10 Ways the Pandemic Transformed Franchising
From added incentives to expanded virtual training, franchises want to give people more agency and flexibility on the path to financial freedom.
Can you start a food delivery business without opening your own restaurant space? Can you give tours of senior care centers when no one is allowed in nursing homes? Can you train someone to repair a transmission over Zoom? Can you start an education business while helping your kids with remote learning? These are the sorts of questions that franchises started asking during the pandemic, and when they discovered the answer was "yes, you can," it didn't just save them in a pinch — it changed the industry for good.
While millions were stuck at home, or working increasingly undesirable jobs outside the home, franchises were working hard to show they could offer people more freedom and autonomy over their lives. Here, we look at 10 ways the pandemic affected the world of franchising.
1. Women Saw Franchising as an Escape Hatch
During the pandemic, 2.5 million women left the workforce, an exodus that Vice President Kamala Harris called a "national emergency." Lack of employer flexibility that was frustrating before the pandemic became impossible to contend with when families got stuck at home. But during that time, many women began exploring their options and discovered franchising as an alluring alternative. Women-owned franchises were already on the rise; in the decade leading up to 2019, they had increased by 24%. But in the last two years, interest spiked.
"I feel like there's been this shift about what you're not going to take anymore," says Tamika Franklyn, who educates women and people of color about franchising through her Precision Franchise consultancy in Brooklyn, New York. "People want to follow their passion even more. People who have been working at home have realized how important it is to have that flexibility."
Franklyn says many women are surprised when they learn about franchising's options. "I think they're just unaware about funding," she says. "They don't understand that there are over 40 industries." Megan Allen, market president of FranNet Colorado, has also seen more women calling. They either inquire and then opt to stay home with the kids, or decide it's finally time to go for it. "I think it's 50-50 now," Allen says, "and that's night and day from 10 years ago."
Andrew McCuiston, president of Goldfish Swim School, says 40% of franchise agreements the company signed in 2021 included women owners. Some are husband-and-wife teams; others are female business partners. "Goldfish has experienced approximately a 5% increase year-over-year in signed franchise agreements involving a female owner, each year," McCuiston says. "60% of Goldfish Swim School's 124 open schools include a woman owner." He thinks the trend is not just more women considering franchises, but also brands like Goldfish recruiting more women. "I think women are sometimes better at running this business than men," he says. "If we can find female franchisees in Texas and California, in particular, we see a huge need there."
2. Young People Discovered Franchising as a Way to Take Charge of Their Futures
A year and a half ago, three siblings near Boston — TJ Nelson, 22, Tara Nelson, 26, and, Tori Nelson, 28 — opened a Cousins Maine Lobster truck. Yes, there was uncertainty starting a business during the pandemic, but that only emboldened their resolve to take back some control over their lives. Tori Nelson was about to become a working mother and was looking for a job with flexible hours. Tara had graduated from college in 2017 and knew she didn't want to be stuck in the same office job forever—or in Zoom meetings for eight hours a day. And TJ had been thinking a lot about how when he was a kid, his dad never missed his baseball games. Someday, he wanted to be that kind of dad.
So the siblings asked their father, Todd Nelson, a partner in the largest Valvoline instant-oil-change franchise, for help with opening a family franchise location. "The days of coming out of college and working for the same company for 30 years are over," Todd says. "We did our due diligence on Cousins Maine Lobster, and it's a fantastic franchise." The Nelsons are now preparing to launch their second truck this spring.
Gen Z, the generation now entering the workforce, is showing a strong gravitation toward entrepreneurship. And during the pandemic, quite a few young adults acted on those instincts.
Firehouse Subs just got its youngest-ever franchisee: a 23-year-old. At Dryer Vent Wizard, a 26-year-old franchisee is considering a multiunit expansion. At NuVinAir, which does odor removal, CEO Kyle Bailey says a franchisee in his early 30s already doubled his territory. "There's this younger generation that doesn't necessarily want to be what their parents were," Bailey says. "They've witnessed so much pain, so much disruption, so much disconnect — first in 2008 and now with COVID — they're thinking, How do I avoid being part of that system?"
They want to control their own destinies. "Owning our own business like this gives us the opportunity to decide what we want to do," Tara Nelson says.
