Will The Franchise Sector Survive The Second Wave And How Can Nedbank Support It?
By now, we all know that the pandemic wreaked havoc on our economy during 2020. Then, just as businesses were starting to recover and become cautiously optimistic, the second wave of Covid-19 infections struck our country and franchise industry – at the most inopportune time. The festive season usually brings an increase of up to 30% in various subsectors in the industry, allowing businesses to build cashflow reserves for the following, historically slower months. This year, of course, businesses were also relying on the festive season to recoup some of the losses from a disastrous 2020.
The franchise sector anticipated this second wave, but possibly underestimated the severity of it and how quickly it would escalate. In fact, franchises have become more efficient and streamlined because of lessons learned during the first wave in terms of staff training, safety protocols, store layouts and staff planning. Where the sector fell short, is not having sufficient reserve funds to ride the second wave – a situation that is beyond their control as the sector has not even recovered from the first wave.
For their part, franchisees and franchisors are doing all they can to stay afloat. They have been agile by cutting costs and improving efficiencies. Most operators are having further negotiations with landlords to reduce rentals and many landlords have assisted, while banks and other stakeholders continue to help their clients, wherever possible. Franchise operations are concentrating on building their digital presence, with the pandemic having significantly accelerated e-commerce adoption across the world. Recent information released by Mobicred states that online shopping in South Africa grew by 40% last year and, interestingly, the age group of 60+, who were previously averse to online shopping, grew by 90%.
Despite this, the second wave will likely result in casualties in the industry. We are particularly concerned about the eat-in restaurant sector, which is highly impacted by the banning of alcohol sales and strict curfew times. Should the current ‘Advanced Level 3’ continue beyond three months, it will result in complete turmoil in the restaurant sector, with a slim chance of recovery anytime soon, while the alcohol industry will recover but with a serious debt burden and losses carried forward.
At Nedbank, our leadership team views the pandemic as an opportunity to live our purpose of being financial experts who do good, and they have instilled that in each of us. Right from the start, it was critical for us to understand exactly what our clients were experiencing. We mobilised our teams to contact every client to determine their needs – in many cases, this has gone beyond banking needs to emotional support. We understand the passion franchisees have for their businesses and the relationships they have with their staff, as very often the owner of that franchise business started as a pump attendant, cashier or store assistant. The tough decisions these franchisees must make to keep their business afloat is no easy journey.
Aside from the financial support provided by payment holidays, working capital facilities to assist with reduced revenue and restructuring of payments, there are finer details we have helped with. For example, ensuring that our clients have sufficient merchant devices to cater for deliveries, opening staff accounts so that they could be paid directly with minimal risk, and derisking the additional threats that fuel stations face because of curfews.
Talk to your business manager or contact us on email@example.com to find out more about how we can help you grow your franchise business in 2021 and beyond.