FRANdata Analysis: Restaurant Franchising Could Be a Smart Bet

The restaurant and hospitality industry were among the hardest hit by the global pandemic. Aside from the obvious reason—crowded indoor dining and the risk of a highly transmissible virus—there is now statistical data that tallies up the damage. In January, the National Restaurant Association (NRA) released an industry report that includes key findings from surveying thousands of owner-operators and consumers. In 2020, total sales fell $240 billion below pre-pandemic forecasts, eight million jobs were furloughed or lost, and over 100,000 establishments closed temporarily or for good.

But that was then, and this is now. According to industry analysis from FranNet’s research partners at FRANdata, franchise ownership in the restaurant category might just be a smart bet.

Each quarter, FRANdata releases their New Concept Report, which tracks emerging franchise brands, and their last edition of 2020 revealed something quite interesting. Amid these emerging brands, they discovered 69 new franchise opportunities representing 19 different industries. A full 38 percent of them were restaurant concepts. Digging deeper, FRANdata found that 23 of the 69 new franchise opportunities provided average unit revenue (AUR) data, the mean average of which was approximately $1.2 million. Five of the top-seven highest performing revenue producers were—you guessed it—restaurant franchises!

So what gives? Is it possible that amidst so much loss, the pendulum has swung back in favor of renewal and opportunity? The shortest and simplest answer is—yes.

Restaurants Closed, But Appetites Rose

Looking back, while many restaurants and QSR operations shuttered amid challenging conditions, consumer demand for dining out remained quite stable. In fact, it’s probably safe to say the demand for eating restaurant-quality food actually increased. Think about it—how many among us propped up our neighborhood eateries, adjusting quickly to contactless service and curbside pickup?

More Statistics…

According to some surveys, Americans dine out on an average of 4-5 meals (not nights!) per week, spending over $200 a month—not counting on-demand delivery service fees. Remember the 100,000 restaurants forced to close operations? 75% of these owners said they had no plans to reopen in the months or years ahead. Who might fill this opportunity gap?

The Restaurant Revitalization Plan

The American Rescue Plan, recently passed by the current administration, includes provisions and funding directed squarely at the restaurant industry. $28.6 billion is earmarked as the Restaurant Revitalization Fund (RRF). They can access this grant money to address franchise establishments hit hard during COVID-19. Thus, those restaurant franchisees who’ve weathered the storm up to this point are now eligible for some well-deserved relief.

The NRA’s 2021 State of the Industry Report closes with some encouraging news. Based on consumer surveys, pent up demand for dining in restaurants is extremely strong. 80% of respondents shared that their dining experiences at restaurants could not be duplicated at home, and 60% stated that eating establishments are an essential part of their lifestyles.

The restaurant and hospitality industry shouldered a heavy burden in 2020, but as the dust has settled, FRANdata is noting an opportunistic future which is beginning to take shape. Should your franchise ownership goals align with this industry, FranNet can help you navigate the investigative process and find a food and drink business concept that fits your unique lifestyle and career plans. 

May 5, 2021