Unique Challenges Of Franchising Businesses During COVID-19
Arizona’s Preeminent Business Lawyers Discuss The Challenges Of Owning a Franchise During The Pandemic
Franchising has long been a way for established businesses to expand their reach and increase revenues, as well as for aspiring business owners to open a business without as much risk. While many people have still purchased franchises during the COVID-19 pandemic, and many established franchises continue to operate, they are facing unique challenges because of stay-at-home orders, social distancing, and other changes prompted by public health concerns.
Many have been able to work with a Scottsdale business attorney to redesign their agreements with vendors or other contractors, while others have even moved to sell their franchise or break with the franchise agreement. If you are a current franchise owner and are struggling, it’s important that you talk with an Arizona business attorney about the best options for moving forward.
Challenges Franchises & Franchisors Are Facing
Both franchisors and franchisees have been reporting challenges in the business environment created by the pandemic. Franchise Advisory Councils have been reporting challenges from their members including:
Supply Chain Disruption
Problems With Cash Flow
Inability To Make Royalty Payments
New Cleaning & Hygiene Requirements
Paid Leave For Employees
Inquiries about how to handle these issues has gone up dramatically, according to the Councils. More franchisees are asking about their options for closing their franchises or for managing their money, such as by stopping or deferring their royalty payments. They are also seeking advice about how to handle things such as employees being out of work because of in-person closures.
Not all franchisees have the capital to see them through these rough times. Some have dealt with these challenges better than others as different areas of the country have seen a bigger spike in COVID cases or have had harsher lockdown measures in place for longer periods of time. Franchisees are struggling to meet their obligations, and franchisors are struggling without the royalty payments they once made.
Ways You Can Respond To The Franchising Challenges
There are many resources and options available for both franchisors and franchisees, depending on the specific challenges they are facing. Some options include:
Talk with a Tempe business attorney about your franchise requirements and how to meet the terms of your agreement;
- Keep an open line of communication with the franchisor and the Franchise Advisory Council;
- Implement new procedures to protect customer and employee safety;
- Look for ways to improve the quality of service or goods, as well as to improve marketing
- Look for ways to modify your business to continue meeting the needs of your customers; or
- Talk with your Phoenix business attorney about the force majeure provision in your franchise agreement and whether the challenges you are facing from the pandemic allow you to close your business or defer royalties.
Know that the pandemic is a short-term problem. Though it has gone on for a while, it will not be forever. It is important to look for ways to manage the crisis without taking drastic, long-term measures. Every business is facing challenges right now, including franchises and independently owned and established businesses. Look for support wherever you can find it, and take advantage of resources such as loans provided by the government.
Talk to a Gilbert business attorney about your options for closure or for deferring royalty payments only if it seems like you cannot meet the challenges through other means. Ending your agreement will put an end to any potential profits or growth you would see from the business later. Only consider this option if you feel that you cannot make it through this rough patch or if you have decided that you no longer want to run the business.
Contact Professional Franchising Law Lawyers In Mesa, AZ
The business attorneys at Denton Peterson Dunn are experienced in franchise legal issues, and they are ready to help you understand your legal rights and explore your options as a franchisee or franchisor. An Arizona business attorney from our team can review your agreement and help you understand the best way forward if you are a struggling franchisee. Or, if you are a franchisor, we can help you with matters related to struggling or delinquent franchisees. Contact us today to schedule a consultation with a business attorney in our Scottsdale or Mesa office. We serve clients throughout the Phoenix metro area.