A March study by FranConnect found that 66% of franchisors were actively pushing sales of new franchises. This prioritization of franchise sales came at a time when the coronavirus outbreak was causing massive lockdowns throughout the US—indicating that these brands were still planning to grow in 2020.
An interesting finding from that report: the variance between industries. Almost 90% of business- and residential-services brands continued to bring on new franchisees. However, restaurants were the opposite: 75% of food-service brands were stopping all franchise sales efforts.
This contrasting franchise growth across industries is an excellent example of how the coronavirus has impacted business sectors differently. If you’re an entrepreneur looking into buying a franchise, you should consider both the current and long-term effects of COVID-19.
Below are some of the best and worst franchises to buy in 2020 based on industry.
Best Franchises to Buy in 2021
Buying a franchise is a great way to bypass many of the struggles that come with launching a new business. Instead of building a brand, you can use the marketing collateral of the franchisor. Instead of worrying about procedures and systems, you’ll gain access to training and processes that have been tested across other franchises.
You can mitigate risks by going the franchise route with your startup, furthering your likelihood of success by becoming a franchisee for a brand in a growing industry.
Below are a few industries you may want to consider if buying a franchise in 2020.
Commercial Cleaning Service
The $117 billion US commercial cleaning industry is expected to be one of the biggest financial benefactors from the coronavirus outbreak. While some commercial cleaning businesses saw a decline in work during the pandemic with fewer people frequenting schools, offices, or public spaces, the emphasis on sanitation and cleanliness moving forward will likely bring ample contracts.
Starting a commercial cleaning company is a low-risk business. It requires little investment on the front end, and the long-term outlook from industry experts is a growth trend of 5.4% annually through 2025.
Unlike residential cleaning services, commercial services offer more stability and longer contracts. Below are some of the commercial cleaning franchises worth considering in 2021.
- JAN-PRO: As one of the fastest-growing commercial cleaning franchises in the world, JAN-PRO has 10,000 franchises across 8 countries. Becoming a JAN-PRO franchisee offers you access to a proven business model, rigorous training, and brand recognition. The initial capital needed to buy a JAN-PRO franchise is only $1,000, and the estimated investment for launching the business falls between $5,000 and $60,000.
- Coverall: Touted as the “health-based” commercial cleaning solution, Coverall might be one of the more exciting cleaning franchise opportunities out there. The company focuses on eco-friendly cleaning solutions, an expertise area that may entice coveted healthcare contracts. Coverall was founded 35 years ago, and since then, they’ve launched over 8,000 franchises. The franchise fee for a Coverall business is $10,000, but it comes with comprehensive training—not just in cleaning, but also in business operations. The fee also includes equipment, collection software, customer support solutions, and a regional support center.
- Vanguard Cleaning Systems: Founded over 35 years ago, Vanguard Cleaning Systems is another popular and reputable commercial cleaning franchise. They focus mostly on commercial offices and have been known to work with the likes of Amazon and Toyota. They offer unit and master franchise opportunities and focus on providing a personalized experience to both their customers and their franchisees. The franchise fee is $8,000, and the initial investment to launch a Vanguard Cleaning Systems business ranges from $8,000–$40,000.
Courier and Local Delivery Services
Consumers around the US have become reliant on delivery services during the coronavirus pandemic. Contactless food delivery solutions like Uber Eats and Instacart have kept people fed during the state-wide stay-at-home orders. Not only are there opportunities for entrepreneurs to join these trendy delivery apps, but you can also invest in your own delivery business through franchising.
Market research suggests a steady growth of 5% year-over-year for the local delivery and courier industry through 2023. With health-conscious consumers likely to continue using delivery services and online ordering for the next several months, there’s no better time to start your franchise delivery business.
Below are 2 popular franchise options for entrepreneurs interested in joining the courier and local delivery industry.
- The UPS Store: UPS is known for its shipping and logistics, but you can actually open a brick-and-mortar UPS store, providing shipping, marketing, and printing services to local consumers. Entrepreneur Magazine ranks The UPS Store as the 5th best franchise on its Franchise 500 list for 2020, behind powerhouses like Dunkin’, McDonald’s, and Taco Bell. Prospective franchisees need $60,000 in liquid assets to start a store and can expect franchise costs to range from $75,000–$470,000 depending on the type of franchise store (traditional location, rural location, store-in-store location).
