By Eric Parker
Covid-19 is not over!
Even if the infections are down, the devastation left in its path will remain with us for the foreseeable future. This assumes we don’t get a “second wave” like the majority of the rest of the world.
We believe the biggest devastation will be on the economy, both in South Africa and worldwide.
Contrary, business and consumer debt are at the highest level in memorable history.
The unemployment is at unrecoverable levels and the rate of people who have stopped looking for employment is growing The unemployment rate in June 2020 was approximately 30.1% and decreased to 23.3% at the end of September, the decrease was only due to fewer people actively seeking employment. This level of unemployment causes reduced expenditure and lack of faith in capital investment.
Expect a bumpy ride for at least the next 3 years so, “buckle up”.
Considering the background, what can a Franchisor do to help their franchisees?
- Landlords: It’s really not too late to negotiate reduced rentals. Landlords are facing vacancies and unpaid rentals like never before. Any tenant is in an extremely favourable position and can negotiate reduced rentals particularly if the tenant is prepared to sign a new lease.
- Suppliers: Suppliers are working with reduced sales volumes putting a strain on their cost structure. Retrenchments and cost-cutting measures have already been implemented. We think this is a favourable time to negotiated better terms with the suppliers provided you are prepared to guarantee volumes.
- Marketing: Media houses are under pressure with reduced advertising spend resulting in the closure of certain popular magazine titles etc. Now is a good time to negotiate favourable deals directly with the media companies.
- Negotiation: Challenge your procurement department to stop and negotiate good deals from all the suppliers. Even Insurance Companies and medical aids are not increasing their fees.
Lastly, if you are not fully utilising benchmarking as a way of helping franchisees control costs and measure them against their peers you must start as soon as possible. Franchisees breaking even and losing money must be placed in ‘INTENSIVE CARE’ and a rescue plan must be put in place.