Part 2: The Restaurant Franchise Industry in Canada

Survival in a Post COVID–19 Era

Part Two

June 26, 2020

For the restaurant & franchise industry, the time now to plot new strategies is very much different from the past.  

Prior to Covid-19, the industry was ripe with a great deal of pain.   Rents were already through the roof, food cost peaking at near 40%, labour skyrocketing, an abundance of over-excessive competition and often, even a franchisor’s greed.   They all played a part in the industry’s total lack of concern for a “pandemic” of its own making.  Things were already bad and to make it all the worse, operators just conformed all along.    Death for many in the industry is now quite imminent.   There is, however, a ventilator to rescue those on life-support.   

“New thinking” is the sugar that will help the medicine go down.    First and foremost is to recognize (which most never do and often remain in denial), is that he or she is bleeding.    This bleeding must stop no matter how painful it is to do so.   

It’s time for every restaurateur & franchisee to turn and tell those who have been sticking it to them for years (like a spouse in an abusive relationship), “Stop – you’re no longer going to abuse me”.   There are always options to extract oneself from an abusive relationship.        

Options available to an ailing business are many.  However, not one would be to borrow capital, increase debt and solidify the inability to cash flow the business.

Just as Starbucks has demanded from its landlords, concessions to support modified operations and adjustments and the vacating of no less than 200 locations in Canada alone, so too must the rest of the industry.   These concessions are rent relief, a reduction of 50% gross rent at least.  

David must awaken from his slumber and confront Goliath.   Make the necessary demands.  Even to a landlord.  Survival depends upon this.   If the restaurant and franchise industry is expected to adapt to a new retail normal, so too should landlords.   For those landlords unwilling to adapt, the tenant should send them packing, not the other way around.  A landlord’s unwillingness to work with a tenant clearly signals it’s time to leave.   It’s time to end the long-standing co-dependency of an abusive relationship between landlord and tenant – especially one that has come to light as a result of Covid-19.   

Unfortunately, much of the same issue exists with the large suppliers who have socked it to the restaurant industry for years.  It’s time for the industry to tell these folks, “forgive the debt or I’m gone!”.  It’s that simple.    There are thousands of suppliers who want your business and their pricing is more competitive.  

A prudent restaurateur/franchisee will shake off the noose from around their neck & disengage the shackles around their heels.   Cut those hand-cuffs and walk boldly to freedom.  There are too many locations available for lease and landlords willing to provide incredible concessions.   Likewise, there is an abundance of suppliers all willing to work hard and gracious for your business.   Afterall, you’re the customer, right?      

You certainly do not have to be Starbucks in order for David to slay Goliath.    The market is yours; the destiny belongs to you.  But you must act boldly and decisively.   

Next will come the big banks – although much creative strategy will be required. I call this the “integrity strategy”.  It will be discussed in part three of this blog.    What you have just read is only the beginning of a solid good recipe that will be consumed for years to come.