3. Franchisors and Franchisees Added Incentives to Attract and Keep Employees
Reports of labor shortages persist throughout the United States, with employers looking to hire more EMT first responders, mental health professionals, restaurant servers, pharmacy technicians, parks employees, retail associates and countless other types of workers. The franchising business model is not immune to this labor strain, and has been adding incentives to entice and keep employees.
Numerous franchisors have recognized that cash is king. McDonald's announced a 10% hourly wage hike that should raise the average at company-owned restaurants to $15 an hour by 2024. Some McDonald's franchisees went even further; in Pittsburgh two locations advertised pay of $22 an hour along with free bus passes. A McDonald's in Illinois offered new hires a free iPhone after six months. Domino's Pizza locations in Washington, D.C., offered $500 sign-on bonuses.
Other brands began offering perks that gave employees a sense of purpose and support beyond their bank accounts. A franchisee with Seniors Helping Seniors, which focuses on in-home senior care, not only added signing bonuses and pay increases, but also donated $50 in each employee's name to a local charity supporting Alzheimer's research. Pizza Hut promoted its Life Unboxed EDU program, which lets team members earn college credits on the job, in addition to reduced tuition for college courses. MaidPro looked to support employees whose children had been sent home from school, leaving working parents in a bind.
"Not only did students suffer from the lack of school, but many of our employees were left without childcare options throughout the day," said MaidPro Wichita owner Paige Rounds. "As a company, we hosted socially distanced learning at the office on days when school was canceled."
4. Franchises Ramped Up Virtual Services for Customers
Deloitte calls "presence-free living" one of the main pandemic-driven trends. Whether for work, education or leisure, consumers realized that physical presence is not always required to achieve a goal or have some fun. Franchises had to adapt, and fast.
"We found out we weren't pandemic-proof," says Dean Fisher, who heads Driven Brands' collision-repair brands, including Carstar. "This pandemic accelerated some things in our industry — things like the claims-handling process." In the past, a vehicle owner would call for an in-person estimate of crash damage when trying to file a claim. "We created a process in our system where a customer can take photos of their vehicle and receive an estimate related to the damage," Fisher says. "There are even apps being created and refined to guide the customer through the process of taking those photos, and what an insurance company is going to want from certain angles."
Assisted Living Locators, which helps customers explore senior-living options, also experienced what CEO Angela Olea calls a "big paradigm shift." Prior to COVID-19, the brand prided itself on in-person facility tours. "There was a big panic about how we were going to do this," she says.
Her team turned to online guided tours, which was a challenge for smaller facilities, at a time when statewide restrictions meant nobody could get inside. "The higher-end places had the tools and technology that let us do an acceptable virtual tour, but the smaller places, we had to meet with the owners to get what we needed," Olea says. Going forward, she adds, consumers will continue to expect the virtual options. "Before, 20% or 25% of the tours we were doing were virtual," she says. "It is going to increase."
5. Franchisors Added and Expanded Virtual Training for Franchisees
On top of the challenge of building out virtual offerings for customers, many brands were simultaneously creating presence-free support systems for franchisees.
One of those franchisees was Micah Wells of Savannah, Georgia. He's a veteran who signed with AAMCO auto repair in February 2020. "They were going to fly my wife and I out for two days to meet everybody, and then we would go to AAMCO school in Florida," Wells recalls. "Then all of the sudden, everything halted." AAMCO corporate leaders had to reimagine everything from the welcome day to in-person classes for owners, managers and technicians. "Pre-pandemic, we had hands-on transmission training events where the technicians would go, and they would work with our master technician trainers. They would actually take apart transmissions and put them back together," says AAMCO CEO Jim Gregory. "During the pandemic, we even took that virtual."
AAMCO was far from alone. Franchise brands such as ProLift Garage Doors, Maid Right, Kitchen Wise, and Handyman Pro all revamped franchisee training for the digital realm. As it turned out, many people liked the virtual versions better, including AAMCO transmission trainees. "You can actually see some things better with a zoomed-in camera online than you could if you were standing around somebody in a circle," Gregory says.
