Level 3 lockdown, how franchise brands are coping

coping-lockdown

As South Africa tries to get back to some sense of normalcy amidst a pandemic that is not abating, franchises allowed to trade under Level 3 are trying their best to focus on maintaining and adapting their business formats to best serve their customers in this crisis.

According to Vera Valasis, Executive Director of FASA, “some sectors have weathered the COVID-19 storm much better than others but more importantly it seems business owners who managed to re-open their doors at the first opportunity, stand a better chance at long term survival, even while trading with only limited lines or products and a limited staff compliment.”

Competitors may not have chosen to remain closed until all products could be placed back on the shelves, so customers may develop new habits and relationships with competitors instead of their usual brands. We all know the saying – ‘out of sight, out of mind’. Business owners have been forced to look for alternate but complimentary products to boost sales and most certainly have had to adopt digitalisation in every aspect.

Strong leadership is of the utmost importance during times of crises and while some franchisors and their franchisees were planning for growth at the start of this year, they had to virtually overnight plan for contraction, retrenchments and scaling down – no mean feat. Some managers have found it difficult to make the switch so quickly and these are the businesses that could trail behind. Speed is of the essence – we have heard from so many franchisors who said digitalisation plans that they have had for the last two or three years and somehow just couldn’t get off the ground, were implemented within a week or two. Some positions within their organisations have become questionable and most certainly franchisors would be scaling down related to many aspects of their businesses. FASA canvassed some of their members on how they were coping with opening.

Car Service City

Natasha Bohmer of Car Service City reports that lockdown has been hard on the group with all branches badly affected with a 100% loss of income during the month of April and most of May, which has had a significant impact on the branches’ cash flow. “Most branches had to cut staff salaries, do retrenchments or go for the ‘no work, no pay’ option. Head Office offered Franchise fee discounts of up to 100% for March, April, & May which has helped our franchisees and we are happy to say that not one of our branches had to close down because of the pandemic.”

Since opening on Level 3 business has resumed but not with an overflow of vehicles coming through the doors. “It is understandable that customers are very reserved with spending at the moment, says Natasha, “and we do not see that changing anytime soon within the automotive industry.”

Continued support by head office includes compiling all the workplace readiness documentation and policies for the branches, keeping franchisees up-to-date with the latest regulations as things change with head office staff visiting branches to ensure compliance and to ensure that customers feel at ease with the precautions put in place. Head Office is also assisting franchisees with ways to keep their overheads as low as possible and to negotiate better rentals with their landlords and service providers until the economy has gained some traction again.

Chip ‘n Dip

A franchise like the Chip n Dip Group that has a number of brands such as Hot Dippity Dog, Chip Twister, Dancing Doughnut and Doughnut Pops – with 90 franchisees who among them own 260 units across all brands – have been allowed under Level 3 to open their stores for limited trade but the mobile part of their business, that makes up the majority of the business, is still unable to open or trade as they were used to, says Gerald Brown, MD of Chip n Dip. “Specifically with Chip ‘n Dip very few of our Franchisees are in shopping Malls or in fixed locations which would allow them to make use of any form of delivery as our product is more of an impulse purchase and would not fit into a delivery model.”

With the groups’ brands trading largely in the eventing space none of their Franchisees can currently open as all gatherings have been prohibited. “So until such time as this is lifted or relaxed we will not be able to trade. The earliest we can expect any of our Franchisees to start trading is when the Hotels and Resort companies start opening and, where we are on the premises we will be hopefully allowed to trade. The earliest expectation for this will only be at the end of June.”

“As a Brand, we do not for see us returning to any form of normality until the end of the year, says Gerald Brown. “This will severely impact on the Franchise as well as the Franchisee’s in our system. With no income coming in it will be difficult for any of them to keep their heads above water with these restrictions.”

This then led the Group to contacting and getting their Franchisees to contact their local municipalities to see if there is any opportunities that they could trade from other areas. They have also been in contact with some of the Petrol Companies to see if they could place some of our Franchisees on their forecourts and have also done this with some of the shopping centre groups. “At this point we need to pursue any avenue that could possibly lead to our Franchisees being able to trade and hopefully some of the opportunities will pan out to be viable for them,” concludes Gerald.

Cash Converters

The Cash Converters group were open for partial trade from 1 May with the balance opening on 1 June and have been surprised and impressed with the numbers across their products which include buying and selling of second-hand goods, pawn broking, and unsecured micro-finance. They report trade strongly ramping up to pre-Covid figures. According to Richard Mukheibir, MD of Cash Converters, customers have adapted to the “new normal” and settling into the hygiene requirements to come to stores.

With three complimentary businesses under the Cash Converters banner; buying and selling of second-hand goods, pawn broking, and unsecured micro-finance, seeing how each of these areas of business will perform is still to be seen as there will be a delay through the economy while things settle down.

With regards the buying and selling of goods, the group has not seeing a trend emerging at this point and don’t expect to see this impact for a few months but hope this will pick up as people have had time at home to clear out and de-clutter, and may welcome some extra cash whilst others will look for value-for-money purchases.

“The financial services side of Cash Converters business was affected badly, mainly because we were unable to loan money during May and are effectively re-building our books now that we are able to trade again. We expect that this will be short-lived and imagine the money lending to pick up over the next few weeks as people’s expenses start to increase as people have not been eating out, takeaways, buying alcohol/cigarettes, driving, etc.”

 

FASA Franchise Association South Africa
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