EXPERT ADVICE: George Knauf | Senior Franchise Business Advisor | FranChoice
Record Business Start-ups Fuel Franchising The migration of employees to business owners began in mid 2020 and continues to be strong. In the final US Census Bureau tally, 2020 was the best year on record for new business start-ups. We expect 2021 could likely exceed the previous year as the applications month by month have been robust. What drove this massive shift? When Covid set in there were three big contributing trends. The first was moving from office to home based work. Employees got used to working outside an office with a boss present, and they liked it. They got to avoid traffic to and from work. They could spend more time with their family and still get their work done by shifting work to hours after the kids leave for school or to weekends. In some cases, people even 16 Franchising MAGAZINE USA
changed where they work renting a home at the beach for a month or more to work from their dream home. Employees learned that work did not have to be an office based 9 to 5 Monday through Friday box. Secondly, as we entered this phase in our economy the types of services and how people sourced products shifted. This opened opportunities in a myriad of segments that did not exist in the same way previously. While sales in full-service restaurants and office cleaners may have fallen, sales in home renovations, online sales and other categories may have grown substantially. And finally, there were layoffs. Anytime we see employers shrinking their labor force we see a corresponding growth in entrepreneurship and, in our case, franchise brands. This has been true for my 30 years in franchising, every down economy or downsizing has seemed to lead to franchise growth. The one exception to that seemed
to be the great recession when the housing market fell as people did not have as much in savings and borrowing was challenging. This time around we have the layoffs and downsizings while savings rates are very high and borrowing is very approachable. These trends are layered on top of a shift in housing overall from cities to suburbs. This shift has driven the home sale and renovation market, along with home prices and home equity. As homeowners are getting ready to sell they renovate key parts of their home to maximize sale price. When buyers move into a new home they continue the renovations to make the space they will live and work more perfectly suited to their needs. And all of that money consumers saved up is hitting the market with huge demand for products, services and experiences like restaurants and gyms. While this increased demand has raised prices, many of those increases will retreat as demand wanes
