Franchisors react to stage 4 lockdown in Melbourne

The Victorian Government has announced stage 4 lockdown restrictions to be implemented in Metropolitan Melbourne from tonight, leading to the loss of employment for over 250,000 Victorians.

According to IBISWorld, the unemployment rate in Victoria has risen from 5.3% in February 2020 to an effective rate of 9.8% in June 2020, and is expected to surge higher through August as a result of the new restrictions.

IBISWorld senior industry analyst, Matthew Barry, said stronger measures are necessary “to fully flatten the COVID-19 curve”.

“Despite the heavy toll imposed by these restrictions, the cost is necessary to avoid the threat of a truly uncontainable outbreak,” he said.

Victoria is expected to record a budget deficit of $7.5 billion in 2019-20, down from a $618 million surplus originally anticipated for the year. This deficit is the first recorded in almost 30 years.

Businesses in regional Victoria can apply for a $5,000 grant while those in Melbourne and Mitchell Shire can apply for up to $10,000 in recognition of spending longer under restrictions.

How franchisors are responding

Just Cuts has welcomed the announcement from Victorian Premier Daniel Andrews of additional financial support for businesses forced to close under the introduction of tougher restrictions in Melbourne and across the state.

Hairdressers are included in the business group required to cease operations from 11.59 on Wednesday 5 August for the next six weeks.

Just Cuts CEO Amber Manning pointed out some franchisees are ineligible including a number who have been in business for less than 12 months.

“There is still a significant strain on our small business owners and unfortunately, it’s only going to continue so we need to be exploring additional measures such as assistance with payroll tax,” she said.

“The reality is we need all State, Territory and the Federal Government to continue to move on stimulus and support measures to help us all get through this.”

To help with the difficult weeks ahead Just Cuts franchisees will receive rebates for online purchases. The business is also promoting gift vouchers for clients to use when Victorian salons reopen.

Fellow hair chain Hairhouse Warehouse has 100 stores nationally with 40 of these in metropolitan Melbourne. The chain aims to offer click-and-collect from most if not all of these stores, as well as same-day delivery for online orders, thanks to a partnership with food delivery company Door Dash that was forged during the first lockdown.

“This was a critical pivot born out of the changing landscape of the ‘last mile’ as it pertains to meeting customers ‘where they are’,” Johanna Scully, chief marketing officer at Hairhouse Warehouse told Inside Retail.

Scully acknowledged that the restrictions will “hamper” a portion of the store network, but she said, “challenge always drives great innovation and opportunity”.

Another innovation developed in the first shutdown is a virtual online consultation service. Scully said both of these offerings will serve the Melbourne store network well over the next six weeks.

“We are an omnichannel retailer that encompasses both retail and service models, so we are committed to weathering this period and continuing to engage with our valuable customer base including our compromised Victorian customers,” she said.

Gyms have been particularly hard hit through Covid-19.

Nigel Miller, co-founder at Plus Fitness, told Inside Franchise Business Executive, “For our franchisees in Victoria they were trading for just a week and a half prior to the second lockdown of gyms in metro Melbourne and these further restrictions will see our regional gyms now closing again this week.

“In terms of support then from a financial perspective we have of course suspended all franchise royalties and associated fees in the same way we did during the first lockdown in Victoria. In addition, we have negotiated with all key service providers to once again do likewise.”

Miller and co-franchisor John Fuller remain in regular contact with franchisees, available 24/7, Miller said, backing up the field manager support.

Essential services remain open

Not all franchisees are forced to close their businesses under the stage 4 restrictions. Among the businesses deemed to provide essential services is the test and tag franchise ATS. However there will be fewer services provided said ATS general manager Sarah Allen.

“Our operations are dependent on client access, and as a result of some Stage 4 business closures we are unable to access some sites to provide services.

“After the last shut down we found the majority of our clients who had closed wanted “catch up” servicing, and we anticipate this to be the case with this shut down too.”

In the highly regulated test and tag industry, health and safety has always been a priority.

Keeping franchisees up to date over the shutdown periods has involved multiple plans and revisions including the Covid-Safe plan, Safe Work Method Statements, templates for the Permitted Worker Scheme for Melbourne, advice on Stage 4 Restrictions  and border closures.

“The investment we made two years in moving our entire business operations to the cloud with Microsoft Dynamics and Microsoft Office 365 has been absolutely invaluable,” said Allen.

“We simply could not have successfully transformed our entire operation to working remotely at such short notice with our legacy systems.

“Calls to and from the support office are made using Microsoft Teams and can be made from anywhere using our current phone numbers.  This means we are functioning as we normally would, albeit our support office team are all working from home and have been since mid-March.”

Authors: Sarah Stowe, Inside Franchise Business Executive; Heather McIlvaine, Inside Retail.