May 23, 2020 - Economy & Business

The little guy behind the big brand

Illustration: Eniola Odetunde/Axios

Familiar chains that look like giant corporations are often independently owned small businesses that are getting wrecked by the pandemic alongside local mom-and-pops.

The big picture: Franchising has exploded in recent decades, with 733,000 franchise establishments employing more than 7.6 million Americans. The coronavirus closed 74% of them, according to a survey by the International Franchise Association.

Be smart: Fewer than half of all franchises are restaurants. The rest are in sectors like home health care, business services, hotels, auto repair, child care, dry cleaning, gyms, salons and spas.

  • They pay a one-time fee — usually tens of thousands of dollars — to buy a franchise, then give a percentage of their sales to the parent company in exchange for national advertising support and the right to use their brand and processes.
  • The franchisee is responsible for day-to-day operations, including staffing.

What they're saying: “We like to think that franchisees have these huge war chests of money, but they’re boot-strapping it. They’re small businesses that don’t have a lot of money,” Jania Bailey, CEO of franchise consultant group FranNet, told Restaurant Dive.

  • “Many [franchisees] will put everything on the line — they do a 401(k) rollover, they invest their retirement fund, take second mortgages on their homes — anything and everything to get that business open. And they scrape together to get it up and operational and get cash flowing positive, and they’re starting to see a little bit of profit, and then something like this happens and it just wipes them out.”

Go deeper

Updated 45 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 6,724.516 — Total deaths: 394,018 — Total recoveries — 2,996,832Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 1,894,753 — Total deaths: 109,042 — Total recoveries: 491,706 — Total tested: 19,231,444Map.
  3. Public health: WHCA president says White House violated social-distancing guidelines to make reporters "a prop" — Jailing practices contribute to spread.
  4. Sports: How coronavirus could reshuffle the sports calendar.
  5. Jobs: Better-than-expected jobs report boosts stock market.
  6. Media: The Athletic lays off 8% of staff, implements company-wide pay cut.

Scoop: German foreign minister to travel to Israel with warning on annexation

Heiko Maas. Photo: Michael Kappeler/picture alliance via Getty Images

German Foreign Minister Heiko Maas is expected to travel to Israel next week to warn that there will be consequences if Israeli leaders move forward with plans to annex parts of the West Bank, Israeli officials and European diplomats tell me.

Why it matters: Israeli and European officials agree that if Israel goes ahead with unilateral annexation, the EU will respond with sanctions.

Minneapolis will ban police chokeholds following George Floyd's death

A memorial for George Floyd at the site of his death in Minneapolis. Photo: Steel Brooks/Anadolu Agency via Getty Images

Minneapolis has agreed to ban the use of police chokeholds and will require nearby officers to act to stop them in the wake of George Floyd's death, AP reports.

Why it matters: The agreement between the city and the Minnesota Department of Human Rights, which has launched an investigation into Floyd's death while in police custody, will be enforceable in court.