Coronavirus and Franchising: Randall Henderson of Property Management Inc. and Bob McQuillan of Hand & Stone Massage and Facial Spa

The coronavirus continues to have dire effects on businesses across the country, and the franchise industry is no exception. Franchisors across segments are strategizing new ways to support their franchisees, keep customers satisfied, help local communities and come out stronger on the other side of this crisis.  

To that end, 1851 Franchise publisher Nick Powills and Charles Internicola, founder and partner of the Internicola Law* Firm, are covering the coronavirus and its impact on the franchising industry through a webinar series titled “Coronavirus and Franchising: Mindset + Strategy to Recover and Grow.”

In today’s afternoon webinar, Powills and Internicola spoke with Randall Henderson, Vice President of Commercial and Residential at Property Management, Inc. and Bob McQuillan, Vice President of Franchise Development at Hand & Stone Massage and Facial Spa to discuss how their brands have adapted to better serve customers and franchisees. 

Here are some of the key insights from their discussion.

The Real Estate Industry is Changing

Many commercial real estate owners may be waiving leases and payments to get in front of rent deferment requests. PMI predicts that 15 percent of its tenants will reach out about rent deferment in April and 25 percent in May. Now is a good time to shape policy and practices so property managers can be confident with how they communicate with tenants moving forward.

It is important to watch out for landlord fallout in the coming months. A landlord may be able to operate for a month or two without payments, but any longer and there will certainly be an economic impact. The real estate industry took nearly five years to recover from the 2008 crash. 

It is important to show to the public that property managers and landlords can get in front of the fallout and proactively reach out to tenants to work together during this crisis to create solutions. By the same token, struggling brick-and-mortar franchisees should reach out to landlords to discuss possible strategies for success.

In terms of residential real estate, the CARE Act put an eviction moratorium on mortgages and removed the ability to charge late fees. The government of Utah issued an order to make sure that no one impacted by coronavirus will be paying rent until May 15th. 

Whatever the government does to support the residential side of real estate will eventually make its way to commercial. No business owners want to use SBA loans to pay rent, just like most Americans aren’t looking to give their $1200 stimulus checks to landlords. The government will have to keep this in mind when creating policies.

Additionally, we will soon see what the federal government will do to drive down interest rates and stimulate home buying. This could be a great opportunity to look at restructuring and reevaluate the real estate industry in general. 

The property management industry will be altered forever from this process. More and more personal property owners are hiring real estate professionals and property managers to deal with the impacts of this crisis.  

Franchisees Need Support

If brick-and-mortar franchisors don’t pivot their businesses now, the impacts of this crisis will be much more severe in the long run. It is important to prioritize constant communication with the franchise system and with the core base of customers to educate them on changes being made. 

In addition to altering business practices, franchisors should look to vendor partnerships as well. For example, PMI has been looking for partnerships to create zero-security-deposit opportunities for tenants and loss-of-rent insurance for landlords, each of which could be more valuable now than ever before. 

Franchisees are looking to their leaders for guidance on national resources. Franchisors should create easily accessible online resources to educate franchisees on SBA loan applications, financing, rent deferment and other relief options. 

After this crisis, franchisors will need better support infrastructures, easy-to-follow workflow processes and virtual training programs to make sure franchisees are positioned for success. They should create tight partnerships with vendors to support innovative training programs for franchisees and unique experiences for customers. 

For service-brand franchisors, delivering a consistent product is more important than ever, for both consumers and franchisees. For example, Hand & Stone’s membership model creates a reliable source of income during these months, even if it is short-term.

Franchisors Should Look Toward the Future

There is a significant chance that real estate prices will drop and more commercial spaces will become available. For incoming franchisees or emerging franchisors, right now could be a great time to negotiate with cash-strapped landlords. 

Traditionally, unemployment drives people to become first time entrepreneurs. After this crisis, there will be more people looking to join qualified brands with strong core values, an adaptable model and leading support. For better or for worse, the stronger franchise players will likely start gobbling up smaller markets and mom-and-pop companies who don’t have the support system to survive. 

For many businesses, it can be beneficial to project worst-case scenarios and act as though there will be no cash coming in until July 1. Everyone that isn’t bracing for change is making a big mistake.