Coronavirus and Franchising Webinar: Day 3 Recap

As the dire impact of the Coronavirus continues to reveal itself, companies across all sectors are scrambling to deal with mass closures, vastly reduced consumption and nervous team members.

This week, 1851 Franchise publisher Nick Powills and co-host Charles Internicola, founder and partner of the Internicola Law** Firm, are covering the Coronavirus and its impact on the franchising industry through a special three-day webinar series titled “What Coronavirus (COVID-19) Will Mean for Franchise Brands.”

Today, Thursday, March 19, Powills and Internicola hosted part three of the three-part series, in which they were joined by Justin Waltz, VP of franchise operations for Big Blue Swim School* and Philip Schram, chairman of Buffalo Wings & Rings to discuss tactics for franchise brands to implement as they deal with the impact of the Coronavirus. 

Here are some of the key insights from their discussion. 

Legislative Updates

The International Franchise Association is advocating for more states to extend the deadline for franchise-registration renewals until the end of April.

As part of the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Small Business Administration (SBA) received $20 million for disaster-relief loan programs that will be made available to entities financially impacted as a result of the Coronavirus. Franchisees, the majority of whom took out loans to support their businesses, fall under this bracket. Business owners should check to see if their state has been declared a disaster state. If so, business owners can apply for SBA loans.

Additionally, Trump issued the Families First Coronavirus Response Act, set to take effect on April 2nd. The Act has many facets, including new temporary employer obligations regarding paid leaves of absence related to the Coronavirus. The act measure also expands employer obligations under the Federal Family and Medical Leave Law. 

There is also word of a new Coronavirus relief bill that will use treasury backed funds to help small business owners.

Staying Positive and Leaning Into Vulnerability

Brands are still bracing for impact, and now is the time for leaders to step up, be transparent and respond to the needs of their teams. 

In addition to being optimistic and inspiring, team leaders should lean into vulnerability and create an open dialogue about anxieties and fears, taking the opportunity to build a strong brand culture and connect with employees. 

For example, Buffalo Wings & Rings has launched a task force and created a blog, named “We Are in This Together,” designed to help franchisees during the virus. The blog creates open communication with franchisees to discuss decisions, tips and important questions. 

More than ever, the hosts agreed, franchisors must communicate that to their teams that they are all in this together. 

Short-Term Franchisee Support

Franchisors should expect royalty- and rent-deferment requests from franchisees. Now is the time to focus on implementing techniques that support cash flow and flexibility while considering legal exemptions for franchisees.

Those who aren’t in a strong financial position should always ask for credit before they absolutely need it. If franchisors aren’t in a position to provide royalty deferment, they should apply for a loan or credit.

Brand leadership and franchisees should have a dialogue about the SBA and crucial loans that will be needed throughout the small business community. 

Franchisees should also be coached on how to build a “two months of fixed costs” reserve fund in order to recover from scenarios like this.

Long-Term Franchisee Support

If China offers any indication, it could be two to three months before small businesses start seeing revenue again. 

Franchisors should examine the new business environment and update policies and practices to grab more market share. For example, although the QSR segment is already prepared for delivery and pick up business, the casual dining segment needs to find new ways to adapt and improve upon their off-premises offerings. 

Come up with tactical ideas to help franchisees generate cash flow and encourage them to use those strategies locally. The best franchisees are able to follow guidelines while keeping an open mind and working outside of the box. 

With some businesses seeing a 90-percent decrease in business, the biggest concern today for many franchisees and franchisors is how to make payroll. Anything that brands can do to support cash flow and keep payroll active will be the key to helping small business owners and building a better team long-term. 

Stay in cash reservation mode in order to avoid or delay expenses, and work with vendors to save money. For example, Buffalo Wings and Rings* had a franchise conference scheduled in three months, but has cancelled and repurposed the budget as a short term fund to help franchisees. 

The Future of Franchise Development

For prospective franchisees in the late stages of the development process, there are going to be delays. On the other hand, the number of entrepreneurial investors sitting at home looking for opportunities may result in an increase in early-stage prospects. Franchisors should plan on big Discovery Days for the third quarter of 2020. 

New franchisees could actually be positioned for success depending on the real estate market. For example, 2010 was a great year to enter franchising because real estate was more available and construction costs were down. Providing real estate support is key. 

Keep franchise development a priority, including virtual Discovery Days. While these measures shouldn’t replace the entire Discovery Day process, it is a good tool to keep candidates engaged during downtime. 

Share as much positive content from franchisees to increase validation, drive conversions and make others feel less concerned.

Overall, the hosts said, the definition of a recession-friendly business is going to change. There will undoubtedly be unique business practices coming out of this, such as deferred franchise fees. Keep an eye on your segment, and be prepared to adapt.

Franchise brands with questions on how to stay afloat during the Coronavirus outbreak can email 

[email protected]

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