Are you preparing to help franchisees make a big comeback once the lockdown ends? We work with over 100 franchise brands and this gives us a unique perspective on what different franchisors are doing to help position their franchisees to thrive as the economy slowly returns to normal. Using these ideas, you can overcome the hardships brought forth by the COVID-19 pandemic.
Comeback Plan Overview
We’ve prepared a generic franchisee comeback plan to serve as a basis for your own efforts. Let’s go through the plan together to explain the various elements and complement the work you’ve already done. To put some structure around this comeback plan, let’s think of it like a standard business plan a coach would collaboratively define with their franchisees.
To come back from this crisis, there are 4 key objectives that we define here in this comeback plan:
-
You need to be able to weather the storm financially
-
You must pivot to the new operating environment
-
You aim to keep your employees and customers safe
-
You want to bounce back rapidly via sales and marketing initiatives
To do this, we are using the Objectives and Key Results (OKR) methodology. We don’t need to go deep in the terminology to explain our plan, but let’s at least explain these concepts.
-
An OBJECTIVE is your goal and aligns everyone in simple terms
-
KEY RESULTS are how you measure your success; you can’t control this outcome
-
INITIATIVES are activities trying to achieve objectives, which you can control 100%
Objective #1:
Weathering the Storm Financially
When we are talking about weathering the storm financially – the goal of the franchisee is to stay in business. The pandemic brings a lot of uncertainty, making cashflow management difficult. This will likely be the main conversation topic between the coach and the franchisee. When you look at this, it begs the question “how do you measure if you weathered the storm after the quarter”? The pandemic brings a lot of uncertainty, making cashflow management very difficult. All of the following Key Results are samples only, and the values themselves should be customized for your business.
-
Maintain 12-months of runway – meaning you have enough cash to pay your rent and employees. If you don’t you need to put something in place today – which will be a loan, gov grant, subsidy, or any other type of relief.
-
Measure having an EBITDA that is not losing 20% of your sales or more. If you are beyond that ratio, maybe the business should shut down completely and take a financial hit for the rent, but not operating.
-
Reach a debt-to equity ratio under 0.75. The goal is to make sure that you will have enough cash in the future to pay off the debts that you incur today.
Although we touch on cash flow, profitability and balance sheet with these three indicators, most franchisors are focused exclusively on cashflow in the short term. Profitability and debt service aren’t as much of a focus right now (other than thinking of them while you figure out your cashflow issues), but they will become critical over the next few months.
In terms of initiatives, these are things that you can do concretely:
-
Develop cashflow model with three scenarios (optimistic, pessimistic, realistic)
-
Perform weekly cashflow review
-
Apply for government relief
-
Negotiate relief with landlord, suppliers and lenders
- Negotiate with bank to assist with cash flow by increasing the line of credit
- Develop strategy for worst case scenario (equity investment from a new partner, divestment to multi-unit operator or shutdown)
These activities are within your span of influence. You may not have 100% control over whether or not you will get government relief but you know that you can apply. If that initiative fails, then you may need to revisit your plan and see what other initiatives you can do to stabilize your cashflow situation.
Objective #2:
Pivot to the New Operating Environment
The world has changed, so we have to take an honest look at how the world is today, and you are going to have to adapt. Restaurants are letting customers order ahead, or arranging curbside deliveries. Service franchisors are doing remote meetings instead of face-to-face. Some stores are changing their layouts to accommodate new practices such as having a new cooler for meals while they wait to get picked up. No matter what your business, it has to adapt since this is a new world.
Key results associated with this include:
- All employees have completed the franchisor’s new training course – checking that everyone is aligned with your new operational processes
- Keep labor costs under 33% of sales – the actual ratio will vary based on your cash flow targets, but your staffing plans will likely have changed
- Keep COGS under 33% of sales – you may need to change how you operate to reach this goal
Initiatives connected to these Key Results include:
- Attend franchisor webinars / watch franchisor videos
- Implement franchisor’s new workflows to be aligned with the new environment
- Define new work schedules based on cashflow scenarios (reduced hours/staff, etc.)
- Define reduced product offering to minimize inventory carry
- Update product availability across all online platforms
- Consider grocery staples and produce baskets additions to meet supplier minimums
- Perform daily sales/inventory reviews and compare to cash flow models to be more efficient on inventory ordering
Although there are some businesses, such as those in pizza, who are not losing a lot of business, most have to adapt to the new situation. Think about what changed in your business and how you can determine if a franchisee is ready for the new world.
