.
The demand for restaurants in restaurants is very high. 83 percent of respondents in a new National Restaurant Association poll said they don't eat out as often as they'd like.
In a post-pandemic world, restaurants have an incredible opportunity to meet this increased demand and fill the void that recently closed restaurants have left. For savvy investors and avid entrepreneurs ready to see opportunities that others see uncertainty, 2021 will be the "Year of the Franchise".
If you've ever considered making a career change or just looking to diversify your business portfolio, there are three main reasons for buying a restaurant franchise:
1. Franchising is misunderstood – but not mysterious
There are many misconceptions about owning a restaurant franchise. Some investors believe that they need a background in the restaurant industry to be successful or that buying an early-stage restaurant concept is too risky.
In reality, franchising is a mature business, with processes and systems designed to minimize risk and generate consistent profits. The best restaurant franchisors provide franchisees with a clear roadmap for success and the tools to run their business. They help them hire an experienced operations team, secure loans, set up an accounting system, and select locations. Most brands also have an enthusiastic network of franchisees who share best practices with one another.
Successful franchisee Rick Fisher was an IT sales director with no restaurant experience, but he loved the opportunity to generate passive income and create wealth through franchising. He invested in Five Guys Burgers & Fries when it was a small, emerging brand and now has 10 locations. As Fisher says, "If I knew what I know now, I would take over an early-stage brand anytime."
Related Topics: Focus On These KPIs For Franchise Success
2. It is an ideal time to perfect the art of "Blitzscaling".
After a potential franchisee has completed their due diligence and identified a concept with excellent unit economics, replicable systems, and strong credentials from franchisees, they can make a small investment and scale up quickly. This is achieved through the snowballing effect of lightning scaling – when a franchisee reinvests free money from their first location to open a second location, and so on to increase their returns.
With this strategy, investors not only generate a much larger source of income, but they can also sell their business for a profit later once it hits its high.
3. Good real estate pays off
A new survey from Deloitte suggests that demand for hotel, retail and office space could decline double-digit over the next 18 months. Developers are highly motivated to fill vacant retail spaces and are ready to offer flexible rental terms to attract unique restaurant concepts.
There are also compelling opportunities for franchisees to buy and remodel recently closed restaurants. With commercial kitchen appliances already in place at these locations, franchisees can lower their upfront costs, open their restaurant faster, and get a quick payback on their investment.
Finding the right location is arguably the most important step in the franchising process, and by 2021, franchisees will have a choice of highly desirable locations.
Related: Why The Franchise Industry Is Booming In 2021
The final result
Covid-19 has unveiled an elite class of “future-proof” restaurant chains that lead the industry with resilience, innovation and leadership. Entrepreneurs should be confident of investing in these successful brands and taking full advantage of current market forces to fund and accelerate their growth in 2021.
While it's easy to find reasons to say no – especially in today's complex business environment – entrepreneurs willing to take the opportunity will see incredible success with restaurant franchises this year.