Page 48 - Sep-Oct 2021

SPECIAL FEATURE: EXPANSION & FRANCHISING
Cause

and

Effect

Covid-19 brought the world to its

knees and became the cause of so
many alterations in people’s daily
lives and business’s daily operations.
Eighteen months on and the effects
of the virus are wide-ranging and
varied in nature, and this is evident
throughout the retail sector. Here,
RLI delves into what effects the pandemic
has had on expansion and franchising models for
brands across the globe.

As we approach a post-Covid reality, what’s the state of the franchising industry?
As the pandemic spread around the globe like wildfire, it was the Chinese market that many looked to as a guide of the effect of coronavirus
on businesses in other regions.
According to the ‘Impact of the Pandemic on International Franchising’ by Kristin Corcoran, the initial signs were hopeful that the pandemic
was a storm that could be weathered for a finite period, with the retail sector being hit hard, followed by gradual, steady re-opening. She goes
on to say that over time, international franchising and distribution represented a large part of the market share impacted by Covid-19, and it
soon became clear that the governments of various countries needed to stabilise franchised businesses for the sake of the wider economy. As
it became clear that the pandemic would rage on through the remainder of 2020, some of the solutions that were designed to carry franchise
businesses for a short duration have had unintended consequences for other parts of the economy.
Corcoran’s article explains that many emerging franchisors are already poised to accelerate the use of technology to collaborate and
communicate among their stakeholders, including franchisees and suppliers. If they remain flexible in adapting their business model to the
changing landscape, meeting the needs of consumers as the crisis subsides; they will not only survive the pandemic but also grow in units and
sales. While larger, more established franchisors will also look to adapt, their size and complexity may impede their ability to roll out the changes
as quickly as smaller franchise brands.
An article by Omar Toulan and Niccolò Pisani entitled ‘Retail Growth Strategies: Surviving COVID-19’ highlights how many firms have used
the franchised approach to grow their retail footprint. One of the primary advantages of this retail growth strategy is the reduced level of capital
required. It also has the benefit, compared to a wholesale-based strategy, of having tighter oversight of the physical customer experience.
Store appearance and advertising is generally required to be consistent across locations, and franchise partners must purchase all merchandise
from the firm.
Toulan and Pisani go on to say that a franchise strategy also presents challenges in moving from a purely physical to digital customer experience.
While the firm is acquiring the skills to better influence the digital experience of its customers, its franchise partners may also be initiating
their own activities in this domain, making it more difficult to collect information on customers and control the overall experience. While the
franchised retail growth strategy may have held many advantages in the brick-and-mortar-dominated world, its attractiveness is challenged with
the addition of online sales and digital customer experiences.
Franchising after Covid-19 might feel like a risky or daring move as many companies have been adversely affected by the pandemic, and
are recovering from substantial losses. But here’s what you need to remember: The franchise industry is vast and varied. This is the view of
Cara Squires of Point Franchise in her article ‘The State of Franchising in a Post-Covid World’ that suggests that for every struggling franchise
operation, there are operations which have been able to adapt, thrive and grow throughout the past year. The franchising industry has been
growing and evolving for years, with more and more people turning to franchising as a lower risk alternative to starting a business from scratch.
This evolution took a new turn with the dawn of the pandemic, as many sectors experienced declining sales and impacted supply chains.
Suddenly, new innovations were required, and while some franchisors missed the mark, other franchise operations thrived.
48 RETAIL AND LEISURE INTERNATIONAL SEPTEMBER / OCTOBER 2021