COVID-Resilient Industries and Investing

COVID-resilient

COVID-Resilient Industries and Investing

COVID-resilient | Visa Franchise’s analysis on the industries with the strongest likelihood of a rapid recovery from the recent lockdown-induced recession

After researching and analyzing more than 2,900 businesses at Visa Franchise, we have found a select few industries remaining stable during social distancing restrictions, otherwise known as COVID-resilient. There are other industries expected to thrive once restrictions have been lifted and the worst of the pandemic has passed. The criteria used by Visa Franchise when evaluating these industries, addressed a number of factors. At the outset, we looked at how successful each industry’s businesses were in adapting to these new restrictions. We then studied what opportunities these industries offered for its businesses to diversify during difficult times; and also speculated on what curve model best suited each industry’s recovery process once lockdown restrictions were lifted. Finally, in cases where this was possible, we also cross-referenced industries’ performance predictions with the historical data on their SBA loans, made available on our affiliate company, Vetted Biz.

Main Findings: 3 Characteristics, One Outcome

The findings from this initial research, concluded that COVID-resilient industries normally contain the following three characteristics: 1. secure payments, which refers to having recurring revenue ensured by having either periodic contracts or offering services deemed “essential”; 2. market leverage, which concerns having a strong brand and industry performance prior to lockdown restrictions being imposed so that businesses do not have to disburse additional costs in marketing during this time; and 3. an efficient budget, which encompasses factors such as high margins, strong liquidity and overall profitability. The article below will address in-depth, industries that are deemed by Visa Franchise either “COVID-resilient” or that will likely bounce back in the short-term once local restrictions are lifted. It will provide pertinent examples on how each industry is adapting accordingly, and will conclude by showing how the industries selected all have the three characteristics previously deemed necessary by Visa Franchise.

Covid business factors

COVID-19 Industries Growing

Landscaping

Because the landscaping industry was not shut down during the recent lockdown, it was able to keep servicing its clients and generating revenue. The fact that state and municipal laws require businesses to maintain the landscaping orderliness of the territory they are operating in, means businesses offering landscaping services are treated as a priority by its commercial clients.  Additionally, as commercial businesses begin readying themselves to open up, landscaping businesses are once again able to leverage their presence and ensure they are able to hold already existing clients while adding on new ones as well. Another important factor to consider, is that most services contracts within this industry are signed on a long-term basis, thus meaning recurring revenues is a strong characteristic of this industry. Finally, because the services provided by this industry are at the client’s specific location, the business is able to optimize its budget by not having to allocate a great percentage of it towards real estate costs, which normally make up a large sum of a business’ expenses. Visa Franchise works with a landscaping business that has shown resilience and growth even throughout these unstable times, particularly because they hold all three characteristics previously outlined: secure payments, an efficient budget, and considerable market leverage.

Ghost Kitchen Restaurants

Ghost Kitchen restaurant models, are another sector that not only have remained open during the recent lockdown, but that also saw an increase in sales throughout this period. Amongst the numerous benefits that come with investing in a Ghost Kitchen concept, two specific ones particularly created optimal conditions for them to continue to thrive during the current situation: their efficient budget, and market leverage. Because Ghost Kitchens focus solely on servicing delivery and takeout orders, not only is the kitchen’s site required by the restaurant smaller, but also, the location of the kitchen is not as important seeing the business is not as dependent on foot traffic – both of which allow for lower costs associated with real estate. Additionally, Ghost Kitchens can be run by as little as 2 to 3 employees, a fact that given the current situation not only further reduces costs associated with payroll, but also mitigates any contamination risks which remain a predominant concern during this recent Covid-19 era. In terms of this sector’s market leverage, it is important to consider recent studies showing that 31% of consumers use delivery services at least once a week, and that 59% of millennial orders every week are either for takeout or delivery. Beyond that, in VettedBiz’s recent analysis on SBA Loans within the food and beverage industry, we found that between 1991 of 2019, 61% of food & beverage franchise loans were paid-in-full – a relatively high value when compared to other industries such as fitness centers or home services.  The characteristics outlined above serve to show that Ghost Kitchen models are a sector of the restaurant industry that should only be expected to continue to strengthen as social distancing becomes a greater part of the population’s reality.

Property Management

Property Management is an additional industry that has proven to be COVID-resilient.  Their long-term contracts with owners in need of services to manage property on their behalf, allows for a strong inflow of recurring revenue seeing not only is the business deemed essential by home owners themselves, but also long-term contracts allow for greater stability and makes it harder for clients to go back on their service contracting decisions. Additionally, the fact that businesses in this industry can be run from a home office and by 1 or 2 employees only, once again allows for them to run on an efficient budget that is consequently not as deeply affected by recent lockdown restrictions. Once again, Vetted Biz’s SBA Loan Data analysis shows that similar to the food and beverage industry, SBA loans disbursed to businesses within the Real Estate industry also had a relatively high paid-in-full rate of 60.1% – thus further corroborating the industry’s strength despite recent circumstances. Visa Franchise works closely with a number of property management concepts that have proven to be Covid-resilient, particularly because their secure payments and efficient budget allow them to keep operating at a rate, considered to be as normal as possible given current conditions.