Since the height of COVID, in addition to their 700 on-demand courses, AAMCO has added hundreds of on-demand videos and offered more than 2,000 hours of live online training. "I personally liked it that way," Wells says. "I was in my house. I didn't have to travel anywhere or stay anywhere. I still got the full benefit of all the information." AAMCO plans to keep the digital options, Gregory says, and is now trying to develop more hybrid options. "That's where our head is at," he says. "How can we take the incremental capability that we developed during the pandemic and improve it?"
6. Diversity, Equity and Inclusion Became a Driver of Franchise Ownership
Every year, PuroClean does a franchisee satisfaction survey. In 2020, the restoration company, which repairs things like water and fire damage, saw almost 7% of respondents self-identify as Hispanic. Another 18% were non-Caucasian. As of October 2021, "the Hispanic bucket has grown to nearly 10%, and we're almost at 22% in those identifying as non-Caucasian," says Tim Courtney, vice president of franchise development.
At the start of the pandemic, some business experts fretted that companies' priorities might shift away from diversity, equity, and inclusion. But that's not what happened in franchising. With PuroClean's home-based options, the franchise became appealing to a wide array of people. "Everybody always assumes race, but diversity is all-inclusive," Courtney says. "I think there's been a seismic shift. It's really opened up to all."
Scott Williams, CEO of Batteries Plus, says his brand's investment costs of $199,000 to $360,000 made franchising accessible to the most diverse group of applicants ever. "It's everything from ethnicities to gender to different nationalities," Williams says.
In 2020, Coldwell Banker launched an Inclusive Ownership Program with financial, education, and mentorship incentives to attract diverse franchise owners, and last year Realogy extended it to Century 21 and other affiliated brands. More than 30 franchisees signed on so far. It's smart business given that by 2040 some 70% of new homeowners are expected to be Hispanic, says Sue Yannaccone, president and CEO of Realogy Franchise Group. "There are legitimate barriers to getting transactions done if we're not serving people in the same language they're speaking or with the same cultural values they're looking for," Yannaccone says.
Ivan and Karina Oliver of San Antonio, PuroClean's franchisees of the year, know that reality firsthand. They are Mexican natives whose Hispanic, Black and white employees receive wide-ranging referrals in their various communities. "I believe that the culture and the engine behind how we are approaching things is driving the business to excel in the marketplace," Ivan Oliver says.
7. Home-Based Franchises Without Brick-and-Mortar Locations Got a Big Boost
Dan Tarantin, COO of Belfor Franchise Group, doesn't even use the phrase "work from home" anymore. "We actually call it "franchise from home,' " he says. "Being in business for yourself and having a franchise provides a lot of flexibility for folks in their lifestyle. Working from home really takes that to another level."
Belfor's brands include Chem-Dry carpet and floor cleaning, The Patch Boys drywall repair, and Ductz HVAC restoration and air duct cleaning, all of which let franchisees start out at home. As consumer demand for home services increased during the pandemic, so did demand for low-overhead, home-based franchises offering those services. "They thought, "Gosh, I'm spending this money in my home; there must be a lot of other people doing it too,' " Tarantin says. Most of Belfor's brands reached record levels of new franchisees during the past 12 months. "Amongst our 11 brands, we're on track to award over 230 franchises this year," he says. "That's over 25% from prior years."
Premium Service Brands, which includes Handyman Pro, The Grout Medic and House Doctors, also saw demand skyrocket for both services and franchises. The company is trending toward 54.5% growth in 2021, building off 2020's 37% growth, says CEO and founder Paul Flick. Two types of franchisees emerged, he says. One wants to keep an existing job while owning a franchise that a general manager runs. The other lost a job and wants to own and run a business. Both types view low-overhead, home-based franchises as ideal. "It doesn't mean that when we're on the other side of COVID, people won't want to open their own offices," Flick says. "But they don't have to in the first two or three years."
8. Customers Wanted More Home-Related Services From Franchises
The U.S. economy shrank by 3.5% in 2020, but spending on home improvements and repairs grew more than 3% to nearly $420 billion. That growth included much more than painting walls and installing tile. In franchising, it included everything from repairing upholstery to fixing computers.
