What Coronavirus Means for Franchise Brands and a Roadmap for Franchise Recovery

“We don’t know what we don’t know.”

Today, March 17, 2020, that is the sentiment for all Americans, small businesses, and, for the focus of this article – franchisors! What we don’t know if the stage of this pandemic in the United States, judging by other nations such as China, Italy, and Spain, it appears that we are only now entering the pandemic phase and with an escalation of COVID-19 infections on the rise with store closings and an escalating drop in consumer demand. While we don’t know when the pandemic will peak, we do know that at some point it will end and we will enter a recovery.

So, how do franchisors survive and overcome the financial effects of this pandemic? While a lot will depend on current cash-flow, government intervention, and how long this pandemic lasts, Franchisor’s need to plan for the short-term, intermediate-term, and long-term.

We know that a recovery will eventually be at hand, and during our recent franchise webinar, we discussed the following framework:

• Short-Term: Brace for Impact – Short-term franchisors need to “brace for impact.” Focus on (a) cash flow, (b) availability of additional capital, (c) franchisee support, and (d) a revaluation of your legal relationships. Depending on your industry, consider royalty and brand fund deferments to better support franchisees;
• Intermediate: Plan for a Recovery – During the intermediate-term and after the pandemic reaches its peak, start deploying your focus, assets, and resources on (a) recovery and how your brand will lead the franchise industry post-coronavirus, (b) leadership and being a good franchisor, (c) create buckets of success by protecting what works, (d) recognize the opportunity for innovation, (e) over-support your franchisees – “build scaffolding around them” – and (f) continue to adjust your franchise agreement and franchisee obligations to ensure a win-win relationship. Remember, now is the time to validate the trust your franchisees have placed in you and your future franchise sales. The trajectory of your franchise system will (post-recovery) depend on how you support your franchisees now and their validation in the future; and
• Long-Term: Recover and Grow – There will be an end to this pandemic and when it comes the entire franchising landscape will have shifted and will be poised for growth. Long-term you need to (a) plan for growth, (b) adjust your brand, brand positioning, and value proposition, (c) adjust to the new franchising landscape, and (d) lead your team, your franchisees, and the franchise industry.

Right now, the biggest variable is that we don’t yet know how extensive and how long this pandemic will last. Will short-term be a few weeks, a few months, or more? We just don’t know. However, what we do know is that this will pass and, together, as a franchise community in the long-term we’ll come back better and stronger than ever.

Stay safe.

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By admin March 17, 2020