Coronavirus pandemic has destroyed 1.4M franchise jobs, causing ‘lasting’ damage: industry group

Before the coronavirus pandemic, franchises employed roughly 8 million Americans

The coronavirus pandemic wiped out an estimated 1.4 million franchise jobs through the end of August, causing "lasting perennial damage" to the sector in the U.S., according to the International Franchise Association.

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Nearly 60% of the job losses were classified as temporary, although recent data shows many U.S. employers who thought they'd be able to rehire furloughed workers are now saying they cannot.

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"This report shows that COVID-19 has caused a staggering amount of business closures and layoffs across franchise businesses,” Robert Cresanti, International Franchise Association president and CEO, said in a statement. “These are locally owned, community businesses like exercise studios, dry cleaners, restaurants, and bars. Additional broad-based and long-term Congressional action is desperately needed to stave off additional closures and layoffs, particularly for the hardest-hit businesses.”

In this Sept. 20, 2013, file photo, visitors use the Unemployment Insurance phone bank at the California Employment Development Department, EDD office in Sacramento, Calif. (AP Photo/Rich Pedroncelli, File)

Before the pandemic, franchises employed roughly 8 million Americans, according to the International Franchise Association. The group estimates that 10,875 franchised businesses closed permanently in the first six months of the pandemic, and it also predicts 36,000 more franchised businesses are at risk of closing in the next six months.

The International Franchise Association's members include sandwich chain Subway and cleaning service Jani-King.

Meanwhile, the U.S. economy added 1.4 million jobs in August as the unemployment rate unexpectedly fell, indicating the nation's labor market is continuing a slow but steady recovery from the coronavirus pandemic.

The Labor Department's payroll report released earlier this month showed the jobless rate fell sharply to 8.4%, down from 10.2% in June and a peak of 14.7% in April. It marks the first time since March that unemployment has been below 10%.

Still, joblessness remains historically high. The unemployment rate sat at 3.5% in February, a half-century low, before the crisis began.

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Government hiring helped boost the figure, with employment increasing by 344,000 in August -- accounting for one-fourth of the total gains. The increase stemmed largely from the federal government's addition of 238,000 temporary Census workers.

FOX Business' Megan Henney contributed to this report.

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