Chapter 18: Crisis Management and Business Continuity Planning

As evidenced during the COVID-19 pandemic, crises can be unexpected and strike at any time. During times of crisis, the foundation of trust between franchisors and franchisees becomes a powerful asset. That’s why it’s important for franchisors to have a plan of action to navigate challenges. 

How Franchise Systems Can Best Prepare for a Crisis Before it Happens

Tom Spadea, a founding partner at Spadea Lignana Franchise Attorneys, noted that the franchisor-franchisee relationship is like building any other strong relationship. If done correctly, all parties should be able to work together during a crisis, specifically with strong leadership to guide them along the way.

“A company can withstand the crisis if they've built up goodwill and trust,” he said, in reference to the COVID-19 pandemic. “And if there's trust between the franchisor and the franchisees, then they're going to be much better able to withstand the unexpected. This is why anyone going into a franchise should talk to existing franchisees to understand if this franchisor is a leader. Crises are solved by good leaders, and leadership doesn't happen overnight. It happens by the trust that you've built up over the years.”

Maintaining transparency is also one of the best practices for dealing with challenges as a franchise organization, Spadea noted. 

“When a crisis happens, it's much easier to not have a franchisee wonder what you're not telling them,” he said. “Building a culture of transparency and responsiveness is the best way to get ahead. Then, when a crisis happens, deal with bad news fast and honestly. Whatever is going to happen is going to happen. But at least you will have a much better chance of overcoming it.”

Developing a Comprehensive Business Continuity Plan

During the pandemic, many businesses had to put a business continuity plan in place on the fly. Now, more companies are developing plans for such unforeseen events.  

When developing a plan, franchisors need to think about how they are going to operate if a certain event were to occur. Ask the following: “How would my franchisees operate if they lost, A, B or C?” 

For example, if a catastrophic weather event takes place, what does that mean for your business? How are you going to operate in a situation like that? Once they determine a plan of action, franchisors should have it detailed in franchise operational manuals that they are providing to their franchisees. 

Franchisors should also think about what insurances they can provide to their franchisees to help them during a disaster. This can be done by reviewing what an insurance plan will handle and working with professionals who can provide the best policies for franchisees. Plans should include elements such as flood/earthquake, property, roof and liability insurance.

Giving Franchisees the Tools to Manage Emergencies

Because franchises are operated by franchisees, it may be difficult to predict how each one will handle an emergency. However, what franchisors can do is give them the tools they need to handle each potential predicament effectively. 

The pandemic served as a test bed for franchisors to evaluate their systems and determine how to effectively implement necessary measures. Franchisees relied on the franchisor for guidance. The response to these plans (for both the franchisor and franchisee) could also be used as a lesson learned to reevaluate and improve on the next emergency plan.

From the franchisor's perspective, there are two key aspects to consider. First, identify how to best support franchisees in overcoming the challenges posed by a crisis. Second, define the actions and goals franchisees needed to accomplish in order to successfully adapt to a new environment. 

Success ultimately relies on the franchisees' willingness to embrace and utilize the resources provided by the franchisor, but it is crucial for brands to build out those systems to make it happen.