things franchisors must prioritise during the current crises


COVID-19 has affected every aspect of our lives. It has turned the business world topsy-turvy, and there is hardly any sector that hasn’t got affected by it.

In this kind of landscape, keeping your business on its feet and ensuring that it stays above water can be an incredibly challenging task. Many businesses have shut shop while others are deep in debt. What makes this situation worse is that there is no timeframe in sight when the situation will change.

Since we are living in uncertain times, it has become necessary for every business owner to not just think on their feet but look for unique ways to do things so that they can keep their business alive and stable during the pandemic. Various government-mandated restrictions have impacted franchises that operate in the non-essential services sector, the franchisors and franchisees in the system.

While the situation seems very dire, it is still necessary for you to formulate a detailed action plan. You must determine how your business operations might become impacted by the current pandemic. While you have to look at the short-term impacts, it is also necessary to plan for the long-term so that you can mitigate risks. With this in view, there are certain things franchisors must prioritise during the current crises. Let’s look at them below:

1. The Financial Aspect

This is one of the first things you would need to take into account. If you have somehow managed to keep your business running, it is still essential to stay prepared for a temporary closure in case things get worse. The closure will affect your financial position, and you need to know what your solvency is at all times.

Take stock of the situation and understand in detail all the terms and conditions of your agreements with franchisees. Pay special attention to termination rights, other provisions with your key creditors as well as the franchise partners. Doing all of these things can be disconcerting; however, it is essential to be well prepared for various scenarios.

2. Maintain Healthy Relationships with Your Franchisees

When you are facing difficult and stressful times, it can be very challenging to maintain business relationships with franchisees that are looking up to you for guidance and support. However, it is crucial to understand that they too are going through the same uncertain face that you are.

As per the franchising code of conduct, you are obliged to disclose relevant facts to each one of your franchisees. When a franchisee sends you a written request, you are required to send them a copy of an updated disclosure document. This would have to include the financial details and earnings information.

Everything around us is in a state of change. Over time, you would have to keep all your franchisees in the loop about various developments and make formal disclosures at the appropriate times as needed. Also, you must get your franchisees to keep you updated with relevant information so that you can work cohesively and find some stability during these trying times.

3. Effects on your Supply Chain

It is quite typical for supply chains to get disrupted during a crisis such as the current one and you must communicate regularly with your suppliers. Wherever there is an impact on product availability, and the suppliers cannot guarantee supply, you need to make your franchisees aware of the situation. Do your level best to have an alternative arrangement till things stabilise. This would mean you might have to develop business relationships with other suppliers.

Just as you review all the other paperwork, go through the supplier agreements. If you need to, pull in a force majeure clause in situations where suppliers are unable to fall in line with their obligations and responsibilities under the agreements.

4. Take Employees into Consideration

Depending on the business model that you operate on, if it permits you some amount of flexibility, consider incorporating Agile working practices. Your franchisees may also have queries about the aspect of leave. Would need to look back at the jobkeeper payment scheme announcement and determine where your business lies on the scale and guide your franchisees accordingly.

5. Focus On Your Customers

Even if you find your customer base is dwindling, you can still focus on the ones that survive. There are still people out there that want certain services or products and are willing to pay for them. Since you have a lot of excess staff at the moment compared to the market demand, take the time to service the existing customers in a much better way.

6. Invest in IT Infrastructure

While this might not be the right time to invest in anything, depending on which sector your business is in, you might have to invest in some information technology. For example, if you are in an industry where your employees are working out of home, you need to be sure that the systems you have are capable of supporting and sustaining this work. You would also need cybersecurity systems in place and a relevant insurance policy for it.

7. Communicate With Your Creditors

Communicate regularly with all your suppliers, landlords and financiers. You might have to set up alternative payment arrangements in case you have not been able to meet various immediate financial obligations due to the current pandemic crisis.

At the moment, the government has announced a mandatory code of conduct for all commercial tenancies and temporary evictions as well. Under these specific measures, evictions can be put on hold only for the following six months for all commercial tenants that meet specific eligibility and are unable to keep up with their financial obligations.

Based on the decline in turnover for a tenant, you can also seek rent reductions. This has been designed in such a way that tenants and landlords can share the current financial burden. Under the code of conduct, banks are also expected to support these specific arrangements.

8. Update Your Business’ Terms and Conditions

There are always cancellation clauses in the terms and conditions in a business. This might not be the best way to go, but you might have to do it if you need to keep your head above the water. And it could also mean that you need to update your cancellation clauses so that there are more realistic fees and lead times which are an accurate reflection of the severe losses that are being incurred.

Starting this conversation is crucial even before you start discussing things with all the parties involved when it comes to survival. You have to take a multi-pronged approach for your efforts to be effective and successful.

9. Seek Government Support

There are various measures that the government has announced to support businesses affected by the pandemic. For example, employers can get temporary cash flow support, and the government is providing a 50% guarantee to SMB lenders for their new and secured loans to be used as working capital.

There has also been an increase in the instant asset write-offs for various eligible businesses. With this in view, if you have a solid strategy in place, it will help to ensure that your franchising network and your franchisees can bounce back once the pandemic blows over.

It is also crucial that you maintain some level of balance while trying different strategies. Just as you do not want your business to be affected, you also need to look out for your franchisees and bring your leadership qualities to the fore. After all, they are a very crucial aspect of your business. Once normalcy returns to the market, it will be very challenging for you to start from scratch, without their support.

Instead, if you have most of your franchisees and suppliers in place, it will be far easier for you to bounce back. The FCA website also has various online resources for franchisors and franchisees alike. You can get information from there and remain updated on the latest happenings and changes in the industry. Above all, stay resilient and don’t lose hope- every situation changes, as will the current unprecedented one.

If you want any more information or support and ideas on how to go about communicating with and keeping your franchisees engaged and in a positive mind frame, contact our franchise consultants 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


Stats References:–leases/963438/retail-and-other-commercial-leases-covid-19-amendment-regulation-2020-nsw?type=mondaqai&score=67

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