Despite the challenging economy, more people started their businesses in 2020 during the pandemic.
The Wall Street Journal reported that applications for the employer identification number (EIN), which is required to start a business, have increased from 2.7 million in 2019 to 3.2 million in 2020.
If you’re considering business opportunities, franchising can be as close to “plug and play” as you can get.
Here’s an overview of the market conditions that favor franchising in 2021, the top franchises to own right now and franchises you should avoid.
Franchising is a method of distributing products or services provided by a franchisor, the owner of a brand’s trademark and its business system. The franchisee pays an initial fee and a licensing fee (also called a royalty) to the franchisor for the rights to sell branded products or services using the trade name, business model, intellectual property, proprietary business knowledge and processes.
Why You Should Own a Franchise in 2021
The resilience of the franchising industry and new technologies that allow business owners to work effectively from home will attract an influx of young entrepreneurs to franchising opportunities in various verticals.
Here are some reasons why franchising will thrive in 2021:
According to the International Franchise Association, the industry has a long history with modern franchising dating back to the 1850s. It has survived many economic recessions, adapted to new market conditions and proven to be very resilient.
Franchising opportunities are attractive to people who have saved up money during the ten years between recessions and have the capital to invest. Industry veterans predict high unemployment and low interest rates will lead to an increase in franchise sales in 2021.
New Ways to Run Business
During the COVID-19 pandemic, most people have adapted to using various online tools to work and communicate. With the aid of technology and a new remote working mindset, many franchise owners are now running their businesses virtually. They also recognize the advantage of being able to work from home and generate an income during shutdowns.
Even legacy franchises have made strides to adopt technologies that will keep them relevant. For example, they’re supporting franchisees with the right digital platforms to connect with customers and operate cost-efficiently when in-person interactions aren’t possible.
A Tight Job Market
High unemployment rates caused by the economic downturn is leading to the rise of entrepreneurship, which has become a more attractive option than job hunting to many. Thanks to low interest rates, it’s now easier to receive funding to start a business.
Younger generations are turning to franchising to build a legacy while leveraging the support of an established brand. These entrepreneurs are also bringing with them innovative ideas that will help franchisors adapt to new consumer demands and behaviors so they can become more relevant.
Tried-and-True Business System
There’s no time to reinvent the wheel in today’s fast-changing market. Becoming a franchisee allows you to leverage an established brand name already trusted by consumers, as well as its business system and infrastructure, so you don’t have to start everything from scratch.
You can get support from franchisors in different areas to run your business cost-effectively while meeting changing consumer expectations. These can include site selection and development, training for your management team, research and development of new products or services, technical and field support, as well as marketing and advertising.
The Best Franchises to Own in 2021
1. Courier and Delivery Services
- The UPS Store
- Amazon Delivery Service Partner
2. Commercial Cleaning Services
3. Health-Care Services
- American Family Care Centers
Courier and Delivery Services
Consumers have grown to rely on online ordering and delivery services to get food, grocery and other necessities delivered to their doors during the Covid lockdowns. Many enjoy the convenience and are likely to continue using these services.
According to Market Reports World, the courier and local delivery services market is projected to register a compound annual growth rate (CAGR) of more than 5% by 2023. Here are some of the best franchise opportunities in the industry:
The UPS Store
United Parcel Service (UPS) is well-known for its shipping and logistics services. You can leverage its brand name to open a brick-and-mortar UPS Store that provides shipping and printing services to local customers. The UPS Store is ranked the 5th best franchise on Entrepreneur Magazine’s Franchise 500 list in 2020.
Franchisees get assistance from UPS to secure a retail location, build the store, procure permits and bids, as well as order equipment and computers. You’ll have access to a series of web-based training on operational procedures, product knowledge, and business acumen. The company also invests in advertising campaigns to help franchisees reach local customers.
Amazon Delivery Service Partner
S&P Global reported that Amazon saw e-commerce revenue gains of 47.0% year over year for the second quarter of 2020 and will continue to soar. The retail giant is actively seeking Amazon Delivery Service Partners (DSPs,) a delivery franchise under the Amazon Logistics arm.
Amazon will provide franchisees with exclusive deals on Amazon-branded vans, comprehensive insurance, industrial-grade handheld devices and hands-on training. You’ll also get all the tools and technology you need to run the business, as well as on-demand support such as a comprehensive operations manual, driver assistance for on-road issues and a dedicated business coach.
Commercial Cleaning Services
The reopening of schools, offices and other public spaces in 2021 with an added emphasis on sanitation will create substantial demand for the commercial cleaning services industry. These are relatively cheap franchises to start, making them an attractive choice for many.
