Is COVID-19’s Effect on the Franchise Industry Overblown?

The effects of the COVID-19 pandemic have reached virtually every industry, and franchising is no exception. But amid the chaos, many brands are finding time to sit back, reassess their plans and create new solutions to improve their operations, support  franchisees and reach consumers. Some of those adjustments may just offer benefits that last well beyond the current crisis, and some are even finding lucrative new opportunities in the immediate term.

Swim-school franchise Big Blue Swim School* closed four multi-unit deals accounting for 14 new swim schools during March.

Those leads were in the pipeline far before March, of course, but those prospects still saw something that compelled them to sign on the dotted line after the impact of the coronavirus pandemic had been laid bare. 

“We did pause a lot of lead-generation activities but will ramp back up at the end of April,” said Scott Thompson, Big Blue Swim School CDO. “We have a robust pipeline and we’re giving them what they need during this time. However, we're pausing Dive-In days until our locations are reopened. Candidates looking at Big Blue need to meet us in person and see the product in action.”

Despite that pause, Big Blue has remained aggressive in its real estate efforts. 

“One of the most challenging parts of what we're trying to do is find sites in A and A-plus locations with a density of kids and great school systems. With the economy the way it was before, those sites were hard to come by,” said Thompson. “We know that some of those retailers are going to free up some sites. We view this pandemic as an opportunity for us real estate wise. The other thing is landlords will be more receptive to us. We bring more customers to shopping centers for other tenants, so we’re seeing an increase in landlords getting back to us.”

As Big Blue focuses on new real estate, early- and supplemental-education franchise Sylvan Learning* has been focused on adjusting its strategy to provide service despite the reduced role of its brick-and-mortar locations.

“I think what we've done is utterly amazing,” said Sylvan Learning CEO John McAuliffe. “We've been able to take a system that was focused predominantly on in center delivery to almost being exclusively online delivery. We've been able to do that because we invested heavily in technology over the years, allowing us to pivot quickly. Our system was interested in continuing to serve from their centers, and they had an overwhelming feeling to help kids who won’t get to finish out the school year. Every parent’s fear is that their children won’t be prepared to go into the school year next year, but every parent wants their children to be successful. Our mission-driven franchisees wanted to be able to help.”

Not only have Sylvan’s franchisees stayed in business, they’ve also been able to expand their offerings. During the COVID-19 outbreak, interest to provide in-home tutoring has also grown across the system, something that is not likely to dissipate once the pandemic is contained.

“We have set ourselves up so that when we exit this, we will be able to deliver in-center, in-home and online,” McAuliffe said. “I don't know if anybody will be able to offer all those modalities right now. Now that virtual tutoring is out of the bag, we're not going to go back.”

Evan with a savvy pivot to virtual lessons, Sylvan is unlikely to sign new clients during this crisis. Therefore, the franchise has rolled out a royalty and fee deferral program to support franchisees while revenue streams are slowed. The franchise’s corporate team has also been on the front lines with franchisees, teaching and training them how to apply for payroll loans and ERC employee attention credits.

While the impact of the coronavirus pandemic on the franchise industry is undeniably dire, these case studies prove that with a few clear-eyed pivots now, franchise brands have an opportunity to come out of this crisis even stronger.