Where is Franchising today? An Analysis leading to solution

Posted On May 26, 2020

As we pass the waves of strict lockdown, majority of states in the US are opening up and looking forward to restoring their pandemic-wounded businesses. Franchising industry, which most likely suffered from the whole situation is taking a proactive approach to getting back on business and opting for solutions, feasible for both the franchisors and franchisees.

bar graph representing how are business continuing their sales effort

To make this transition easier, Naranga stepped up and surveyed with leading franchise leaders, to analyze the situation. And to come up with the best possible franchise operations management solutions.

The good thing: Franchising industry is finally moving towards business sustainability with minimum possible losses.

The state of franchising - Where is franchising today?

We carried out a survey with franchise leaders to analyze and quantify the impact of COVID-19 on businesses. The results were surprising! They showed how immensely, businesses fell prey to pandemic. Majority of the participants represented 9 industries: Restaurants, Food and Beverages, Consumer Services, Health and Wellness, Management Consulting, Information Technology and Services, Education Management, Marketing and Advertising and Retail.

For further assurance, last week we re-surveyed the participants to see what has changed after four weeks. We’re going to go through each and every question and share our perspective, leading towards real-life franchising-friendly solutions.

Preview: Surprising Results, Current state of franchising, positive insights and a dose of headache on the new normal in franchise business industry.

Amid the widespread store closings and business uncertainty, our franchisors have shared their business insights along with the steps they’ve taken to lessen the impact.

Financial Impact: Sales decline

More than 90 percent of the franchisors reported a decrease in business sales while, a few, claimed to have no impact of COVID-19 on their business sales.

According to the CEO of the International Franchise Association, Franchises have been directly hit by the COVID-19 pandemic. The statement was verified further when we probed into the current issues faced by franchising clients. There have been widespread store closings, decrease in the supply chain and a state of utter confusion about “What’s next?”, among the franchisors.

Owing to the adverse effects of pandemic on business finances, franchising industry just like other businesses had to make critical decisions.

Impact of Sales decline on business

Upon deeper analysis, a high percentage of industries affected from this situation were: restaurant, consumer goods, and health and wellness.

Collecting the statistics of sales decline, nearly 32% claimed a sale decrease below 25% while 22% of the results showed numbers between 25 - 50 percent. The remaining participants reported loss in sales, above 50%.

sales decline (1)

 

While majority of the businesses went for: furloughs, salary deductions and downsizing, there were a few who focused on looking for solutions to drive in more business by exploring other possible options.

Exploring new options: How are businesses continuing with sales efforts?

The relaxation in lockdown and changing mandates from “stay-at-home” to “safe-at-home”, of government have lent a sigh of relief for businesses most affected by the situation. While majority of the states in the US were planning to take drastic measures to minimize the impact of pandemic, some were still looking towards finding a middle way. As the US went into complete shutdown and it was the franchising business that was most likely affected by the situation, these are the solutions that companies opted for.

1. Introducing new products and services

Not going for the mainstream approaches of saving business, a large number of industry leaders chose to explore new horizons and ways of expanding business as per the needs of their business and franchisees.

Organizations mainly opted for eCommerce and digital marketing solutions to grow their online presence. They focused on expanding businesses online and launch products and services for business growth and sustainability.

2. Changing ways of customer interaction

It is insightful of organizations to think on the lines of improving ways of customer interaction. This is not only bringing them closer to their clients but also assisting in nurturing potential relationships.

The franchisors who showed interest in switching towards eCommerce reported to change the way of dealing with customers. In times like these, Naranga also offers a 90 days free trial version of Franchise management software to let franchisors run their business operations smoothly. 

3. Switching to E-commerce

Since, the horizon of E-commerce is ever-expanding and online shopping will no longer be limited to the B2C marketplace, going for online selling has been the best considered option for franchisors so far. As per a statistical report by Statista, the expected retail sales of eCommerce are to reach up to 600,000 million US$ by 2040.

bar graph e-commerce sales

 

Not only this, but experts predict that impact of COVID-19 is not merely a short term boost for eCommerce industry but is actually something that's here to stay. This is due to the fact that consumers and businesses will soon be comfortable with the new purchasing behavior and with the convenience and benefits of contactless payments.

In lieu of these facts, Naranga also stepped up to setup a robust online store for franchising clients. Majority of our franchisors have reported exceptional sales by taking Naranga e-commerce solutions.

4. Cutting operational costs- optimize operational costs

Last but not the least, 25% of industry leaders went towards furloughs and downsizing to reduce operational costs and streamline business operations. These actions lead businesses towards forming a sustainable model with minimum needed resources and saved them additional costs.

Although it isn't a win-win situation for all but furloughs can save the company some additional money, prevent layoffs, and save organizations from rehiring costs. Several franchising companies also enrolled in Paycheck Protection Program (PPP) offered under CARES act.

The act covers extended unemployment benefits with Pandemic Unemployment Assistance (PUA) and Federal Pandemic Unemployment Compensation (FPUA) and provides small business loans worth of 2.5 times their monthly payrolls.

You can explore further about the CARES act and PPP at https://cares.fransupport.com/

Expected recovery time

19% of the businesses are optimistic about getting their business back on track by the third quarter of 2020. While 24 percent of the franchisors predict the improvement in situation by Q4, 2020. 

The remaining 36% were skeptical about the recovery of their business anytime soon and predicted that recovery will not come till Q2 of 2021.

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Naranga at help!

We at Naranga are always striving to bring in best franchise management solutions for our clients. Whether it comes to customizing solutions for handling large franchise networks or coming up with new solutions to solve the issues of franchising industry. We truly understand the difficulties faced by our franchising clients and are  always rooting to assist them in ways to bring in more business and innovation to manage their franchise business.

Are you also skeptical about your varying sales? Give us a discovery call and explore options of managing business sales! Because your possibilities of managing franchise business are endless.