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The franchises bracing for – and capitalising on – Brexit

Written by Angus Shaw on Tuesday, 12 February 2019. Posted in Analysis

Not even the government can see the future post-Brexit. But from Caremark to Rhythm Time, the uncertainty alone has seen these franchisors go to some serious lengths to protect their franchises

The franchises bracing for – and capitalising on – Brexit

Doomsday stories surrounding Brexit are inescapable for businesses and consumers alike, with economic bulletins being fired at just about everyone. When it comes to franchising, networks face unique challenges around everything from recruitment to supply chains. And although foreseeing exactly what’s going to happen is so arcane even the government’s been caught with its tail between its legs, there are many measures franchisors have already taken to prepare for the worst.

And for good reason. For one, enticing potential franchisees to sign up has already proven difficult amidst the thick Brexit fog. For instance, David Glover, managing director of Caremark, the homecare franchise saw a record-breaking 250 leads per month last year but things fell through when it was time to make a decision. “[The problem is] actually the conversion between meetings and sales and the primary reason for that is the economic uncertainty Brexit is causing,” he explains. “It’s a reluctance of people to commit to buying a franchise.” It goes without saying now’s not a compelling time for anyone to splash out investments. But given franchisees' importance to networks, franchisors can’t afford to lose them. “With the economic uncertainties Brexit has caused, people are worried if they buy a franchise and it doesn’t work [then] how difficult is it going [to be to go] back and get a job somewhere else?” Glover argues. 

The lack of confidence is unsurprising considering the model’s tricky position. “Franchising is very popular in the UK, however, because we sell mainly B2C, Brexit could seriously affect us and only time will tell,” says Kathy Doolan, founder and managing director at Rhythm Time, the children’s music and drama franchise. Indeed, for consumer-focused franchisors like those in food and hospitality, network-wide logistics may become too expensive to maintain in the event of a no or limited deal and force franchisees to cough up for the losses. “At that point, we would be faced with two options: increase the initial franchise fee to cover the price or source our products in non-EU countries,” Doolan says. “The latter will be the cheaper option but it might be something we have to reconsider once the Brexit ball is rolling.”

Thankfully, we’re yet to witness such events and may never have to. That’s because there’s still time for franchises to adopt tactics to not only wade Brexit tides but use them to their advantage.

When life gives you lemons

Whether Brexit’s the smartest idea since round wheels or the equivalent of being conned into accepting a recreational colonoscopy, simply making the most of the hand you’re dealt may be the best thing you can do. And not enough can be said for getting that message through to your franchisees. “Brexit and its potential outcomes represent more of an opportunity than a threat for [our] business owners,” says Matt O’Neil, head of partner recruitment at Expense Reduction Analysts (ERA), the business management consultancy. Launched back when Article 50 was triggered, ERA’s “educate and compel to act” marketing campaign pumps out blogs, advice pieces and white papers encouraging franchisees to address customers’ Brexit woes, supplemented by new network-wide resources. “In addition, many of our specialists have created high risk and hot topic fact sheets for the collective use of the network in attracting new clients and helping to safeguard existing [customers],” O’Neil adds.

It’s a classic case of knowing your audience, as ERA’s customers are business owners. “Naturally, as [a] B2B service provider, economic uncertainty affects our client base,” O’Neil explains. “However, we’re able to capitalise on both and expanding and contracting markets by offering business consultancy support growth as well as vital cost savings services when businesses, large and small, are looking for ways to economise.” It stands to reason therefore that not every franchise can capitalise on Brexit ambiguity through their service or product. But if it clearly benefits the consumer, shining light for those in the dark works wonders. “Helping franchisees to better serve their clients has been a vital part of our Brexit strategy,” O’Neil says.

Be the voice of reason

From the government to the opposition, many Brexit uncertainties simply revolve around not knowing anyone’s plans. Likewise, if a franchisor isn’t projecting more confidence than ever about the state of its brand leading up to Brexit, don’t expect staff to feel safe sticking around. That’s something Caremark, for example, is conscious of. “We introduced a culture campaign at the beginning of 2017 to re-emphasise the culture within Caremark,” Glover describes. “[We] emphasise our values, beliefs and ethos to let our carers know they're part of a larger organisation and that they’re not on their own.” From stuffing leaflets in the payslips of 5,000 employees to handing out “culture books,” Caremark’s been doing everything it can to reaffirm its stability and, well, care. That goes two-fold for talent at risk of jumping ship or backing out of joining. “We've also really hit the digital side of things in terms of care and recruitment,” Glover says. “And also recently taken on somebody with responsibility at head office purely for carer recruitment and retention.”

These are simple yet powerful considerations nervous employees appreciate. And Caremark’s gone even further by looking at new, accessible policies for workers. “Traditionally within the domiciliary care market people work on zero-hour contracts [and] we’ve looked at introducing guaranteed hours contracts,” Glover reveals. Opening up to fresh avenues in the month preceding Brexit certainly shows a franchise unafraid of the future. “We’ll look at other different things there to make it more appealing to people,” Glover summarises.

Keep your options open

Although bullishness can inspire people to join a franchise’s network, never take a risk with one of the most hotly debated Brexit issues – imports. For franchises, fresh import taxes following no UK-EU deal could harm wide-reaching supply chains shared by entire networks. “If import duties are imposed on products, this may affect us,” Doolan says. “This could cause an increase in the prices of our instruments.” As insurance, Rhythm Time now sees some of its products made closer to home to mitigate potential turbulence from getting them overseas post-Brexit. “Recently we decided to have two of our products made in the UK, so that will certainly help and it’s really good to be able to support British suppliers,” Doolan says.

However, Rhythm Time certainly isn’t putting all its eggs in one basket but taking a slow and steady approach to rethinking supplies. Anything more dramatic than that is something for the future. “We will certainly look for other suppliers once we know how Brexit is going to turn out and whether or not we will be impacted but at the moment we’re purchasing as normal,” Doolan emphasises. After all, franchises are far from being in the worst situation. Independent businesses, for instance, face Brexit problems of their own. “I think Brexit will have a massive effect on small businesses, with the uncertainty alone stopping people from taking the leap to becoming their own boss,” Doolan concludes. “Franchising gives people the opportunity to be their own boss with a safety net of their franchisor and fellow franchisees.”

You can’t hit a bullseye by shooting in the dark, so it’s unwise to plan for what Britain's exact departure from the EU will look like. However, by addressing the tangible vagueness already felt by franchisees, employees and customers alike over the long negotiation period, franchisors can prepare their networks to get ahead of the curve for when, or if, Britain exits the EU. 

About the Author

Angus Shaw

Angus Shaw

With a keen eye for politics as editorial assistant, Angus can often be found scanning the horizon for the next big waves crashing against business shores – which makes up the time when he's not setting sail at Radio Caroline, the former pirate station, on weekends. Follow him on Twitter @Angus_Shaw for his latest cognition

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