In his March 30, 2021, Franchising column in the New York Law Journal, Dady and Gardner, P.A. attorney, Ronald Gardner, explains the choices, expansions, and developments of franchise systems over the past year.
As a faint light begins to glimmer at the end of the dark COVID-19 pandemic tunnel, franchisors in all sectors have begun to survey their estate, and the consequences that have befallen them as a result of closures occasioned by 2020 and beyond. While some systems have fared extremely well, there are many others who have suffered closed units, or franchisees who have had to shrink their footprint in order to survive.
As I reported in my last column in November, many franchisors see this business carnage as an “opportunity” for expansion. Between suddenly available real estate, landlords desperate to make a deal, or operators who can be bought off on the cheap because they are merely trying to survive, there is no question that aggressive actors smell blood in the water. Unfortunately, however, there are and will be losers here. I believe this expansion may mean the extinguishment of small mom and pop businesses and/or, perhaps worse yet, “requirements” for development, as a condition of approval of entry or growth within a system, that can ultimately be detrimental to even the most well-heeled multi-unit operator.
By some accounts, hundreds of thousands of small businesses have closed over the last year. Given that franchised businesses represent such a large percentage of small businesses across America, it stands to reason that many of these businesses were franchised. Irrespective of the number, we know for certain that units have closed in virtually every franchise system in America. Of course, closed units mean less revenue for franchisors.
– Ron Gardner, New York Law Journal
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