Ahmed Mahmood, Franchise and Business Development Consultant
Scope management Consultancy
Coronavirus pandemic has undoubtedly resulted in global implications and adversaries on Franchise including Franchiser, Franchisee, SMEs and large businesses. In the UAE, these implications overstretched all Franchise activities. Franchise model along with all the systems, packages, operational mechanisms, obligations and conditions it includes, which are contained in a detailed and inclusive agreement is more vulnerable to the changes in direct and indirect business management environment. In response to that, governments have imposed health controls on people and various economic sectors to protect them under this vicious and fast spreading pandemic. Therefore, it has become necessary to change people’s day-to-day behavior, lifestyle, dynamism and interaction. Many government organisations, markets, malls and businesses, except food, medication and daily necessity providers have been locked down. Retails, including Franchise and others, have also been locked down or got their activities restricted. This includes Franchise in various businesses like restaurants and cafes, which are allowed to work only through delivery. Besides, transportation, tourism, aviation, healthcare, retails and services sectors have been locked down where appointments are set in advance and the number of customers and workers in closed environments is restricted. Health and regulatory conditions for social distancing, disinfection and measuring temperatures have been set. Distance learning and e-education has also been applied.
Sever and Various Implications on Franchise
These implications include new costs, managerial states and various operational patterns. Franchise businesses have faced very new normal and continuous losses, which Franchise seeks to minimize them in different ways.
Some of these implications are:
First: Income and Cash Flow:
Third: Management and Legal Obligations:
Fourth: High Rentals in Malls and other places:
High rents in malls and outside places have been some of the highest expenditure clauses for the Franchise private sector businesses where their outlets are multiple. Such rents have become one of the risk factors for SMEs growth, which exert tireless efforts for continuity. Along with coronavirus pandemic, which has resulted in triple-crisis: economic, health and social, high rents have become one of the most serious issues that should be reduced or deferred for several months until full recovery. This, of course, needs the interference of the government and the cooperation of mall owners who sometimes do not respond to the requests for rent reduction and resilience making the competent entities to address them officially. Canadian Franchise Association has requested the competent entities to interfere for the interest of Franchise as a global and strategic sector for transferring experience, technology, capabilities, investment, training and creativity to Emiratise them within the UAE who met the request through a Rent Relief Programme and met the request of the Association by facilitating loans and reducing fees and taxes. It is worth noting that it has requested financial relief to pay salaries. All of these initiatives meant to maintain Franchise continuity and its significant contribution to economy.
South Korea has provided the largest support and incentives packages via trade agency. It also forced Franchisers to reduce Franchise property fees by 50%. It also reduced sales, services and supply fees by 30% from Franchiser to Franchisee. Besides, it supported cash flow and reduced the profit percentage for loans and bank credits provided the corporate submit an updated Franchise Disclosure Document (FDD).
Key Steps you should adopt to protect your Businesses
Double Think on Protection against Risks