"We definitely were part of that surge," says Jesse Johnstone, president of Fibrenew, a mobile-service franchise that repairs leather, plastic, vinyl, and more. "With people being at home more, they were either sitting on or looking at their couch more and saying to themselves, "You know, I've been meaning to get that pet damage restored or get that conditioned or re-dyed.' "
The business bump started in May 2020, when people realized they'd be stuck at home for a while, he says. Fibrenew franchises saw a 20% to 25% increase in business, with many hiring additional employees and technicians. NerdsToGo, which offers computer repair and IT support, also surged, and Propelled Brands acquired NerdsToGo in September 2020. "Compared with 2019, it was up significantly in 2020, and this year, we continue to see strong gains over last year," says Mark Jameson, Propelled Brands' chief support and development officer.
NerdsToGo shifted its focus from customers bringing devices into retail locations to having technicians head out in vans, helping small- and medium-size companies organize remote workforces. "We had businesses asking us to go out to their employees' homes to make sure they were all set up," Jameson says. He expects demand to stay strong. "I think what we're seeing is a permanent change," Jameson says. "Some employees will return to work, but a great number of people have worked at home and enjoyed it, and companies are realizing that they have to be flexible."
9. Ghost Kitchens Popped Up Everywhere
In August Wendy's announced plans to open 700 ghost kitchens by 2025, with expectations that each unit could earn as much as $1 million in annual sales. The news prompted many people to ask, "What, exactly, is a ghost kitchen?"
A ghost kitchen, sometimes called a dark kitchen, is a physical space where food can be prepared for delivery through apps like Grubhub and DoorDash, but without the typical build-out of a restaurant. Ghost kitchens can be a fraction of the size while offering food from the menus of more than one restaurant brand. The business model reduces real-estate costs, staffing, property-maintenance fees, and everything else that comes with a traditional dining space. Consumers may not even realize a ghost kitchen is in their community, but the delivery drivers know how to find them, grab the orders and get the food to people's homes or offices. That means with a ghost-kitchen deal like the one Wendy's announced, customers can order a Bacon Double Stack Biggie Deal even if there's no traditional Wendy's location nearby.
The ghost-kitchen industry is estimated to be worth more than $43 billion today, with projections that it could top $71 billion by 2027. And the pandemic only accelerated interest, with the massive demand for in-home food deliveries. Franchise brands such as The Halal Guys (fast-casual American Halal food), Dog Haus (gourmet hot dogs, sausages, and more), and Sora (sushi boxes) all saw success. Others are using the ghost-kitchen model to test new markets. To get a good sense for how the industry is angling for growth, just look at how it pitches itself to brands. The company CloudKitchens, which helps restaurants establish ghost kitchens, states right on its site: "Since it's a low-risk model, it's also a good way to test your concept in a different market before building out a brick-and-mortar."
10. Humans and Their Furry Friends Got Widespread Access to Telehealth
Telehealth wasn't a foreign concept to doctors or veterinarians when COVID-19 appeared. Dr. Sam Meisler, founder and CEO of PetWellClinic, says the veterinary conference he attended in February 2020 included numerous telehealth lectures. He was still getting a handle on the subject when the pandemic shutdowns began. "We were going to give it a try anyway, and at that time, none of us knew what was going to happen," Meisler says. "Everyone was just very fearful."
The same thing happened to Sean Hart, vice president of sales and development at American Family Care. The company had been considering telehealth options, but hadn't found the right fit when officials started telling everyone to stay home. "When COVID hit, we panicked — and I mean in a hard way," Hart says. "Within 10 days, we had a telecare solution. It was crazy."
Both companies discovered that clients liked the telehealth option for pets and people. Sometimes, appointments were one-and-done. Other times, clients were screened to determine if they should visit a franchise location for in-person services. Hart says that at peak use, telehealth made up about 15 % of American Family Care's appointments. Today, that number is about 6%. "The benefit now is that if I have no need for a test, I can do the follow-up or get the prescription through telecare," Hart says.
Meisler says PetWellClinic has also seen demand for telehealth decrease overall, but he sees additional uses for the technology going forward. "We're going to develop our own app," he says. "We'll use it for a lot of communications, like messaging. Then we won't have the phone interrupting our work during the day. We'll be able to concentrate on the clients who are there, and it will be a value-add for the clients too."
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