Franchises and associations unite to overcome the economic crisis resulting from the COVID-19 pandemic
The COVID-19 pandemic resulted in a huge transformation in the global economic scenario. Over the past few months the world has been seeing business situations changing every day. The team of Franchising Brasil — a sector project for the internationalization of Brazilian franchise brands carried out by means of a partnership between the Brazilian Association of Franchising (ABF) and the Brazilian Trade and Investment Promotion Agency (Apex-Brasil) — talked with three global players in the machinery sector who explained how Europe, Latin America and Brazil are facing the crisis and innovating during such period.
Europe was the second epicenter of the novel coronavirus outbreak after the appearance of the disease in China. According to the global markets and the coronavirus report prepared by Apex-Brasil, technical recession or a growth close to zero is expected for 2020 in the main economies in the continent.
A survey conducted by the Portuguese Franchising Association with 1,410 franchisors showed that most sectors had reduced earnings in comparison with the same period in the previous year. “Logistics is one sector showing growth as a result of the high demand for essential goods. The work-from-home model was implemented by approximately 85% of the companies that participated in the survey, thus showing flexibility during this social distancing period”, says Cristina Maria Matos, Director-General of the Portuguese Franchising Association.
Based on such data, 61% of Portuguese franchisees participating in the survey suspended their activities completely, and just a small percentage of them (1.4%) saw a little bit promising scenario in the future. “This low percentage, 1.4%, is only possible because of the support they get from franchisors and other franchisees. The knowledge sharing and the support explain why the closing down rate in franchising is lower than in other business sectors”, says Cristina.
According to the analysis conducted by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Latin America will be a major focus of COVID-19 and a 1.8-percent reduction of the GDP is expected for the region in 2020. To Gabriel Grasiuso, Secretary-General of the Ibero-American Federation of Franchises, the market has changed, and the new rules will certainly be the “new reality”.
Gabriel also talked about how Latin American franchisors are facing the pandemic. “They usually take very good measures immediately. They understand the context and the situation of everybody. It means that they talk about the benefits of this business model to which they belong to a network where everybody has the same interests.”
Among the good practices adopted by Latin Americans are: total or partial release of royalty payment, support in the negotiations with tenants and suppliers, and collaborative actions that involve the franchisees in the decision-making process by means of committees.
In Portugal, innovation is the key word. There are some fitness franchises that implemented online training systems, real estate offices that developed a system for virtual visits to properties, and insurance and financial advisory companies that made available a toll-free phone number to help entrepreneurs to understand better the Portuguese governmental supporting programs. Also, a great number of brands are investing in the online training of their employees.
To Jae Ho Lee, CEO of the Ornatus Group and International Director of ABF, the Brazilian franchises that have bet on the internationalization of their brands may be less impacted by the crisis. “There are some markets that were less affected, that are reacting faster. If you operate in a more mature market, you will have an earlier return, because the curve is more pronounced. That’s the greatest benefit of operating abroad: you put your eggs in several baskets and can carry on for a longer time”.
What to do during this crisis?
According to Jae, the Brazilian franchising sector has to join forces and know that it can count on ABF during this difficult period: “In the franchising system, our strength is our relationship with franchisees. It will make us closer; that will be the result of this situation. We will find a solution together”. He finishes by saying that “Franchisees are part of the chain. This is the time to be transparent, have empathy, share information and stick together”.
Cristina, from the Portuguese association, thinks likewise. To her, franchisors should make all efforts to support their franchisees by encouraging online meetings and free training sessions during the most critical times. Also, she suggests that they determine which financial fees may ensure the longevity of the franchisees’ businesses and find solutions to reduce such fees.
And she completes: “Plan with franchisees the marketing actions to be developed during the emergency period and beyond. To franchisees I say ‘Don’t give up’. Try to be proactive in the search for new products and services for the brand and work together with franchisors aiming at the business health”.
About Franchising Brasil
Franchising Brazil is a joint project of the Brazilian Franchising Association (ABF) and the Brazilian Trade and Investment Promotion Agency (Apex-Brasil), which aims to support the internationalization strategy of Brazilian franchise networks and their international commercial promotion. The initiative was designed to promote this recognized business model in the main international markets.