Objective #3:
Keep your Employees and Customers Safe
Third objective is about keeping people safe – that is key. At the highest level, if you don’t do this, you are going to get in trouble. People are posting on social media about businesses that are laggards in this regard. This damages the brands reputation, even if it is just a matter of one or two franchisees. On top of that, there are lawyers driving around looking for employers to sue, since employees do not feel safe. This is a risky environment for business people.
Key results that could help you measure the objective include:
-
No employees or customers are contaminated at your place of business – hard because maybe they get infected at the grocery store, but nice key result to aim towards
-
Have all employees perform new COVID-19 training material – specific procedures related to sanitization and such
Initiatives that support keeping everyone safe include:
-
Install new recommended signage / protective barriers / sanitizing stations
-
Train staff on new COVID-19 procedures (cleaning, disinfecting, social distancing, recognizing symptoms, etc.)
-
Perform check-ins with staff to ensure they feel safe at work
-
Monitor your franchisor’s communications daily to stay abreast of best practices
-
Communicate with local health to learn about local regulations which apply
Keeping people safe is challenging for franchisors as they aren’t necessarily able to visit the units during the lockdown. They must influence franchisees who actually execute these best practices to keep people safe. Fortunately, most franchisees are welcoming of these initiatives and see value in their franchisor helping them implement best practices.
Objective #4:
Bounce Back Rapidly Via Sales and Marketing Initiatives
Overall, we are going to go through a recession. As a result, people will be strapped for cash and some businesses are going to be in trouble. It has been proven that doing marketing during a recession or a downturn helps during the recession and after. There are lingering results of consistent and effective sales and marketing. That market share that you can capture will be important. Although businesses want to control variable costs, the cost-cutting should not occur in the marketing area.
That being said, you want to be delicate. You want to make sure that your marketing initiatives are in tune with the demands in the marketplace. You cannot be tone-deaf or too aggressive and you have to operate with tact.
Key results associated with this include:
-
Achieve 250 marketing campaign conversions – measuring the success of whatever pandemic-aware campaign you are running
-
Add 250 new customers to our loyalty mailing list – a bigger list you can market to on a continuous basis
-
Receive 250 new downloads of our app – expanding the list of people you can reach with promotional offers
-
Increase average transaction size to $20.00. Online transactions are great but they can create a lot of busy work. If you can tack on upsells like grocery staples, it can benefit you.
Initiatives that support the Sales and Marketing objectives include:
-
Review tone and messaging of the franchisor’s proposed marketing campaigns
-
Perform one community engagement campaign. There are a bunch of franchises like sponsor a meal for front-line workers, where the franchisee delivers that food but gets paid for by a member of the community – it is a paying it forward. It also helps them achieve the minimums they need to keep to order from certain suppliers
-
Perform a marketing campaign on social media
-
Perform a direct mail campaign
-
Perform a PR campaign; contact 3 local media outlets to pitch them the story.
-
Perform an email blast campaign to loyalty/app members
-
Perform weekly marketing ROI analysis and course correct if needed
Operationalizing Your Plan
Overall, the franchise comeback plan is defining the key results, the initiatives and objectives that you will be reviewing on a recurring basis as a franchisee and a coach. Typically we are creating annual and quarterly business plans. Here is what the comeback plan looks like in FranchiseBlast:
Here, you can see a summary of the objectives, along with a chart showing whether or not they are on track.
They Key Results and Initiatives are also seen, aligned with their relevant objective.
On each key result, you have an opportunity to check in, show whether or not you are on track, and put in a note for future reference.
With FranchiseBlast’s Business Plan module you are able to collaboratively define the comeback plan and, more importantly to avoid it sitting on a shelf and going stale, come back to it on a recurring basis.
You can also choose to implement your comeback plan as a self-assessment which would be more in line with a simple checklist. By sending out the self-assessment on a recurring basis, it stays top of mind. The individual questions would be formulated a bit differently (Did you perform your weekly cashflow review? Do you have enough cash for the next 3 months in a pessimistic scenario? etc). This model is a better fit for franchises where franchisee engagement is not currently optimal and/or franchisors who have had to furlough a large portion of their teams. In both of these cases, it is difficult or impossible to setup coaching sessions to review the comeback plan.
Download the Comeback Plan Now!
We are pleased to offer the Franchise Comeback plan in PDF form below, to help you with this effort.