Bookkeeping & Tax Preparation

Finally, the bookkeeping and tax preparation industry is another one that has thrived during this most recent recession. With most of the population rushing to have tax returns filed in order to receive government stimulus packages, this industry has recently seen an increased demand that has allowed for its businesses to leverage their market presence. Secure payments have also been a feature of the industry due to monthly payments and renewals from businesses in need of bookkeeping services as they adapted to recent conditions and prepared to apply for stimulus packages as well. Finally, the fact that these businesses can also be run from a home office and with as little as 2 to 3 employees, are another plus towards ensuring this industry’s business budgets are optimized to adapt to the current recession. Once again, bookkeeping and tax preparation businesses have shown that with an efficient budget, secure payments and strong market leverage an industry is able to remain afloat even throughout a Covid-induced recession.

Industries to Likely Bounce Back in the Short Term

Cleaning & Maintenance

While cleaning and maintenance services might have been suspended or diminished as lockdown restrictions were put in place, this industry is likely to see the strongest and fastest recovery curve as these same restrictions begin being lifted. ­With one of the most important conditions for reopening being ascertained cleanliness at all times, it is likely the cleaning and maintenance industry will experience the strongest market leverage, as their services are considered the utmost priority of any business looking to reopen. Additionally, the fact that services provided by this specific industry do not require an extensive employee count or entirely sophisticated equipment, is another positive benefit seeing businesses within this industry are consequently able to plan for an efficient budget. When cross referencing this industry’s performance prediction with its historical data on SBA Loans disbursed between 1991 and 2019, VettedBiz found that the cleaning and maintenance industry had the highest paid-in-full rate at 67.8%, once again reiterating the industry’s strength and likelihood of recovery once lockdown restrictions have been lifted. Visa Franchise works with a number of cleaning and maintenance concepts that have played a big part in the fight against COVID-19 and who are only expecting continuous growth as they optimize their budget and leverage their market presence to their best advantage.

Figure 1 Likely economic recovery curve for industries such as cleaning and maintenance, barber shops and children programs

Barber Shops & Beauty Salons

Although beauty salons and barber shops were not deemed an “essential service” during the recent lockdown and consequently had to shut down their services throughout most of the quarantine, they are likely to see a strong recovery curve as restrictions are lifted and people begin to resume their normal lives. Grooming services especially for men, will likely peak as they return to work in need of a haircut. Additionally, women resuming their normal lives will likely seek beauty salons to address services in need such as waxing, haircut and eyebrow design in particular.  In conclusion, by leveraging its market presence as people begin leaving their homes and resuming their regular self-care routines, the barber shop and beauty salon industry will likely see a strong recovery.

Children Programs

Children education and after school programs is another industry that will likely experience a strong bounce back once lockdown restrictions are lifted. Because most businesses have remained open and transitioned to online platforms, they have been able to maintain their market presence and secure a steady inflow of revenue as their help in keeping their children entertained or providing additional reinforcement to online schooling efforts became an unprecedented priority to parents also working from home. Additionally, it is likely their market leverage will be even further elevated once families resume their daily life and parents begin to push their children towards reestablishing their regular routines. Finally, as children return to school in the Fall and parents begin to notice the education gaps left from online schooling during the spring semester, education programs in particular should experience an even greater growth rate. Children education and after school programs have a strong leverage to secure a steady growth once restriction lockdowns are lifted, a fact that is corroborated by its relatively low rate of loans deemed as “charged-off” by SBA, which was at only 4.2% in between 1991 and 2019.

Conclusion

As lockdown restrictions are lifted, a business’ ability to adapt and grow under current circumstances will likely become a strong factor to be considered in any investment process being pursued. By outlining some of the industries we have seen thrive during these difficult times in the article above, we hope to have been able to clarify and mitigate any uncertainty or concerns that may have risen when pursuing your entrepreneurial dreams during this recent COVID-19 era. In sum, businesses and their respective industries that have been able to secure payments, optimize their budgets and leverage their market presence should be considered the strongest candidates for investment as the country begins to recover from this COVID-induced recession.

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At Visa Franchise, we simplify the process for entrepreneurs to reside legally in the U.S. We do this by analyzing the best businesses for our clients and their families based on their own unique profile.

We are the trusted advisor for foreign nationals who qualify for the E-2 visa and would like to own a U.S. franchise.

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