Chain reactions

While restaurant franchises struggle, other sectors experience daily growth

Bubbakoo’s Burritos co-founder Paul Altero estimates that the shore-based restaurant has lost 40 percent of its business during the COVID-19 pandemic. The 32-restaurant chain, with 10 corporate stores and 22 franchise locations, had a take-out-heavy model from the start, long before social distancing strictures turned every New Jersey restaurant into a take-out only establishment. Still, Bubbakoo’s wasn’t immune to the financial impact.

The restriction on dine-in service isn’t only hurting mom and pop shops, according to the International Franchise Association. The IFA found that approximately 20,000 to 30,000 franchise businesses nationwide, many of which are restaurants, will lose liquidity in the next 45 days if they don’t receive immediate relief.

While consumers might hear “franchise” and assume deep pockets, the owner of that location might be the owner of one small business, explained Alesia Visconti, chief executive officer of FranServe Inc.

Alesia Visconti, CEO at FranServe, takes part in a panel discussion titled Finding Your Own Opportunities at the NJBIZ Women in Business Symposium on Dec. 17, 2019 in Somerset. – JEFFREY KANIGE

“You think of them as these large looming companies, but the local branch is not the franchisor. It’s Suzy and Bill, who you know,” Visconti said.

Franchisor support can be of real aid to franchisees, and Altero and his co-owner Bill Hart are committed to helping theirs by holding frequent conference calls to keep morale up and help franchisees navigate issues like talking to landlords about deferred rent payments and vendor negotiations.

Bubbakoo’s corporate is also helping its franchisees with marketing and putting sponsored posts for their locations online to let locals know that they’re still serving.

Communicating with the franchisor, supply chain contacts, and landlords is important for franchisees at this time, explained Porzio Bromberg & Newman PC Counsel Pamela Kapsimalis. “Most important is making sure you get relief on your franchise fee and making sure you’re not in breach of your franchise agreement if you abandon it entirely. Make sure you do that in writing,” Kapsimalis said. “You need to communicate in writing.”

Though restaurants are taking a massive hit during the ongoing public health crisis, other types of franchises are getting more attention. FranServe, which represents nearly 600 franchise brands, is making placements every day for cleaning, eldercare and restoration franchises. Business-to-business cost reduction and finance and banking franchises are also doing well.

“What we’re seeing during the pandemic is a shift in what is thriving and what new people coming into business ownership are looking at. Where they might have looked at the sexy brands and food before, they’re looking at things that are more practical right now as a franchise owner. That’s not normal,” Visconti said. “Things like painting and roof repair are not normally something people flock to because it’s not cool to talk about at a cocktail party, but we see shifts in things new owners are investing in.”

Roseland-based A.Y. Strauss LLC partner Evan Goldman, who represents 90-some franchises, noted that business at hospice franchise systems can’t slow down. They’re booming in the short-term but also, with New Jersey’s aging population, the long-term.

A franchise could take a few months to get up and running, “no one is saying ‘let’s buy a hospice franchise today,’ but I think a lot of people are saying ‘oh wow, this is a business that’s pandemic and recession proof,’ so their sales will increase over time,” Goldman said.

Something interesting happens during times of economic unrest and high unemployment, Visconti explained: entrepreneurship – and franchising – goes up.

“That is very often when people say ‘hell with that, I’m gonna start my own business, I’m gonna buy a franchise.’ I think it’s a wake-up call for people to examine their lives. Do you want to be at somebody’s mercy every time something happens? Part of our positive thinking is what’s been happening,” she said. “We’re seeing it. We’re doing placements every single day.”

Many folks working from home right now will have a hard time transitioning back to working under someone again, she opined.

“When we come out of this, we think that franchising is going to be very strong because all of these people who’ve never worked from home and don’t have a boss over them are being forced to get a taste of independence. That’s a hard thing to give up,” she said. “We think this’ll kind of plant the seed for entrepreneurship. When all of this started, we figured ‘this is going to kill our business.’ And we are not seeing that.”