Emerging Brands – COVID-19 Procedures, Support and Communications with Franchisees: What you should do to lead them

Franchise Relations

Thursday, April 2, 2020; 12:15pm-1:15pm

Emerging Brands – COVID-19 Procedures, Support and Communications with Franchisees: What you should do to lead them

Panelists: Eric Stites / Sam Ballas / Ron Feldman

Webinar Summary –

Franchisor members discussed the challenges and solutions their brands are encountering amid the COVID-19 pandemic, as well as financial relief options available to businesses in light of recent legislation. Panelists discussed the need for companies to establish and maintain a flow of accurate information and data from brands and government resources, including from state and CDC sources. The panelists also reviewed recent updates pertaining to rulemaking from the Department of Treasury on Paycheck Protection Program Loans (PPPL)

Key Bullets –

  • Plan out a 7, 8-14 and 14-21 day strategy for your franchisees, with a focus on unit level operations, communications and benchmarks.
  • Work with your franchisees to go in-depth in their financial and cash flow plans to determine breakeven operations points as a place of stability to work from, and assign senior level staff to check in continuously
  • Develop a plan for when crisis begins to taper off
  • Be an active listener, be open, and be responsive to what franchisees are saying and to their guidance – don’t just be in “problem solver” mode always
  • Continue to follow Treasury rulemaking and regulations process for information regarding application and loan money receipt

Full Bullets –

  • Franchisor Challenges
    • Develop inflow of accurate information and data
      • IFA
      • Brand legal and CPA engagement
      • CDC
      • GR Grassroots engagement
      • State data on health mandates
      • Unit Level Data
    • Brand Must Do’s – first 7 days
      • Communications strategy – calm and confidence; franchisees need to understand what they should be doing to survive the crisis
      • Amplify CDC Protocols
      • Rebuilding brands “unit level” operations and business model
      • Deployment of COVID-19 business model à takeaway
      • Assign brand leadership – SVP, directors now have communications roles with different locations; getting benchmarks and KPIs developed
      • Establish collection of unit level data
    • 8-14 days
      • Review Cash flow reports
      • Weekly mandatory calls with all franchisees
      • Brand “white paper” and send out every two days
      • Develop unit level weekly break-even model
      • Re-focus marketing strategy
      • IFA has webinars, industry calls, peer network to utilize
      • Retract additional data from other associations you engage with – NRA, IFMA
      • Communicate and negotiate with supply chain partners and vendors – payment relief, delay, discounting and deferment of costs
      • Franchisor needs to correspond with franchisee landlords of what the ask needs to be – send franchisees a template for their use to request rent deferment and abatement
      • Work with franchisees and validate the COVID-19 breakeven model
      • Continue to adapt this model and make changes as needed
    • 14-21 days
      • Continued unit level revenue, cost, and bottom line engagement
      • Franchisee debt forbearance and deferment strategy
      • Added pressure on landlords
      • Validation of supply chain and preferred vendor strategy à ongoing to reevaluation for a further push into different quarters
      • Deliver Brands COVID-19 Franchisee Relief Plan
      • Brands are looking at itself and what the corporation operational structure needs to do for COVID-19 à looking at the corporate office to make sure that the “mother ship” is healthy
    • Ops and Off-ramping
      • Management of legislative issues and CARES Act – pushing these out to franchisees, weekly or daily
      • Continued benchmarking and KPI collection – pushing to franchisees
      • Transparency for all units on ULE and COVID-19 business model reports send to all franchisees showing all locations
      • Supply chain management
      • Develop plan and strategy for when crisis begins to taper off

  • Create an active listening situation and develop human connection with franchisees; don’t just go into problem-solving mode. Keep formal and informal channels open
    • One-on-one calls, video calls when possible. Seeing franchisees gives them confidence
  • Daily game-plan and boil it down for franchisees. Help them to determine a way forward
  • Highlight the wins, even small wins
    • Units that are above break-even points
    • Keep communication on this open and on-going

Breaking news!

  • Payment relief – SBA is required to pay principal, interest and any associated fees owed on 7a loan in regular servicing starting with the next payment due for both existing and new borrowers.
    • Existing borrower not on deferment: six months of P&I with the next payment due
    • Existing borrower on deferment: six months of P&I after the deferment period
    • New borrower: six month of payment of P&I with first payment, only for new loans
  • EIDL vs. PPPL
    • EIDL – no loan forgiveness, all are eligible, borrow up to $2 million, 30 year loan, use of funds: working capital, loans are made by SBA
      • $10,000 grant once application has been processed, but no timeframe on when you’ll receive money
      • SBA is processing lots of loans, and so the time horizon is difficult to know
    • PPPL – loans made by banks authorized to make SBA loans; guaranteed 100% by US Government. Waiting on rulemaking and guidance by Treasury
      • All franchisees eligible
      • Loans may be forgiven if borrowers maintain payroll during crisis
      • 12 month average of payroll headcount and dollar; if you keep this average, then your loan will be forgiven. If they are lower, then your forgiveness will be lower on a sliding scale
      • Win on interest rate, loss on amortization
      • No collateral, credit requirements, personal guarantee
      • Max loan is 2.5x average monthly payroll
      • No prepayment penalty
    • PPPL can be forgiven – unsecured loan that you’re getting at 0.5% to stay open and pay your employees. Beneficial for those businesses that are still open and paying their payroll
      • Approved use of funds: payroll, rent, utilities, interest à if you use the money for anything other than these categories, you’ll be committing fraud against the federal government
    • Maintain payroll – it’s number of people, not the same people
    • Cash > tax credits at this moment in time. Take the money; cash is king

  • Under PPPL, you must check a box that you’ve been “affected” by Coronavirus, which is essentially every business