Are franchising and licensing valid business models in the 2020s?

. 4 min read

As with virtually every business practice out there, investors and business owners are asking whether licensing and franchising are still legitimate in our current world situation.

“Licensing” refers to granting permission for an outside company or source to use your IP (think of companies that make sports apparel). With “franchising,” a business owner is buying into a company that already exists and setting up their own business (this is what a lot of fast-food chains do, so each separate restaurant is its own franchise). Licensing and franchising have both been around for many years, but does it seem like they’ll continue into 2021 and beyond?

It may seem like anything that’s tied to opening a new business – specifically in the food industry – is doomed to fail in our Covid-dominated world. However, potential licensors and franchisors need to remember that everything eventually changes, and Covid will not last forever. Many fast-food companies have changed portions of their business models – shrinking their menus of available items, adding breakfast hours, and/or adding delivery options – to weather the worst of the pandemic. 

As Point Franchise states, “Some franchisors…are starting to adapt their offering to 2021 thinking, now more than ever looking at how they can make it easier to attract new franchisees to fund their own future growth to become more resilient[;] often rewarding early adopters or being ever more creative in how the franchisee can buy-in … even offering to help them build something that is even more repeatable and scale-able than franchising would have traditionally been… and it is the franchisors that have spent 2020 ‘pivoting’ or adapting that are now seeing the benefit of making those changes, which will continue in 2021 whilst others potentially have to play catch-up…”

With this mindset, it seems franchising at least will continue to grow, no matter what the global situation is. Licensing can also continue to be relevant, as long as those seeking licensing agreements can also “pivot” with the times and change direction as needed.