New IFA Report Documents Covid-19's Crushing Impact On Franchising

By: Multi-Unit Franchisee
Published: September 29th, 2020

More than 1.4 million franchise jobs were lost and more than 32,000 franchise businesses have closed since the start of the coronavirus pandemic, according to a report just released by the International Franchise Association (IFA).

The report's details the pandemic's impacts on locally-owned franchise businesses across the country. The franchise sector employed about 8 million Americans before Covid-19.

The numbers are shocking. Within the first six months of the outbreak, an estimated 32,700 franchised businesses closed. 21,834 businesses were closed temporarily, while 10,875 businesses closed permanently. Additionally, the franchise sector experienced an estimated total loss of 1.4 million jobs, of which 59.8% were temporary and 40.2% were permanent. Furthermore, the report projects that an estimated 36,000 franchise businesses will close within the next six months without additional government assistance. The report was compiled by market research firm FRANdata.

"This report shows that Covid-19 has caused a staggering amount of business closures and layoffs across franchise businesses," said Robert Cresanti, IFA President and CEO. "These are locally owned, community businesses like exercise studios, dry cleaners, restaurants, and bars. Additional broad-based and long-term Congressional action is desperately needed to stave off additional closures and layoffs, particularly for the hardest-hit businesses."

The full report is available online here. Here are some sobering highlights:

• The economic downturn caused by the pandemic is likely to last longer than expected without further government support. Based on the most current survey results conducted by the U.S. Census Bureau, only 26% of small businesses indicated that they have regained the normal level of operations or only had little or no effect from the pandemic, and the remaining 74% of businesses have not yet recovered from the losses, with 1.5% of businesses having already ceased operations.
• In the next six months, 4.8% of small businesses expect to permanently close, which would leave an additional 36,000 franchised businesses at risk. Sectors including accommodation and food services, arts, entertainment, and recreation, and educational services are anticipated to suffer greater losses with an estimated unit permanent closure rate of 10.7%, 9.4%, and 7%, respectively.
• Despite the fact that the unemployment rate is falling, an increasing number of workers are losing their jobs permanently rather than being temporarily laid off or furloughed, based on the results from the Labor Department's August Survey, which is a sign that the pandemic has created lasting perennial damage.

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