The president and CEO of the International Franchise Association reveals how the U.S. franchising industry will undoubtedly recover from a challenging year.
As the president and CEO of the International Franchise Association, Robert Cresanti spends his days deeply immersed in the present and future of the U.S. franchising world. He’s often working with Congress to advocate for the best interests of the industry, and over the course of 2020, his input has been instrumental in guaranteeing support and relief for the networks that need it most.
This interview was conducted in July 2020.
How do you think the government’s response has been to COVID-19, with regard to U.S. businesses’ best interests?
RC: Despite all of the complaints and naysayers that are out there, I can’t say enough about the attention the government has paid to small businesses and to small- and medium-sized enterprises.
They’ve not always gotten it perfectly right, but I can tell you that they are quick at learning and recovering and in my lifetime, I’ve never seen a government work with the speed at which they have been these past few months. There’s been a lot of goodwill, and that’s really moved legislation forward in an environment in which legislation was almost not flowing at all.
Are there any areas in which you think there’s still work to be done?
RC: Absolutely. I think moving forward, one of the things that needs to be focused on is liability protections. One of the unique issues that the United States faces, which isn’t as big of a factor in other global franchise economies, is that we have a high level of trial lawyer activity. So far, we have had almost 4,000 COVID-related lawsuits filed, and this number is going to only increase as those cases become what we call syndicated.
We spoke with Secretary Mnuchin and said that businesses who follow appropriate guidelines need temporary and limited liability shields, to ensure that their relaunch efforts aren’t hampered by unfounded lawsuits. I’m not saying shield businesses that are behaving irresponsibly; rather, protect the people who are following government guidelines to the best of their ability.
Why have the Paycheck Protection Program (PPP) loans been so important during the pandemic, and what work has the IFA done to make these accessible to the entire franchising community?
RC: It can get very complicated, but on a larger level, under the CARES act, individual owners of a franchise business could apply for PPP loans. Under the rules that we put in place, there was a waiver called the affiliate rule for the franchisees, which allows independently-owned franchise businesses to apply for PPP loans. Without that designation, franchisees could not apply, as only one franchise business in the organization was eligible.
It makes me smile to think about it, because thousands of franchisees out there now had access to these loans, but had no idea that at the other end of the oar sat the IFA; working with government folks to make sure that access was open to them.
Do you think that the franchise community in the U.S. can fully recover from the blow of COVID-19, or will the industry of 2021 look very different to what we’ve come to know?
RC: The million-dollar question; I think things will be very different and yet surprisingly the same, simultaneously. Adjustments have already been made, like takeout windows for restaurants that didn’t have them previously, and business is just flying through those. People are gradually moving to a place where they’re more comfortable grabbing food and taking it out, and are spending less time in beautiful environments that they’d previously eat in.
There’s no better system out there that’s better suited to scale that wall and make a recovery than franchising. The franchise business model is so diverse and broad, and its opportunities are so promising, that it’s absolutely going to recover. The real question is whether that recovery will be uniform or sporadic, and that depends entirely on the different business segments; we record 300 different segments at the IFA, and some like eldercare have continued to be operational throughout the pandemic. Other business like trampoline parks and entertainment venues, however, have been hit extraordinarily hard.
One of the ramifications of all this is that despite the ongoing support, and despite the federal government’s help, we are going to lose a lot of businesses. Both mom and pop concepts and brands that have been going for 20 or 30 years are facing the same challenges, but for those that manage to come out the other side of this, there’s going to be a tremendous amount of opportunity.
Do you believe that we’ll see an uptick in the rate of franchise recruitment as the U.S. recovers from this financial blow?
RC: Yes. We call franchising serial entrepreneurship. We saw the same thing during the last recession: franchise ownership increased as people left their corporate jobs, or as those jobs were eliminated.
In fact, the financial crisis of 2008 resulted in growth in employment in the franchising sector by 7.4 per cent, from 2009 to 2012. In the States as a whole, the overall employment rate only increased by 1.8 per cent.
There are a large number of opportunities opening up, and I think in the U.S. in particular, the idea of opening up your own business, utilizing the training of your career thus far, and working for yourself is ingrained into the American personality.
What kind of franchise brands are going to prevail in this new industry landscape?
RC: The ones that will bear out are the ones that have been the most agile during this period. I’ve seen such innovation these past months; a restaurant, for example, only had an eat-in space, so it rolled a trailer into its parking lot and took spaces and turned them into a dining area, because it didn’t have a drive-thru window.
Franchising is well suited to adaptation, and I think that now is a good a time as there ever has been to own your own business.
This interview is an excerpt taken from our conversation with Robert for the Global Franchise Podcast. To listen to the entire episode and all of our back catalog, make sure to visit globalfranchisemagazine.com/podcast
