This article was first published online by Franchise Times on April 22, 2020 and subsequently published in the May 2020 print edition.
Global health crises of the magnitude of the COVID-19 pandemic have far-reaching implications for international economics and commerce, and franchise systems must navigate the resulting storm. There have been catastrophes and casualties. That said, franchises have demonstrated a remarkable resilience and resourcefulness in weathering the conditions – providing valuable lessons and insights for the franchise community going forward.
A consistent theme in franchisors’ response to the pandemic is significantly increased communication with their franchisees (and other stakeholders). In a climate of uncertainty, franchisors discovered that timely and continuous communication through multiple channels is critical. Ha Ly, Pokéworks’ chief marketing officer, said, “Our executives were in constant contact with our investors, franchisees and customers, regularly emailing relevant announcements, updates and recommendations—far more than previously.”
Some franchisors extended the increased communications protocol to other stakeholders (including landlords and suppliers) to manage key relationships. Overall, this speaks to the strength of leadership displayed by franchisors, and particularly their support for franchisees. Importantly, a number of franchisors now espouse the benefits of increased communication and intend to continue with similar post-pandemic protocols.
“Crisis Management Team,” “Task Force,” “Emergency Response Team”—whatever the title, these groups were fundamental to formulating a rapid response to the pandemic. The mandate of these groups often included stress-testing (and improving) systems and structures already in place, as well as assisting franchisors to pivot and adapt in the climate. A common area of improvement for franchise systems was the enhancement of health and safety protocols:
“We acted quickly in developing extra safety measures for members, actively demonstrating what we were doing to protect them and keep them safe,” said Rebecca Hull, franchise recruitment manager at Fitstop Australia.
Enhanced strategies and protocols to address business interruptions are another area of significant growth over the past several months, particularly as it relates to health crises.
But it has become apparent that the growth and development extends beyond that context. Ly said Pokéworks actively met “with industry and functional experts outside the company to stay abreast of the latest best practices and strategies relevant to the pandemic and generally.”
Pivots and adaptations
Franchise systems must evolve, adapt and innovate like any other business. For franchise systems, however, change can take time. Global health crises comprehensively test a franchise system’s ability to pivot with agility and make necessary adaptations rapidly and decisively.
There have been no “one-size-fits all” solutions during the crisis, not across industries, not even across specific franchise systems. However, there were a few common strategies.
Many franchisors pivoted to increased use of social media to engage with each of their franchisees and to facilitate their franchisees’ engagement with customers.
“Companies looked to engage their customers via social media and live streaming platforms to keep their brand in consumers’ minds, and to maintain some sense of normality” said Bernard Birnbaum, CEO of The Warrior Factory.
Many QSR concepts took to takeout, delivery, self-serve station and grab-and-go service formats. Alas, sales from the modified formats paled in comparison to ordinary course sales. Ly conceded that the takeout format adopted by Pokéworks was “insufficient to keep its franchise stores open for any extended period during the crisis.”
Gloria Jean’s Coffee developed alternative formats, but acknowledged that “there’s no straightforward way of addressing the challenges. …We provided guidance regarding best alternative formats on a jurisdiction-by-jurisdiction and store-by-store basis, based on governmental guidance/restrictions and other region-specific conditions,” said Grant Fischer, the brand’s retail food group international development manager.
Ultimately, whatever the pivot or adaptation, consistent with the tenets of the franchise business model, “franchisees had the support and resources of their franchisor to help them through tough times,” said Jason Gehrke, director of the Franchise Advisory Centre, a sentiment evidenced by the following testimonials.
“We actively worked with our franchisees to ensure they took all necessary steps to protect their caregivers and clients, as well as themselves. We held system-wide webinars multiple times per week to discuss COVID-19 issues, and were extremely responsive to franchisees’ concerns through constant email and telephone communications,” said Doug Luther, general counsel of Amada Senior Care.
“Our focus was on developing plans to protect franchisees from a business interruptions including with respect to government mandated/voluntary shutdowns. As we are a vertically-integrated franchisor we had the ability to suspend fees as well as open invoices for the products,” said John Mansfield, a VP at Detail Garage.
“We worked closely with clients to develop franchisee support plans, which included daily operational support webinars, royalty deferments or abatements and leasing support,” said Annie Caiola, partner at Caiola & Rose.
“Franchisors worked with franchisees to create updated cash flow plans assuming very conservative outcomes to identify in advance those who might experience financial distress, and take steps early to deal with that,” added Gehrke.
One thing remains certain, many franchisors stepped up to the plate to steer their franchise systems through the crisis.