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During the coronavirus pandemic, many businesses, including franchisors and franchisees, have learned that the value of essential businesses cannot be understated.
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While essential businesses have been able to continue ‘business as usual’ many others have been prevented from operating at all or have been crushed under the weight and duration of safety restrictions. Somewhat suddenly, essential businesses, which once operated quietly and somewhat unnoticed now having implemented delivery and safe pickup options, reworked safety protocols, and adjusted communications strategies, are especially attractive and valued in the franchise world.
Essentially the same
Businesses deemed as essential can take on many forms and provide a variety of products and services, including health care, essential distribution, infrastructure maintenance and repair, and financial services. While the definition of what constitutes an essential business is set by city, state, provincial and federal governments, these lists are generally consistent. The reason for this consistency is straightforward: these are the industries and services required to keep people fed, clothed, sheltered and cared for.
While there was initially some confusion, as well as some positioning and lobbying by some industries, the government documents and guidelines as to what were deemed essential were generally clear. In the case of Metal Supermarkets, the franchisor was very active in assisting franchisees by researching government guidelines and definitions to ensure the definitions of essential business were properly met.
From a broader perspective, there seems to be general agreement that the demands of the COVID-19 pandemic are proving to be especially challenging for small businesses. Businesses without the supportive backbone of a proven franchisor and a mature system, often with weak financial resources and unsophisticated planning and execution skills, are being hit hard. Reports have noted that pandemic uncertainty has forced many entrepreneurs, lenders and business owners to put their plans on hold. It is also becoming clear that lenders are becoming slower, more questioning and especially more conservative as time progresses. Again, proven franchise concepts have a better chance of attaining lender support.
Franchisors know that the most vital basic of franchising is to provide franchisees a quality business system that works, and then support, market, and improve it. Getting this done quickly, efficiently and properly, even during hard and uncertain times, is proof of a well-organized and professional franchisor.
In a franchising context, the role of the franchisor was especially important in the early days of the pandemic, when there was a period of rapid change and dealing with ‘unknowns’. As the pandemic began, changes in regulations, safety and customer interface protocols, stimulus programs (financial assistance) and consumer behavior, moved at a fast and furious pace. Franchisees relied on their franchisor for guidance to meet the recent safety and logistical considerations, to understand the expectation of consumers and to receive direction on the assistance programs available. Marketing programs were quickly changed and new safety and operational standards introduced.
Franchise systems that extend across borders were probably better prepared and positioned to provide sound advice and execution on pandemic changes, even when markets were uneven.
Metal Supermarkets benefited from its participation in the United Kingdom marketplace. As the U.K. was impacted by the virus earlier than the United States and Canada, this allowed Metal Supermarkets’ management to execute our pandemic-related changes and solutions faster in North America utilizing our U.K. knowledge. As the pandemic progressed, cross-pollination of solutions and ideas between all of our markets benefited the entire network. When combined with a business concept that is essential, such as providing metal products, healthcare, or even consulting services, adapting to the current situation has necessitated aggressive pivoting strategies to fit the needs of the market. Network transparency is critical to maintaining and building morale. Like many franchise networks, Metal Supermarkets increased franchisee communication when the pandemic struck. In addition to the normal weekly newsletter, CEO video and monthly conference call, Metal Supermarkets added a daily CEO update newsletter and scheduled twice-monthly conference calls. Attention was focused on maintaining morale and brand pride in addition to practical advice related to safety measures, managing customer relationships and government initiatives, as well as maintaining consistent, transparent sharing of store-by-store sales and customer service metrics.
Of course, the option to undertake these pivoting strategies and support franchisees to ensure their continued success was only afforded to essential businesses that were able to continue operating. Even essential businesses were impacted from a revenue perspective, with some enjoying higher revenues while others stayed flat or suffered reduced sales. Adding to the fluidity of the situation, franchise concepts that operate in both the B2B and B2C space benefited from strong sales diversification.
“Essential businesses are now a more compelling and rewarding option than they were pre-pandemic and franchise candidates will logically consider this in their analysis”
When a franchise system succeeds, potential franchisee candidates take notice. Franchise systems that have demonstrated their products and services are required consistently by a loyal customer base are always an attractive prospect. Essential businesses are now a more compelling and rewarding option than they were pre-pandemic and franchise candidates will logically consider this in their analysis. So it makes sense that, from a franchise development and expansion perspective, essential businesses are now finding they are receiving much more attention – something that wasn’t contemplated by potential franchisees or franchise professionals before the pandemic.
This abrupt shift in recognition and attention is both rewarding and gratifying to essential franchise brands. During the pandemic, Metal Supermarkets has continued to grant franchises and open more stores. Currently, the brand is on track to open more than triple the number of new stores this year compared to 2019, and this could well be consistent with other essential business franchise brands.
The next new ‘normal’
Without minimizing the existing and continuing impact of what has occurred, opportunity can spring from adversity. The businesses and industries that survive and prosper during the COVID-19 pandemic will need to continue to evolve and adjust to changes. But non-essential businesses have a tougher road in front of them. Even as the pandemic subsides, they will need to be even more flexible and innovative to adjust to new consumer tastes, tolerances and safety standards. They may well also need to work harder to attract supportive lenders and investors.
It would seem that at this time essential businesses have some strong advantages. Perhaps, without planned intent, the pandemic has caused governments, consumers and safety standards to effectively favor them, resulting in higher quality financial results accompanied by reduced investment and business risk. Though all industries bear risk and we have all learned to “expect the unexpected” during these unprecedented times, essential businesses are now in a superior position to discretionary businesses in many ways, and will be for some time to come.
Stephen Schober is the president and CEO of Metal Supermarkets, the world’s largest supplier of small- quantity metal products.
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