Adaptability leads to opportunity, so how adaptable is your prospective franchise?

By Sponsored | 24 Feb 2021 View comments

The disruptive effect of the Covid-19 pandemic and consequent restrictions has been deeply experienced by many participants in the franchising sector. Franchise businesses that are nimble and adaptable have coped better with the situation and some have even done better than expected.

Some franchising sectors by their nature have been more seriously disrupted. Many franchisors and franchisees involved in fitness, café, fast food and restaurant businesses, which operate from leased premises and involve constant in person interaction were particularly hard hit and needed to rely on Jobkeeper and rent relief under emergency government regulations.

The nature of the franchise format which places a premium on uniformity and requires adherence to the franchisor’s system can be an impediment to adaptability, but also gives franchisors and franchisees an opportunity to cooperate and make changes more quickly and efficiently than in the past.

Action and adaptability create opportunity

There is a saying “action and adaptability create opportunity”. Some franchisees in the café, fast food and restaurant have been able to adapt and implement contactless payment and delivery options that have ameliorated the financial impacts of the Covid-19 restrictions and maintained or increased sales volumes.

It has also been encouraging to see franchise businesses who offer both services and products be able to adapt during lockdowns and shift the balance of their offering in favour of products and to implement or enhance the e-commerce part of their business. Other franchises have been able to go virtual in the delivery of services or obtain permission from franchisors, at least on a temporary basis, to source products from alternative suppliers when supplies from preferred suppliers have been disrupted.

For many franchised businesses there has been a recognition of the need to move ahead with less premises space than previously used or leased. The take up and application of new or improved technology has added to this trend.

Due diligence is important

The Covid-19 restrictions have also had an impact on persons seeking to enter the franchising industry either by starting a franchise chain or buying a franchise business.  There is always a need for a due diligence, but this due diligence now must now question the impact of Covid-19 on the franchise system.  

For example, a prospective franchisee now needs to ask questions such as:

  • what changes were made to the franchise format to deal with the Covid-19 impacts?
  • what support did the franchisor provide to franchisees?
  • to what extent have these impacts been ameliorated by the adoption and implementation of new and improved technology or changes to the franchise system.  

The answer to such questions will give the franchisee an idea as to how adaptable the franchise system is when faced with disruptive events. This is important because when the effects of the pandemic pass we will all face another disruptive effect: the rapid advance of technology which, as a consequence of the pandemic, has accelerated.  

The adaptability of a franchise system and the franchisor is a matter that the prospective franchisee would wish to consider in making an informed decision to acquire a franchised business.

At Morgan Mac Lawyers we specialise in providing advice to franchisors, franchisees and clients wishing to start a franchise chain or acquire a franchise business.