Just after Easter we held our Franchisor Academy. However, with the global pandemic still causing chaos both for business and otherwise, it was unlike any we’ve hosted before. We hosted the event virtually and the format was a no holds barred Q&A session.
The panel was made up of our own business advisors plus legal and banking sector experts. The discussion fundamentally surrounded how franchisors and franchisees can access support quickly in challenging times. Please note, the views expressed during the discussion were those of the individual and were not necessarily a consensus of all the panel experts.
We heard that the banks are still very much available to reassure and provide assistance but processing claims for loans is taking time due to the huge demand. Representatives from Lloyds Bank, Suki Dehal and Richard Holden advised that for franchises needing a loan, the important information to have at your fingertips is previous trading history and accurate cashflow forecasts, so that you can evidence the need for all the funds requested and prove historical affordability. Factor in any furloughed payments too.
Loan applications need to be realistic and they need justification as banks don’t want franchisees to commit to new borrowing they can’t afford to pay back. The question on their minds is: would this loan have been viable before the crisis hit? For more urgent financial concerns, it was advised that contacting your bank to access overdraft facilities may offer more immediate help.
Roz Goldstein of Goldstein Legal discussed questions over franchise contracts, fees and Force Majeure clauses. She confirmed that contracts need to be assessed individually as wording can vary significantly. Force Majeure clauses (termination of agreements due to inability to fulfil contract) are often added as a matter of course but we were reminded that last time they were relevant was during the Second World War. Case law of this kind hasn’t been enacted in a number of years, so it is likely that we won’t have a precedent to follow until one goes to court and has a ruling one way or another.
We also discussed the situation where franchisees are no longer able to pay franchisee fees. Currently it’s very difficult to enforce contracts regardless of the wording. Should franchisors be doing this anyway? For franchisors able to support their franchisees more proactively by pausing fees and helping them keep afloat in other ways, we believe when business returns to a more normal situation, franchisors will be repaid ten-fold.
On a more positive note, our chairman Carl Reader reminded us that, unlike normal recessions, the economy was in good shape when we entered this crisis. This may mean the V of the dip will enable many businesses to pull out of difficulties quickly. When consumers can resume spending there will be a boom in demand and getting prepared for that now will pay dividends later down the line.
Jonny Welch from our marketing partner 360Fizz suggested updating marketing collateral, refreshing websites and boosting a considered social media presence to bring the characters from your franchise to life. Engaging with customers in this way now, will strengthen relationships ready for when they can start spending once more.
When the dust settles, there is no-doubt a different business landscape will emerge. Working from home may become the new norm, offering companies ways to reduce real estate costs on a permanent basis. Our dress code influenced by working remotely, may change to a more relaxed style. Traveling to meetings will be avoided when a video conference will do. When we do meet, will we ever shake hands again? One thing’s for certain, patterns will change.
One main takeaway points from the discussion was that never before have we had so much time to ‘work on our businesses’. If we don’t take advantage of this now, we will certainly kick ourselves later. So, keep motivated, apply for that business loan, update your marketing, get your end of year accounts up to date but above all, be ready for when we can all get back to the future.
For all things Corona-support related and details of future free franchise academies, please visit d&t’s website. www.team-dt.com
