Impact of COVID-19 on Franchising & Some Key Sectors of the Economy
Opportunity India Desk
Aug 18, 2020 -
5 min read
Towards the end of 2019, the world witnessed the outbreak of coronavirus (COVID19) disease in China. By January 2020, the World Health Organization (WHO) declared COVID-19 a pandemic, as the virus had spread over 190 countries with the United States of America, followed by Brazil, being the worst affected.
The impact of this pandemic on businesses in general, and franchising in particular, cannot be ignored. As the number of COVID-19 cases increases daily and governments struggle to develop a strategy to contain the spread of the virus, like every other sector, the franchising community too must prepare itself for the new normal.
As per the GrantThornton report, the rampant spread of COVID-19 has severely affected most economies globally. The outbreak of the pandemic disturbed political, social, economic, religious and financial structures of the world. The world’s largest developed economies such as the USA, the United Kingdom, Germany, France, Italy, Japan and many others are currently in deep stress. The WHO has been working closely with global experts, governments, and other health organisations to provide suitable precautionary and preventive measures to the countries.
The unprecedented outbreak of the ongoing crisis poses multiple threats and challenges for the economies globally, such as economic slowdown, reduced trade, supply chain disruption, commodities and logistics challenges, employment and others.
Globally, as of 23 July 2020, there have been 15,012,731 confirmed cases of COVID-19, including 619,150 deaths, reported to WHO. With the number of cases rising, India is in the third position in terms of confirmed cases.
India reported its first confirmed coronavirus case on 30 January 2020 in Kerala. Since then, the number of cases has been spiraling. As of 8 July 2020, there have been 742,417 confirmed cases of COVID-19 with 20,642 deaths in India. The government has taken several strict measures to curb the spread of the virus. The country announced its first-ever nationwide, 21-day lockdown towards March-end, which later got extended till May. The goal was to flatten the curve and using the time to plan and resource responses adequately.
The COVID-19 pandemic has triggered a deep economic crisis where fundamental changes will take place in how people, businesses, and economies function in India. The franchising community in India has never experienced a crisis like this. The immediate effects are apparent with the shutdown of the salon, pre-schools, K12 schools, food outlets, retail shops and others.
Some franchise chains, such as those in travel and tourism, retail, food and beverages, are likely to witness a lost demand that is largely irrevocable. However, with economic adversities, new industries and opportunities have emerged bringing with it a renewed hope of recovery.
Businesses offering door-step banking, telemedicine, online doctor consultation, online retail, online education and others will largely witness a positive impact.
The impact of COVID-19 on franchising business would vary depending on the overall impact on the sectors. According to a report by GrantThornton, some sectors and businesses that will benefit while some adversely affected are highlighted below:
Changing consumer behavior triggered by social distancing guidelines is likely to keep the demand weak until the COVID-19 pandemic continues. No or less demand even post the lockdown along with other restrictions have resulted in many restaurants, cafes and bar to shut operations in the country, especially in urban areas.
Amidst an ongoing health crisis, demand for essential and daily medicines has gone up. Further, due to uncertainties with respect to supply from China, people are buying more and stocking essential medicines.
Classified under the essential category, supply witnessed minor disruptions. Moreover, with people being hesitant to step out and visit stores, online pharmacy and teleconsultations have increased.
Frequent visit to salons, gyms and others to be bygone tale post the lockdown. However, being an essential part of a lifestyle, the demand will gradually pick up with all precautionary measures.
With upskilling, innovation in products and taking precautions, supplies to gain momentum post lockdown with increased costs. Gyms offering online classes and personalised salon services like Urban Company are likely to be a new trend.
A sudden shift to online learning is relatively new for India. With strict social distancing measures, online education and skill development are likely to be preferred over traditional institutions.
Post lockdown dynamic and innovative approaches would be required by traditional schools and institutions for uninterrupted services competing with online players Byju’s, Unacademy and others.
Due to the prevailing uncertainty and fear of the virus, a large number of people are staying indoor. Thus, demand for FMCG is expected to rise with the online delivery model picking up increasingly.
From local Kirana stores to online businesses, such as Bigbasket and Grofers, have played a significant role in ensuring FMCG supplies amidst lockdown. Being under essential services, both online and offline stores are likely to increase post-pandemic.
With the ongoing liquidity concerns and lockdown, demand for Business Correspondents, ATMs, internet banking and other services is set to increase for individuals and businesses to access basic financial services.
With the ease of norms by the RBI and the introduction of new schemes and support by the government, supplies are to improve.
