If you are a franchisor, it means that you rely on franchisees who are your authorised brand users and operate businesses that distribute the specific services or goods that you offer.

Best Practices for Franchisors

Here we take a look at some best practices for you to follow during the COVID-19 pandemic, which will help ease the burden for them and you:

  • Spread Your Brand Message – Your brand and company will be remembered for messages you send across to your customers, employees, and suppliers during the worst of times. The human response is what matters at times, such as these and that something you need to have put before everything else.

    Maintain authenticity and transparency in your brand message, and these should work in line with your company’s core values. Keep regionalised brand messages ready so that your franchisees know how to present themselves and what to say to customers or media person’s that approach them for a comment.

  • Create a Downside Financial Model – If you haven’t done so already, create downside projections that identify your cash flow needs and how much cash you immediately have on hand. Contact the financial institutions that your business works with and determine what lending options are available.

    You should also work with your franchisees and help them create their downside financial models and tap their banking partners for solutions. Being well-informed helps avoid panic so you should encourage your franchisees to speak with their respective accountants, while you share standard financial modelling tools with them.

  • Handle Closures Correctly – Royalty fees and licensee sales are interdependent. Given this fact, any economic stress and uncertainty that your franchisees experience will also impact your financial standing.

    Closures can hit your franchise network differently; this would depend on whether you operate in the essential or non-essential services and products sector. Your franchisee locations are the other aspect that comes into the picture with reference to closures. When it comes to addressing franchisee closures, there is no one-size-fits-all solution.

    While you need to be fair to your franchisees and do the right thing by them, that solution cannot be at the expense of your viability. As the franchisor, you have to be available to all franchisees in your network, and that means you have to focus on keeping your head above water during these difficult times. To accomplish this task, however, you would have to reorganise priorities. One of the things you can do is trim your salaries and do away with all the non-essential services.

  • Consider The Financial approaches that work For your Franchisees – The priority is to keep the highest number of franchisees financially stable. Also, consider deferring percentage royalty fees rather than waiving them entirely. If the royalty fees are minimum, you can consider waiving them for a specific period and revisit them later to decide whether you would like to extend the timeframe.

    But you need to look a little beyond the royalty fees as well. For instance, if you sell any products to your licensees for them to resell or use, you can consider using their mark-up or reducing prices for the short term as it can help them stay open. Maintain transparency in your messaging so that your franchisees are aware that these price reductions are a temporary measure to help them tide over this unexpected situation.

    To avoid franchisee closures, help your franchisees negotiate deferrals, rent reductions and rent-free periods. Landlords might expect something in return as well, such as agreements to extend the leases. If this occurs, let your franchisees know you will also extend their current license agreement for that same time period.

  • Be Dynamic in Your Approach – Just as closure can affect franchisees, it can impact suppliers as well because many manufacturing units have been forced to down their shutters. Being dynamic involves identifying alternative suppliers, when and where possible. This substitution should not be at the cost of your core values and brand’s ethics.

This is the time for franchisors to think out the box and make extra efforts so that their franchisee partners stay afloat and their own business stays alive as well. If you want any more information or support and ideas, 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.

fThanks for reading,
The Franchise Institute Team
1300 855 435