- Amazon Delivery Service Partner: Amazon has been one of the few companies that have seen business increase because of the coronavirus pandemic. To keep up with demand, Amazon is actively looking for entrepreneurs to become Amazon Delivery Service Partners—essentially a delivery franchise under Amazon Logistics. To become a DSP, you’ll need $30,000 in liquid assets and can expect costs around $10,000. Amazon vets applicants thoroughly, looking for people who are not just business-minded but also great leaders. At scale, you’ll be expected to oversee a team of 100 employees and between 10 and 40 delivery vans. Amazon estimates a potential profit for franchisees of $75,000–$300,000 for those who have 20+ vans.
The entire telework industry has seen a spike in business because of the coronavirus pandemic. Businesses are looking for digital solutions to enable employees to work from home in order to prevent the spread of the virus.
Under the telework umbrella, you’ll find the telehealth industry: companies that use technology to distribute healthcare services and information. A recent telehealth report from CNBC suggests a massive boom for telehealth unlike anything we could have predicted before COVID-19. An analyst in the report expects telehealth will host more than 1 billion healthcare interactions this year alone.
While you might be itching to mine the telehealth gold rush, your franchise choices are limited. Most telemedicine businesses are startups themselves with very little brand equity or market share. If you want to go the franchise route in telemedicine, you really have 1 option: GoTelecare.
- GoTelecare: While many telemedicine startups work directly with consumers, GoTelecare is building a franchise business model for the telehealth space. GoTelecare has built state-of-the-art software solutions for telehealth and is essentially licensing these solutions to entrepreneurs in the form of a franchise. You have 2 main telehealth solutions to choose from: telemedicine or medical billing. GoTelecare markets itself as a “zero headache operation” because it handles every business aspect after client acquisition. The franchisee’s goal is to acquire customers and handle some minor customer service, and the team at GoTelecare manages training, customer support, billing, and more. To become a franchisee of GoTelecare, you’ll need $100,000 in liquid capital and should expect to make an initial investment of $60,000.
Worst Franchises to Buy in 2021
In addition to understanding the most favorable industries and franchises of 2021, you should also know which ones to avoid. The coronavirus has severely impacted many businesses and industries throughout the country. The franchises and business sectors mentioned below have been some of the hardest-hit by COVID-19 and the related changing consumer trends we anticipate after the pandemic ends.
Food Service and Restaurants
The food service industry is one of the leading franchise categories in the country, but because of the restrictions and hurdles placed on restaurants during the coronavirus pandemic, it’s now one of the riskiest industries in which to invest.
Fast-food chains, coffee shops, and smoothie stores alike are seeing their sales plummet from people staying at home and their profits shrink from using third-party delivery solutions.
Recently, a franchisee operating 49 IHOPs had to file for bankruptcy, citing closed dining rooms for its inability to repay debt or continue operating its locations. There are countless stories of food service franchises closing from declining sales because of COVID-19, and the pandemic has also ratcheted up the tension in operator-franchisor relationships.
When you operate a franchise, you’re typically restricted to certain activities as dictated by the parent company. When you and other franchisees disagree with the choices made above your head, it can be very frustrating. This scenario has played out many times—and because of the unique pressures placed on food service franchises during the pandemic, these disputes are now boiling over.
The Pizza Inn franchise has come under fire recently because its parent company, Rave Restaurant Group, has tried to take control of the brand’s advertising funds—a business area that has historically been controlled by operators. Disputes over ad control are pretty common in the franchise business model, but Pizza Inn operators are not giving up their control willingly.
It’s a risky time to invest in any restaurant business, but below are some franchises that might struggle particularly in 2020.
- Golden Corral: All family-style buffet restaurants will likely see a decline in business as consumers become hyper-aware of the health concerns associated with this type of dining. In March, Golden Corral suspended 35 of its company-owned restaurants because of the pandemic, and the company has also furloughed more than 2,200 employees since then. The company is almost 50 years old and has more than 480 restaurants throughout the US, but despite their history, anyone considering investing in a Golden Corral franchise right now would be taking on a huge risk.
- Pizza Inn: We briefly discussed some of the turmoil already happening with Pizza Inn operators and their parent company, Rave Restaurant Group. Beyond those issues, this pizza chain—like Golden Corral—is buffet-style. Not only can we expect buffet restaurants to suffer post-COVID-19, but the costs of launching a Pizza Inn are also substantial. The initial franchise fee is $30,000, and after decor, construction, marketing, and other expenses, they estimate franchising costs between $415,000 and $793,000—not including real estate.
