WASHINGTON — The economic implosion created by the COVID-19 pandemic has resulted in the permanent closing of nearly 11,000 franchised businesses in the U.S, impacting roughly 560,000 jobs, according to a new report from the International Franchise Association (IFA).
The economic downturn also resulted in the temporary closing of another 22,000 franchise businesses, IFA said, impacting another 840,000 jobs.
In addition, the trade group warns that — without additional government assistance — an estimated 36,000 franchise businesses will be forced to close within the next six months.
"This report shows that COVID-19 has caused a staggering amount of business closures and layoffs across franchise businesses," IFA President and CEO Robert Cresanti said, referring to the report compiled by market research firm FRANdata.
"These are locally owned, community businesses like exercise studios, dry cleaners, restaurants and bars," he said. "Additional broad-based and long-term Congressional action is desperately needed to stave off additional closures and layoffs, particularly for the hardest-hit businesses."
Prior to COVID-19, the franchise sector employed an estimated 8 million Americans, IFA said.
The economic downturn caused by the pandemic is likely to last longer than expected without further government support, the IFA said.
Based on a recent survey conducted by the U.S. Census Bureau, only 26% of small businesses indicated that they have regained the normal level of operations or only had little or no effect from the pandemic, and the remaining 74% of businesses have not yet recovered from the losses, with 1.5% of businesses having already ceased operations.
In the next six months, the IFA said, 4.8% of small businesses are expected to permanently close, which would leave an additional 36,000 franchised businesses at risk.
Sectors including accommodation and food services, arts, entertainment, and recreation, and educational services are anticipated to suffer greater losses with an estimated unit permanent closure rate of 10.7%, 9.4%, and 7%, respectively.
Despite the fact that the unemployment rate is falling, IFA said increasing numbers of workers are losing their jobs permanently rather than being temporarily laid off or furloughed, based on the results from the Labor Department's August Survey, which is a sign that the pandemic has created lasting perennial damage.