How COVID-hit franchisors can use the situation to their advantage – and emerge stronger as a result.
The saying goes: “Within every adversity is the seed of an equal or greater opportunity”. If you have a scalable idea or business format, which in a normalized trading environment has growth written all over it, then now is one of the most exciting and unique times we may ever get in our business lives.
The pandemic has exposed most companies’ cracks and weaknesses leaving them bare for all to see, with even many goliaths screaming for help. This is a time when only the strong will survive and in some way has created a last man standing environment.
I say the above confidently because our businesses are in both leisure and hospitality, arguably the hardest hit industries alongside the retail high street. Despite U.K. government assistance and relief packages, we are left being locked down with ample time on our hands to consider how we can take advantage of this unintended situation we find ourselves in.
As a master franchisor there are key factors to what you look for when growing your franchise, and current trading aside, the pandemic has brought us opportunity in each area.
If you believe you can handle the risk and reward of what is on offer to step up and take the bull by the horns, here are some elements worth considering to help you make that decision on whether you want to stand still or push forward in this brutal trading environment.
1. Abundance of potential franchisees
COVID-19 has changed most industries forever, affecting the way most of us work. This, along with the essential need for countries to lock down, has given rise to career changes for many different reasons; for example, realizing the benefits of what working from home can bring, having more hours in the day, and generally having more downtime to reflect on what is important in life and even contemplating if now is the time to make that change to pursue whatever dream you have in life.
This has all led to an increase in franchisee interest. Reports are telling us that a large number of private individuals and households are sitting on cash which is unable to be spent, such as redundancy packages or even savings burning a hole in prospects’ pockets.
There has never been a better time to be in the market for attracting new franchisees to your product or service, so seriously consider investing in this area now before someone else snaps up a perfect franchisee for your business.
2. Exceptional property deals
If your business requires a premises to operate and you have taken the advice to go and recruit new franchisees, then a suitable property is a vital part of your franchise offering.
With the high street in disarray globally and consumers shopping habits changing even pre-COVID-19, now is the time to get in the market and start to test what is on offer – you may be pleasantly surprised.
“As a master franchisor there are key factors to what you look for when growing your franchise, and current trading aside, the pandemic has brought us opportunity in each area”
For the first time that I know of, it is very much the tenants’ market, and I could even go as far to say that landlords need us more than we need them – if this is the case in your sector, you need to go and test the market. Pension funds and landlords of all scales have cash to invest in properties and are always willing to do a deal, sometimes rent-free.
To mitigate the risk on taking a lease in this climate make sure your lawyer adds a COVID-19 clause into the lease negotiations; the potential of another lockdown is all too real and if government intervention stops you from trading this clause will protect you. It means that if are not allowed to trade, you do not pay rent or accrue a liability on your balance sheet that you have to pay back at some point in the future. Why agree to put a loose noose around your neck knowing the reality that these lockdowns could raise their heads in the future.
3. Take advantage of the abundance of talent on the market
Finding the right caliber of candidate to fulfill various roles within your company can always be challenging and hiring talented personnel can be costly but usually worth the money when they perform.
The pandemic has flipped that on its head. We have started interviewing for high-level senior management positions and uncovered a whole treasure trove of exceptional people whom technically should be unobtainable and employed, but have been let go purely because of the climate and are willing to take a drop in salary because of the necessity of requiring employment. Remember, most companies aren’t hiring right now.
I would suggest creating performance-related packages within their deal, otherwise, a year or so in the future if the economy is recovering you could start to lose these candidates for more generous job openings. I advise being sensible when attracting them for the longer term and incentivize them to reach pay levels they were seeing before. It may mean they will have to work harder for you than they had in the past, but this is only a win-win for you and your business.
4. Make savings across the company
Now is a good time as ever to make strategic savings across your company. When times are good we can all invest in areas that aren’t necessarily core to our business, but when situations arise that are out of our control and trade drops off a cliff due to unforeseen circumstances, every pound or dollar must be scrutinized.
Start by looking at all non-essential costs and scrap them or, if you can’t, at least freeze them immediately. Then, go through every supplier’s contract, utility companies, and service providers agreement and consider which ones you could attempt to renegotiate. Remember: firms are being squeezed from all angles and every pound or dollar to them is likely to mean as much as it is to you, so the potential of them losing a customer when it comes to the end of that contract because they were inflexible to your circumstances at a time of need, could be too much of a risk they are willing to take.
Be firm and calculated in your approach: some suppliers and contractors will become more flexible if pressure is applied but assess that with each call. And finally, never hide your head in the sand. Communication in these kinds of times is not only fair business but shows a supplier you are dealing with your problems and remember they may be offering you a compromise before you ignore them.
“There has never been a better time to be in the market for attracting new franchisees to your product or service”
Study your insurance contract, as in most cases the majority of companies in the U.K. were not covered by business interruption insurance and specifically related to a virus, however, your insurance may be heavily geared towards supplying cover when you are open; for example, if there is a higher risk to injury partaking in activities in your venue like a gym or trampoline park. If so, speak with your broker. They may be able to apply a short term drop in cover to take on board the fact you are not trading.
If you are owed money from any debtors, now will be the time to call them in, and stand firm on the urgency to recoup the monies that are owed. Be relentless.
In moments of crisis similar to what we are seeing in COVID-19, it is paramount you act without hesitation. Any cash that leaves your bank could be the difference between make or break for you and your business. Who do you want to survive through this, you or them?
Having said that, we are all in this together and everyone should share the pain in some way or another; the support you are shown now will help you make a better judgment to whom you will continue using once out of this crisis, so remember it goes both ways.
5. Keep an eye on your competition
Companies are going into administration at an unprecedented rate and it is my view that we are only at the tip of the iceberg as to what damage the pandemic has done to many businesses – and even entire industries. There will be players in your sector who you follow that will be showing cracks of stress – this can be from creditors calling in loans, mismanagement and inflexibility to adapt to the climate, cash holes that were already growing but have been stretched at an accelerated pace.
This may create opportunities to acquire parts or all of their business at a favorable value to you, or you can even step in and purchase the pieces you need from the administration. It is sensible you keep abreast of your competitors and also link arms with your allies; you never know when you may need to pull in a favor and who will be around to give you a hand should you ever need one.
The trading environment is opportunistic at the moment. I believe in every sector, even if you are a micro-business, there is opportunity to leverage from this situation.
It is also a time to be extremely savvy and make sure to be the last man standing because he who is left will definitely reap the rewards to come.
THE AUTHOR
Richard Beese is the co-owner of Flip Out and Boom: Battle Bar franchises.