The entire travel industry is being decimated by the coronavirus. In a recent report, nearly 70% of hotel rooms currently sit vacant across the US. Moreover, it’s estimated that since the middle of February, hotels have lost over $23 billion in revenue. This hit is hurting hotels—including the franchisees of these hotel chains.
People are not traveling and likely won’t for some time. Not only will fewer guests mean less revenue, but hotels will also be asked to take more precautions to ensure safety and cleanliness in the rooms—which could mean added expenses.
The hotel industry previously battled short-term rentals for business, but now, they face a completely different hurdle. Chip Rogers, CEO of the American Hotel & Lodging Association, believes that half of US hotels could shutter because of the coronavirus.
While it’s not advisable to invest in a hotel business right now, below are some franchises that you may be especially wary of buying in 2021.
- Motel 6: In 2019, before the coronavirus pandemic, the American Customer Satisfaction Index released its report of hotel brands ranked by customer satisfaction. At the bottom of the list, with a rating of 63 out of 100, was Motel 6. The franchise fee for Motel 6 is $35,000, and initial costs can range between $2.6 and $3.8 million. In normal circumstances, Motel 6 would not be a bad investment—it has brand recognition in the budget-lodging sector. Because of the unpredictability surrounding the hospitality space moving forward, though, it is a risky investment for a brand that is considered lower quality by consumers.
- Marriott: Marriott operates a huge portfolio of hotels—many of which are franchised locations. Marriot has 30 different brands, including names like Courtyard, Westin, and Residence Inn. USA Today recently wrote about the effects of coronavirus on Marriott’s business, and it indicates some troubling signs for entrepreneurs considering a Marriott franchise. Marriott temporarily closed 7,300 hotels (25%) around the world and expects more closures to come as it prepares for a sharp decline in reported revenue. These signals suggest a tough road ahead for Marriott operators.
Hospitality and Travel Services
Hotels might be the first business that come to mind when you think about tourism, but there are many more peripheral companies affected by the travel decline. Tourism Economics recently reported that in the week ending May 9, travel spending reached $19 billion (87%) below 2019’s numbers.
While loosening lockdowns are helping tourism to recover, we’re clearly nowhere near stable numbers. To make matters worse, some experts expect it to take years for the travel industry to recover fully.
In fact, the International Air Transport Association (AITA) has one projection that plots 2021 demand at 41% below 2019 and a timeline of 5–7 years for it to return to pre-coronavirus levels.
Entrepreneurs should be wary of starting any franchise that depends on travelers. Below are a few types of hospitality and travel service businesses that you might want to avoid in 2021.
- Rental Cars: Rental car businesses are struggling to weather the coronavirus pandemic. Hertz announced in April that it was laying off 10,000 of its 29,000 employees and restructuring its $17 billion in debt. This announcement came just after AVIS saw its stock price drop from $30.55 on March 4 to $14.38 on April 8. If that isn’t enough, Forbes released its worst franchises of 2019 list—and at the top of the high-investment category were 2 car rental companies (Thrifty Car Rental and Dollar Rent A Car). With fewer people traveling, there’s less need for car rentals—and the high costs of launching a car rental company make it an extremely risky investment, with some estimates placing initial franchisee investments around $6 million.
- Travel Agencies: From Cruise Planners to Travel Leaders, there are several travel agency franchises available to entrepreneurs. Travel agents assist customers in planning their vacations. However, with people not planning to travel as often, the opportunities for clients are slim. Additionally, travel agents are being phased out by travel technology that allows people to easily plan their own vacation with software recommendations and consumer reviews.
- Amusement Parks and Entertainment Activities: Believe it or not, you can actually open franchised amusement parks and other fun activity centers. From Yogi Bear’s Jellystone Park Camp Resort and KidzMondo Water Park to indoor play centers, there are many exciting franchises geared toward group activities. Unfortunately, these businesses require tourists and large crowds to drive their revenue, and ticket sales at these parks are plummeting because of social distancing and general health concerns for visiting public venues. These types of businesses are also some of the most expensive investments of all franchise categories, with conservative costs exceeding $1 million in many cases.
Choose Your Investment Wisely
The coronavirus has severely affected our economy—particularly as it relates to entrepreneurship. If you’re considering launching a new business and are looking into buying a franchise, you have a unique opportunity to see consumer trends that weren’t present 6 months ago.
Now, instead of investing in a fast-casual food chain, you might decide to launch a UPS store or commercial cleaning business. Keep in mind that you don’t need to go the franchise route—you can always start and build your own brand.