Unlike residential cleaning, commercial services offer more stability thanks to longer contract terms. MarketResearch.com reported that the $117 billion commercial cleaning services industry will experience a 7.4% gain and recovery forecast for 2021 and 5.4% annual gains thereafter to 2025. Here are some franchises to consider:
This fast-growing international cleaning franchise offers the opportunities to get long-term and steady contracts with clients in industries such as auto dealerships, daycare and preschools, banks, government, property management, retail, fitness centers, business offices, medical facilities, restaurants, manufacturing and more.
Jan-Pro has several franchising options, starting from $1,250 and going up to $50,000. The company has a dedicated team of sales professionals who find guaranteed clients for franchisees so you don’t have to worry about selling.
The company specializes in eco-friendly cleaning solutions, an expertise that has been gaining traction and will likely attract coveted healthcare contracts in the near future. It has been in business for 35 years and helped over 8,000 franchisees to start their businesses.
Coverall will provide you with an initial customer base and provide training on all aspects of running your company, including business operations and service delivery. You also will get ongoing training and one-on-one mentorship to help you stay current with best practices and grow your business.
From telehealth to urgent care clinics, demand for health-care services is on the rise. Healthcare IT News reported that Frost & Sullivan forecasts a sevenfold growth in telehealth by 2025, a five-year CAGR of 38.2%. Meanwhile, there are more than 9,000 urgent care clinics in the U.S. and the number is continuing to grow.
The coronavirus pandemic has further encouraged consumers to use these services. As patients become accustomed to the ease and convenience of these new formats, the demand is expected to rise in the future.
GoTelecare offers software services for telehealth and medical billing using its proprietary technology platform. The company provides presales and marketing support with a dedicated account management expert to support its franchisees.
The telehealth solution offers opportunities in the remote patient monitoring segment with capabilities to conduct real-time tracking and transmission of patient vitals to doctors. Meanwhile, the end-to-end revenue cycle management services help franchisees become claims adjudication partners for leading insurance payers across the U.S.
American Family Care Centers
Founded in 1982, American Family Care (AFC) has a long track record of supporting franchisees with a proven business model, streamlined medical processes, as well as technology and systems to operate health-care offices efficiently.
The franchising package includes business management software for patient-intake, scheduling and payroll, billing services, marketing materials, licensing and credentialing assistance, ongoing training, staffing and physician recruiting services as well as a private intranet site.
Franchises to Avoid In 2021
Many businesses have been impacted by the pandemic and are unlikely to experience a recovery in 2021. These industries probably aren’t the best bet if you’re looking for franchising opportunities this year:
Food Service and Restaurants
Fast-food chains, restaurant franchises, coffee shops and smoothie stores are experiencing a drop in sales and shrinking profits because of stay-at-home orders, restriction to indoor dining and the increased use of third-party delivery solutions. For example, FSR Magazine reported a 49-unit IHOP franchisee had filed for bankruptcy protection.
During difficult times, franchisees may find it challenging to adhere to certain guidelines dictated by the parent company, which may not be applicable to their unique or local situations. There are more disputes during the past years in this industry. For instance, Pizza Inn franchisees pushed back against the company’s plan to control the chain’s advertising funding.
Hotels and Resorts
As travel came to a grinding halt during the pandemic, the hotel industry is under tremendous pressure. Not only do fewer guests mean less revenue but hotels are required to take more safety precautions in sanitizing rooms and common areas, which are increasing the cost of operation.
According to the American Hotel and Lodging Association, 71% of hotels in the U.S. won’t survive another 6 months without further federal assistance given the current projected travel demand and 77% will be forced to lay off more workers.
Hospitality and Travel Services
Businesses that support the travel and tourism industry are suffering as a result of the pandemic. These include rental car companies (e.g., Hertz filed for bankruptcy protection,) travel agencies, tour operators, amusement parks and entertainment providers.
If you’re looking to invest in a franchising opportunity, it’s best to avoid any business that depends on travelers and tourism. Companies that support airlines, hotels and large in-person events are likely to suffer setbacks that could last for years before they return to the pre-COVID-19 level.
Choosing the Right Franchising Opportunity
The coronavirus pandemic has changed the business world and it’s also hastening some consumer trends that have been brewing (e.g., online grocery ordering and delivery.) As the dust is settling, entrepreneurs now have insights that aren’t available even 6 months ago to identify the best franchising opportunities for 2021 and beyond.
By balancing market conditions, consumer trends, your area of interest or expertise and the amount you have available to invest, it’s not a far-fetched dream to own a successful franchise in 2021.