It already feels like so much has happened since my last article in August and yet that was only a few months ago. The furlough scheme, BBLS and CBILS were nearing their end but with the current lockdown in England all 3 have been extended until 2021. The BBLS and CBILS Schemes now have a repayment term of up to 10 years with existing loans also being able to be increased or topped up dependent on the Scheme. This confirms the potentially longer term impact Covid has had on many businesses, particularly hospitality and children’s activities that will take time to recover and repay their additional finance taken out. The Chancellor will no doubt provide a further update on these two Covid Schemes and potentially a reintroduction of the Enterprise Finance Guarantee Scheme (EFG), which has been suspended since March at some point in the New Year. It is also possible that the EFG Scheme is amended or replaced.
However a negative impact is not the case for all businesses with many franchise networks reporting better than expected performance for 2020 and exceptional sales growth with some, particularly the pizza delivery franchises who are clearly used to delivering food to customers. As we see some areas of the UK move to tighter measures or lockdown these businesses will probably continue to do well, as will others that 12 months ago provided little or nothing in delivery terms but have now adapted their model to be able to continue their business by using this delivery approach, even if a tougher set of measures are introduced and their restaurant needs to close for safety reasons.
Unfortunately there will be many people in the entertainment and hospitality area that have already or may lose the job they had, although hopefully this will be temporary for those that want an employed career or where the business has been put on hold until things improve, such as Cineworld. However for others it provides a potentially unique opportunity to look at investing in a franchise for the first time, perhaps using their past experience or looking at something completely different – something that perhaps they had never considered before. It is now potentially an attractive option as you can potentially be more in charge of your destiny by selecting a franchise that could be less affected or more likely to withstand whatever challenges lie ahead. There is also the support from the franchisor that comes as standard. Of course franchisors normally require people that are not looking to buy a job but develop and grow a business.
I have spoken to many franchisors over the period of this pandemic and most are reporting better relationships with their franchisees. In many cases more engagement and regular face to face contact, albeit via zoom, to ensure support for franchisees is there not just for their business but also their wellbeing and general health. As the UK emerges from the current challenges with a vaccine having positive results so far, this closer community spirit will undoubtedly place these businesses in a good position to take advantage of new opportunities.
When looking at their financial health, a franchisee can build understanding of the impact Covid-19 has had by looking at what has been put in place and what is required for the business. Any costs associated with PPE or screens need to be factored into the projections and of course any longer term ongoing costs that might entail. Of course as any business, you should also look further forward and consider what impact the pandemic may have in to 2021 before the vaccine is more widely available, especially for the first 6 months of the New Year.
This year has been more challenging than any others I can recall, as it is very difficult to predict what may happen over the Winter and in to 2021 – apart from change as always being the one constant and potentially at very short notice with any new measures that are introduced across the UK or locally.
Of course Christmas is now just around the corner and our thoughts are turning to how our businesses will deal with that and what additional impact that may have with more shoppers around.
One thing is certain resilience of the franchise sector has been shown over the pandemic so far and no doubt will continue to be the case.
This article is intended as general information and does not constitute financial advice in any way. You should take independent advice if you have any questions about your specific circumstances.
