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Gabriela Anez-Lobon
By Gabriela Anez-Lobon on November 24, 2020

Hidden Cost Savings for Struggling Franchises

Close to 800,000 franchise businesses exist in the U.S. The COVID-19 pandemic has hit them hard. Like all companies, they may be dealing with massive traffic reductions, new ways of doing business (that increase operating costs), and the challenges of keeping their teams engaged and healthy.

On the flip side, people who have been furloughed or downsized out of their jobs are looking to buy a franchise as a relatively quick way to build an income stream

Franchisors have had to create new programs that help their franchisees succeed, but they are often also cash-strapped. They may be relying heavily on their operators to come up with creative new solutions to boost traffic, sales, and ultimately revenue.

 

The Industries COVID-19 Hit the Hardest

A report from McKinsey ranks the types of businesses that felt the most significant impact of the pandemic. The top three, which will take the longest time to recover, are:

  1. Arts, entertainment, and recreation
  2. Hospitality and food service (including restaurants)
  3. Educational services

Franchisees sometimes benefit from a group of peers to provide business-building ideas and brand support from a franchisor. Still, like other small businesses, they often have to carry the burden of local marketing and traffic-building.

The cost of getting their operations “COVID-ready” (e.g., installing partitions, removing tables and merchandise, and testing/masking employees) added unexpected and sometimes significant expenses this year.

Those costs cut into other line items. Planned capital improvements, expansion, and marketing efforts have been put on hold while franchisees struggled just to get by and keep the doors open and lights on.

26 Bright Savings Ideas for SMBs

The Light at the End of the Tunnel for Franchisees

The road to recovery will be slow, and franchise businesses will need to amp up their creative marketing and tightly manage expenses, relying heavily on technology to deliver operating efficiencies, manage staff costs, and better understand business results and dynamics.

The multi-unit franchise operator will have the greatest chance of survival and success because they have a steady income stream from multiple locations. 

Five ways franchisees can cut costs to help keep their bottom line (and their customers) healthy are:

  • Work with your franchisor on payment arrangements. Some franchises (especially in the restaurant industry) are working out payment arrangements on franchise fees and negotiating with landlords on rent relief. 

  • Automate. The COVID-19 pandemic has accelerated the use of technology into all aspects of business -- restaurant, retail, hotels, and others. Self-service ordering and other integrations of automation into day-to-day tasks can save dramatically on employee expenses and result in higher customer satisfaction, increasing speed, and delivery accuracy.

  • Green your operations. You may be eligible for incentives based on your sustainability efforts. Plus, many customers today choose to do business with companies that value the environment. Not only will you be helping the planet, but you can also enjoy financial relief.

  • Collaborate. Study the many options available to small business owners for disaster relief and put together an internal team to “relief hack” your business. Work with other franchisees and small business owners to brainstorm ways to cut costs without sacrificing product quality and service delivery. Here are five small but meaningful ways to reduce day-to-day expenses. Take full advantage of the economies of scale your franchisor offers on marketing programs and other ways to boost your business. 

  • Focus on energy savings. Opportunities for expense reduction are all around your locations. An energy audit does not need to be a significant business disruptor. Simply review what you’ve been spending on critical energy uses like:
      • HVAC: Heating and cooling can account for as much as 40 percent of your building’s energy use.
      • Electricity: Turn off appliances and lights when not in use and invest in ENERGY STAR equipment. Look carefully at energy rates in your area and negotiate the best deals. Here are some other simple ways to cut back on electrical usage.
      • Lighting: 40 percent of businesses have yet to convert to LED lighting. Switching to LED lighting can save your business as much as 60 percent annually on lighting costs and does not involve any upfront investment. Not only does LED lighting deliver a considerable cost benefit, but it is also more earth-friendly (See #2) and healthier than traditional lighting systems. 

As we head into 2021, follow these steps towards economic recovery and engage your team in problem-solving. Work with other franchisees and outside experts to develop innovative ideas to grow your top line and reduce expenses. Look to those franchises that thrived during the pandemic and adopt their best practices. Above all, stay positive and leave no cost-saving stone unturned.

We’ve helped other franchises save thousands of dollars. Let us help your business. 

26 Bright Savings Ideas for SMBs

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Published by Gabriela Anez-Lobon November 24, 2020
Gabriela Anez-Lobon

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