VF Franchise Consulting

Crisis Management Post-CoV

May 18, 2020

Crisis Management

Franchisor and Franchisee Crisis Management Post-CoV

The pandemic crisis of corona (Covid-19) has recently impacted the franchising industry in ways that have never been imagined and that brings up some very interesting questions that need to be answered by all companies in the franchising industry.  How can franchisors and franchisees manage a crisis of this proportion?

Crisis management is defined as the process by which an organization deals with a disruptive and unexpected event that threatens to harm the organization.  The study of crisis management really originated back in the 1980’s and only gets more and more important as the years go by.  These may include things like fires, natural disasters, data breaches, or even the death of an owner or CEO.  Anything that may have a tangible or intangible cost to a company in terms of lost customers, lost sales, or decrease in revenue.

Large companies often have risk/crisis managers in their employ, who regularly conduct analysis and help management develop policies and procedures to contain or mitigate the effects of such events. However, the fact remains that any size business may be effected by the unexpected. SMEs (small or medium enterprises) often do not have dedicated staff assigned for crisis management and are often less prepared to handle such situations.

What should franchisors and franchisees do when an unexpected crisis happens?  What are some best practices for crisis management?  Let’s deal with the second question first.

Most crisis managers recommend some simple general guidelines:

  • Navigate the immediate risks and minimize damage
  • Tell the truth, the whole truth, and tell it immediately
  • Do not guess or assume, deal with the facts only
  • Let your customers, employees, and partners know what to expect in the coming days, weeks, or months.
  • Make decisions based on what you know now, if they must change tomorrow so be it
  • After any crisis, evaluate and take steps to improve company response or prevent similar situations in the future

After CoV, a worldwide event of extreme impact, we might add another “Prepare for a post-crisis world that might function significantly differently than our pre-crisis world did.”  Every crisis is different and not every one of these suggestions work for every crisis, but more often than not, several can be applied to any difficult situation.

So, in our current crisis, what have franchisors done?  Are there any

best practice guidelines that could be followed both now and also in

future similar events for both franchisors and franchisees?

Most franchise agreements are heavily written in the favor of the franchisor, after all, it is their intellectual property and brand name at stake which needs to be protected.  As such most franchisors have no legal responsibility toward their franchisees during a crisis.  However, many great franchisors have stepped up and taken steps to support their franchise partners during this time, including providing relief to franchisees in the following forms:

  • Royalty relief
  • Delayed development schedules
  • Increased communication of quickly changing laws and environment
  • Sharing of best practices across a brand network
  • Modifying their business model to function during the crisis

We can’t forget that franchisors can also be in a troubled situation with reduction in revenue and all the stresses that entails.  I know of brands who have had to reduce salaries and/or put employees on unpaid leave, reduce unnecessary expenses, reduced services, etc.  I am of the strong belief that those who are willing to be flexible and reasonable with their franchisees during a crisis are building a strong working relationship that will be repaid back many times over in the years to come.  Franchisors must remember this is a temporary situation that is in response to an unforeseen crisis and that is not the fault of their franchisees.  Decide what is possible to support your franchisees and what is not, make decisions and implement them.

In times of uncertainty perhaps communication is the most important step.  Accurate data, best practices, and suggestions in either direction helps keep everyone calm and reminds all parties that they are team working through this situation together.  Often just listening and acknowledging the other party’s viewpoint goes a long way in keeping good franchisor/franchisee relationships in stressful times.  Now what about the future?

For any crisis there are typically 3 stages.  Pre-crisis, Response, and

Post-crisis.

Pre-crisis:

This is the time to plan.  We are obviously too late to do this for CoV-19 but now we all have had our wakeup call and realize that planning for the next crisis is not optional but critical for survival.  Evaluate what has happened carefully and come up with ways your company can improve on how it deals with similar situations.  Brainstorm, run some simulations, and make some new plans or policies now.  Not try to do it during the next crisis.

Response:

This is where we take that plan we created pre-crisis and implement it.  Keep in mind that responses must be efficient and are normally time sensitive.  Ask yourself, “Is our plan correct for this issue or do we need to make some modifications?”  Then get into action rapidly.  During the crisis remember that things can change quickly, be ready to adjust.  Don’t stubbornly stick to what was right for yesterday when it is today and things have changed.

Post-crisis:

Once the situation is over, look back at your strategy and evaluate its effectiveness.  What can be improved?  We never stop learning or improving, don’t assume any plan or policy is perfect.  Be willing to learn from the experience and make some changes to how your company will deal with future events.

There are many advantages in being in the franchising industry during a crisis.  We should remember that we are part of a larger team and be ready to utilize every resource available.  A private SME (small or medium enterprise) just doesn’t have the same support as most franchise systems to deal with a crisis.  Keep open the lines of communication and be ready to take advantage of what the franchisor or other franchisees have learned.  Work through the situation as a team, learn and grow together, act quickly and decisively. 

Here in Asia most countries, like Vietnam, are still in the response stage of CoV, but we are approaching the post-crisis period.  As your company deals with the current crisis, remember your market will likely emerge slightly different than it was before.  Start looking at how your company will capitalize on those changes.  We may not be in control of crisis’ like corona but we are always in control of how our company deals with them.

Read in Vietnamese – Click Here

About the author:

Robert Beausoleil has been visiting Asia for 25 years, and has lived in Vietnam for more than 12 years.  He works as the Director of Business Development and Franchise Operations for VF Franchise Consulting.  He has extensive experience in franchising, both for franchisors and franchisees.

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