2020 has been tough. And with the pandemic continuing, unfortunately it does not appear the challenges will end for franchise businesses any time soon. Governors around the country, including Iowa, are issuing new shutdown orders. What are key considerations for franchises as 2020 closes and we head into the new year:

  • Leadership. A couple of blog posts ago I talked about a franchisor that actually told its franchises that they were “on their own.” Franchisors need to show empathetic and encouraging leadership in the face of challenging times. A failure to exercise effective leadership will result in more franchisee closings, lost earnings, and upset franchisees. Franchisors and franchisees should continue to discuss best practices in order to improve and keep business profitable.
  • Keep Franchises Financially Viable. We know shutdowns mean decreased revenues for many franchises. Franchises must adapt in order for the business to remain viable as the rules change. As an example a primarily sit-down franchise restaurant may begin to emphasize take-out and delivery. Perhaps even a drive-thru, if possible, is now necessary to maintain a viable business. A business that routinely relies upon face-to-face meetings with clients and customers may need to find new ways to attract these customers to Zoom meetings or other methods.
  • Provide Relief to Franchisees. Franchisors may need to consider reduced ongoing fees and royalties in the short term in order to maintain the franchise long term. This may be difficult for franchises without significant cash reserves but giving some relief could go a long way toward keeping franchisees happy and operating.
  • Communication. Franchisors and franchisees need to improve communication during this tough period. Would you believe I have represented franchisees whose franchisors have not spoken to them once during the pandemic? Not a single email, phone call, or text. This is unacceptable. A lack of guidance and assurance from the franchisor will only give rise to feelings of isolation from and discontent toward a franchisor. Franchisors should have a carefully crafted plan to communicate with its franchisees during this difficult time period.
  • Messaging to Customers. Customers want to feel safe during the pandemic. There should be clear messaging that the franchise is operating within the health guidelines. This messaging requires coordination between the franchisor and franchisee. Effective messaging is critical to maintaining customer relationships that will not only survive the pandemic, but continue for years to come .

Set yourself up for better success during the pandemic by following these key considerations. If you need assistance during this difficult time period, whether you are a franchisor or franchisee, please take the initiative to contact us.

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Photo of Rush Nigut Rush Nigut

Rush Nigut is a shareholder with the Brick Gentry Law Firm in West Des Moines, Iowa. His practice includes both transactional and litigation matters including franchising and business law. Rush started his legal blog, Rush on Business, in 2006. He has been quoted…

Rush Nigut is a shareholder with the Brick Gentry Law Firm in West Des Moines, Iowa. His practice includes both transactional and litigation matters including franchising and business law. Rush started his legal blog, Rush on Business, in 2006. He has been quoted or referenced by hundreds of other blogs, websites, and publications. He also is the editor of the Brick Gentry Trial Team blog and can help you identify the most qualified lawyer at Brick Gentry to handle your case. Our lawyers have a breadth of trial experience in personal injury, employment discrimination, business litigation, IP law, and class action cases.