During the annual ICR Conference, companies in the franchise space gave some insight into what they see for the year ahead. The annual gathering was held virtually, a palpable reminder of the dominant challenge facing these brands: COVID-19.
Companies were singularly focused on how long COVID would continue to impact business and what innovations have the potential to make the new normal better.
For Planet Fitness, the big-box gym concept isn't expecting to quickly gain back memberships it lost. CEO Chris Rondeau said it would take "all of 2021 to claw back to pre-2020 levels." The company was ahead of schedule before it largely paused development, giving franchisees an additional year to build new units.
There’s a natural desire to find good numbers, but BTIG analyst Peter Saleh said not to put too much stock in 2021 results.
“I think we’ll start seeing really good numbers in April, but that doesn’t mean we’ve recovered,” said Saleh. “It just means we’re lapping really terrible numbers.”
Hudson Riehle, a leading voice in research at the National Restaurant Association, said the economic hit will drag on longer than the actual virus, even with vaccines rolling out. The most important driver of restaurant sales is growth of income, and that's not happening. “When you look at income growth this year, we’re basically looking at that still being negative,” said Riehle. “If that holds true, it obviously indicates that no way can sales rebound to pre-pandemic level this year. So, looking out to 2022 is probably much more pragmatic.”
COVID forced mass innovation, and there are valuable insights and new tools to take brands into the future on stronger footing.
Red Robin CEO Paul Murphy said the accelerated rollout of Donatos pizza adds 5 to 7 percent to sales. Urban Air CEO Michael Browning Jr. said the company was able to trim labor costs by 40 percent with a new model that reduced staff by using technology for self-check-in and in-location service. That’s not going away.
Similarly, Planet Fitness created a fitness app to keep some money flowing to franchisees during closures and empower in-gym education after COVID. Such innovations set up companies to do more with less out of need, but will pay dividends in the future.