TORONTO — Like every other segment in the foodservice industry, franchisors have been hugely affected by COVID-19. From large groups such as Montreal-based MTY Group to Toronto-based Pizza Nova, the pandemic has impacted the franchise landscape in ways no one could have imagined.
“We owe it to them to try to assist them as much as possible,” said Eric Lefebvre, CEO of the MTY Group, speaking on a Table Talk podcast last week. When COVID-19 “hit and it hit pretty abruptly — you really have no chance to prepare for something like that. You just drop everything you’re doing and switch to survival mode with everyone.” Ironically, he said “We had a lot of good momentum, we were doing a lot of good things. We were pushing the business forward for all our franchisees and for MTY as a whole. But you just drop everything and switch to something that’s a lot less productive,” he said, adding “We need to help our franchisees survive the storm.”
With a total of 7,300 units around the world, with franchisees in North America, Asia and the Middle East, Lefebvre said there was no one-size-fits-all solution. “We needed to have a very tailor-made approach for each store and for each geography and it adds to the complexity of the recovery period for us,” he explained. “You have to deal with your banks, your landlords, your suppliers, your distributors — everyone and everyone is feeling the pain equally, so there’s pain at every level.”
As part of the company’s measures to help, MTY was one of the first franchisors to cut franchise fees. “We had to step in and give a deferral of royalties to our franchisees and I think we were one of the first QSR franchise to offer that, just to try to manage very short-term cash-flow needs for franchisees. It was the right thing to do.” Given the seriousness of the pandemic, “We offered a second four-week deferral period for almost all of our franchisees. Everyone in Canada did benefit from a second four-week deferral period.”
For Domenic Primucci, president of Ontario-based Pizza Nova, with close to 150 units in Ontario, the fact that government deemed foodservice an essential service was welcomed. “We were allowed to stay open, which was a blessing because we’re able to at least keep cash flow going because you’ve still got to pay your fixed costs.” Other than units in food courts, malls or places such as Rogers Arena, Primucci was able to continue operating the delivery business, focusing on contactless delivery to soothe customer anxiety about COVID-19 transmission.
But the initial challenge focused on calming franchisees. “They’re all panicking so you have to try to stay positive and try to guide everybody. Yes, we know there’s lots of moving parts. What are the protocols [for] cleanliness and sanitation? What do we do? How many people do we allow in our locations? What do we do for delivery? It’s difficult trying to calm everybody down.”
To alleviate concern, the company focused on communication. “We didn’t just communicate,” says Primucci. “We over communicated — with emails, and phone calls. Our district managers were out and about talking to our franchisees by phone or live. We tried to ease everybody at a certain point and then we could start the plan and start moving forward. It was the most trying time in my career and in our lives.”
Part of his immediate challenge was staffing levels, as some staff were afraid to work through the pandemic and possibly become infected. At that point, the company had to put ads out and hire new staff.
Like MTY, Pizza Nova also cancelled royalty fees for the first four weeks, said Primucci, adding, “After four weeks, we started adding percentages on a weekly basis until we reach the six per cent.”
Of course, in the franchise game, it’s all about royalties. As Lefebvre said, “If we have no royalties, which is our bread and butter, then we need to watch our expenses. We had to lay off about half of our workforce at the head office level, so that’s about 480 people that were unfortunately collateral victims. It’s not related to their performance; not related to anything we did. These are people we chose to work with; we chose to associate with them and unfortunately, they had to pay the price for something that was totally out of their control.”
As Lefebvre said, “It’s been tough. But there’s light at the end of the tunnel. It’s looking better now than it was maybe two months ago. I’m an optimistic person. I’m still confident in the future of our industry.”
To listen to the full podcast, click here.