2021 AFDR – Essential vs. Nonessential: Impact on Franchise Development Budgets

Despite the recent surge of Covid’s delta variant in the U.S., especially in the South and among the unvaccinated, franchise brands are still moving forward, balancing optimism against the calculated risk-taking mindset so well-known to entrepreneurs. That’s why we started this 10-part series of highlights from the 2021 Annual Franchise Development Report (AFDR).

We began with an overview of the research, analysis, and methodology used in the report. The previous installment looked at the impact on sales teams, revenue, and sales for essential vs. nonessential franchise businesses. This week, in the last installment of the series, we look at the impact on franchise development budgets for essential vs. nonessential businesses.

Background

The results from the 2021 AFDR were unveiled last October at the first-ever Franchise Leadership & Growth Virtual Conference (FLGVC). New in this year’s report is survey data on the effects of the Covid-19 pandemic and new statistics on the changing role franchise brokers play in the development process. Because of Covid, the AFDR was combined with the Annual Franchise Marketing Report (AFMR) this year.

Participants in the survey consisted of franchisors that completed an in-depth online questionnaire. Responses were aggregated and analyzed to produce a detailed look into the recruitment and development practices, budgets, and strategies of a wide cross-section of franchisors. The data and accompanying commentary and analysis provide the basis of the 2021 AFDR/AFMR.

Highlights from the report were presented in a general session at the conference by Franchise Update Media’s EVP and Chief Content Officer Diane Phibbs and CEO Therese Thilgen. Ordering information is at the end of the article. Conference attendees received a complimentary copy.

Franchise Development Budget Impact YTD 2020

“Some nonessential businesses have just been devastated, and their recovery period is just going to take a little bit longer,” said Thilgen.

As noted, essential businesses had higher budgets for the balance of 2020 and the year ahead. This group reported that their franchise development budgets were increasing or staying the same, whereas nonessential businesses were more likely to reduce their budgets going into 2021.

The survey responses back that up: among nonessential businesses, almost half (45%) said their franchise development budgets had been reduced, significantly reduced, or completely cut; 40% said they had maintained their franchise development budgets; and 16% increased slightly or significantly. With the pandemic permeating everyday life, “These numbers aren’t surprising,” said Phibbs.

“The marketer in me says there’s a philosophical decision to be made here,” she said. “The marketer says that when times are tough, market, keep the pressure on, and, unfortunately, spend. But you have to continue your marketing efforts so people don’t forget about your brand. There are many people who may say, ‘Well, everybody knows us.’ But in the end, when there’s so much noise online right now, not everybody will remember your brand.”

Closing comments

Returning to the 30,000-foot view, three things stood out last year, said Phibbs:

1) We saw an uptick in franchise development efforts

2) Budgets would be dependent on overall business conditions.

3) Filings for new franchises had increased in the past couple of months.

Thilgen said she’d noticed a “radical change” in new store openings in the 6 to 8 weeks preceding the conference. “We’ve seen a big uptick in spend over the last 2 months,” she said. “In speaking with franchisors, we’ve seen more optimism on the development side. But when can we get back to the new normal? What is normal now? We just don’t know.”

Wrapping up the presentation, Thilgen said, “Entrepreneurs have to live in the future. They have to look ahead and navigate these uncharted waters to keep their companies alive. Right now so much attention is on sustainability, but thriving is the ultimate goal – and giving their employees the opportunity to be a part of that.

“Necessity and crises are the mother of invention. It’s happening out there, and we’re seeing that too. The pivoting and agility that franchisors and their franchisees are demonstrating are driving their futures.”

Ordering Information

As an additional bonus, the AFDR was combined with the Annual Franchise Marketing Report (AFMR) this past year. The price for the combined report is $350. As noted, all conference attendees received a complimentary copy. Place orders at https://afdr.afrm.franchiseupdate.com