The novel coronavirus has changed almost every aspect of our lives as we knew it at the start of 2020.
Not only has it altered the way we live our lives, but it has changed the commercial landscape to the extent that it has become unrecognisable. Just as the pandemic has impacted all other businesses, the franchising space has also been affected significantly.
As a social and commercial model, franchising has many social and economic impacts such as the development of entrepreneurship, economic modernisation and job creation. It also means that the franchising industry has a significant role to play in the overall employment and socio-economic aspects in the country.
As the COVID-19 outbreak continues to have a significant impact on retail industries and the service sector, different franchising businesses have been affected in different ways. The coronavirus and the actions taken by the government to combat this unprecedented situation have had & will continue to have a major impact on the franchising and all other business sectors.
Businesses everywhere have to make uncomfortable and quick decisions to sustain themselves and stay afloat in the foreseeable future, and franchising networks have also not been immune. Each franchising network will indeed face different types of issues, but those that operate in the non-essential sectors are the ones that are feeling the brunt the most.
Retail, foodservice and construction are some sectors impacted by the pandemic, and there are consequences for the integrity of the system and the stability of its business activities. Also, this crisis creates various other challenges to the dynamic between franchisees and franchises.
If you are a franchisee, you must have made many changes to adjust to the current situation and weather the impact of the pandemic. Here are some basics that franchisees need to consider during the pandemic.
All businesses are legally obliged by the Local/State and Federal governments to stick to the measures in place. There are also penalties for businesses that fail to do so. Typically, your franchisor should be communicating changes in obligations regularly to you. You can also find various resources and the latest information on the FCA website.
Even in this changed situation, you need to meet all your obligations as per the franchising code of conduct. You must go over these, refresh your understanding about the terms and conditions and follow them judiciously.
This step is crucial in ensuring that your business has the resources and tools needed to continue operating as usual now and post the pandemic as well. Any plans you make need to be fluid so that you can make alterations as the situation changes as well. You would have to revisit the plan at regular intervals and be dynamic enough to accommodate the demands of the changing landscape.
As we all know, many businesses have had to shut down to slow down the spread of the coronavirus. Others are operating in a limited capacity while some are experiencing difficulties in providing services and goods to consumers. People have been asked to stay at home, maintain social distancing and have been impacted financially as well. All of these factors affect a business’ profitability.
The outgoings do not change for your business, but you might have experienced a reduction in your cash flow. This situation might not change for the next few months, which is why you need to have a plan-B in place to mitigate the potential effects. Review all your outgoings and work out the areas where you might be able to apply for assistance or cut costs in your business.
If you have any concerns, make sure to communicate those with your franchisor as soon as possible. This will help them take some measures if possible, to reduce the impact of the downturn on your livelihood and finances. It would be best if you discussed some relief measures with your franchisor, including a reduction in franchise fees, marketing fees or the rent in case your franchisee is also your landlord.
When you are assessing this particular question, you need to consider the duration for which you would be able to make these payments without fail. There are some measures currently in place that would work only for the next few months, and not many businesses can afford to function for that duration with minimal/no cash flow. While there is certainly some financial assistance available at both the state and federal levels, you should communicate with your franchisor and get more information about this assistance, and what you are eligible for.
If you have been thinking about different ways to overcome the current operational challenges, discuss it with your franchisor. Many businesses are now adapting to operational restrictions and altering their business model. For example, franchises that operate in the restaurant and fast-food sector are offering contactless payments, takeaway and meal delivery options. Personal and gym trainers are going virtual. The idea is to change service offerings to cater to evolving consumer needs.
Logistics and freight are essential services for many businesses, but the current situation has impacted supply chains across the country. These disruptions can include cash flow problems, difficulties in obtaining raw materials etc. You must discuss these concerns with your peers, and your franchisors as these issues will be common across the network. A credible and experienced franchisor would be able to provide their insights and advice and help wherever possible.
Many businesses are now starting to reopen while others are still struggling to sustain themselves. Just as you need to maintain regular communication with your franchisor, make sure that they are proactive with doing so as well.
You should be getting straightforward and timely guidance to the entire system on reopening issues, including operational changes and procedures, social distancing measures, cleaning protocols and other aspects for handling workplace exposures.
If your franchise network has mentioned that they will be continuing the relief offered to franchisees in the system such as extended royalty relief, etc., make sure you have clear communication about it. Even when it comes to reopening protocols, your franchisor should proactively roll out these protocols so that it reduces the stress on how you operate your business.
Even though the franchisor will have some protocols in place and will provide support, you should also be proactive in developing a protocol in case of coronavirus exposure by a customer or employee. Ensure that all your employees are following the cleaning, disinfecting, and sanitisation protocols rolled out by the franchisor. Local laws and regulations should be followed, and you should learn to respond in a manner that focuses on the overall safety and health of your employees and customers.
Everyone understands that businesses are facing difficulties at the moment. However, you may find that your employees and other stakeholders are also experiencing anxiety and worries about the business in the future. During this time, maintaining communication around different key messaging and any changes that you will be incorporating is crucial. Keep your customers informed about changes in operating hours or delivery of services. If employees or customers raise any specific concerns around areas that you and your franchisor have not yet considered, discuss those with the latter.
It is true that some franchise brands are facing obstacles and struggling to survive during these times. However, most franchise systems have good foundational strength which enables them to alter their operations and adapt to the new normal so that they can continue to be sustainable and grow.
The inherent resiliency of the franchise business model is an advantage that budding entrepreneurs should take into consideration. It is a good motivation, especially if you are considering stepping into the business space. If you are already an entrepreneur, you might find it beneficial to convert your business into a franchise model as well.
Despite the various hurdles that lie ahead of us, the adaptability and resilience of a franchise model have helped many franchisees and franchises overcome challenges posed by the COVID-19 pandemic.
If you want any more information on how to plan your venture into the franchising space, contact the experts at The Franchise Institute. You can call us on 1300 855 435 or fill-in this contact us form, and one of our experts will contact you as soon as we can.
Thanks for reading,
The Franchise Institute Team
1300 855 435