How Franchisors Can Help Their Franchisees Get Through the COVID-19 Pandemic

Whether you are a franchisor or a franchisee, your business has almost certainly been impacted by the COVID-19 pandemic.

If you are in a select few essential industries such as cleaning, disinfecting, or staffing, you may be experiencing a surge in demand. However, for other franchises in the restaurant or fitness industries, you are likely experiencing a reduction in customers or a total loss of business and possibly even closures right now.

We are getting questions daily from franchisors about how to help their franchisees through these troubling times.

  • Each franchisor should reassure their franchisees that this issue will pass and that franchisees should focus on the long-term game plan.
  • Franchisors should help franchisees understand how to shoulder the economic burden of temporarily shutting down. At this moment, franchisees are concerned primarily about not having enough money to pay employees, rent, royalties, and many other difficulties resulting from lost or slowed business.

Challenges Franchisees Are Facing From COVID-19

First, many franchisees have had to make the tough decision to lay off their employees. This decision stems from both saving money and allowing their employees to seek unemployment compensation benefits during this tough economic period. Franchisors should work with their franchisees to create an employee retention or rehiring plan so that these employees feel safe that they have a job to come back to.

Secondly, several franchisees are also concerned about whether or not they will be evicted if they do not have enough liquidity to pay rent. Currently, several banks are deferring mortgages and many landlords are helping tenants waive or defer rent during this period. Franchisors should advise their franchisees to discuss these options with their landlords and banks.

Third, franchisees are likely concerned about whether or not they will have the financial means to pay royalties or meet minimum financial commitments to their franchisor, potentially risking possible default or termination. Here, the franchisor has complete control over aiding their franchisees and calming their minds. Franchisors should consider several options to assist their franchisees such as waiving or reducing franchisee royalties to allow them to meet their other financial commitments.

Fourth, franchisors can help their franchisees determine alternative means of operation. For those franchisors in industries like fitness and coaching services, franchisors should investigate options for virtual services. For other industries like foodservice, now is the time to work with franchisees to offer delivery or take out services. Both of these options, if not already in place, give both the franchisor and franchisees alternative methods to operate and possibly greater reach to market segments that may not have been available otherwise.

Finally, franchisors can pass along financial options to their franchisees that could help them survive this tough time. The Small Business Administration has approved Disaster Loans and offering franchisees small business loans with low-interest rates. Another option is The Care Act which could offer payroll loans that could be forgivable.

Helping Franchisees is Good for Business

Overall, it is in the franchisors best interests to help their franchisees through these troubling times and ensure that they have the ability to continue operating or reopen. These are only a few of the options available to franchisors and franchisees. If you are interested in a more in-depth discussion about what options are available to help franchisees get through COVID-19, please reach out to us at 980-202-5679.

Let's Get Started!
The attorneys at Franchise.Law are dedicated to providing your business with the knowledge and insight you need to get through the franchising process. Filling out the information below will help us get to know your business concerns, and how we can help.