The State of Child Care Businesses in the Face of COVID-19

April 22nd, 2020 by Lorena Yue Wu

Impact on Franchising

The rapid spread of COVID-19 is reminding us how interconnected we all are. With the pandemic changing everything we do in our personal and business lives, franchisors are faced with the same challenges as other businesses. However, franchisors remain optimistic and expect system sales to return to pre-pandemic levels in about six months, according to a recent survey conducted by FranConnect. The survey polled 233 franchise brand leaders regarding the impact of the coronavirus on the franchising industry. Nearly all brands surveyed in business services (86%) and commercial and residential services (89%) are continuing their sales efforts; 75% of full-service restaurants reported halting franchise sales; over half of micro-emerging brands (under 25 locations) surveyed stated they’ve stopped their franchise sales efforts, compared to only 16% of those with between 100 and 500 units.[1]

Due to the nature of franchising and its unique advantage of the network, franchised businesses are more likely to get more information and support from their franchisor and other franchisees compared to independent businesses. Franchisors are helping their franchisees and offering them financial relief.

Some examples include:

  • Fazoli’s is giving its franchisees royalty and ad fund relief
  • Barberitos has launched several initiatives to ensure its franchisees take advantage of government support opportunities such as the SBA Disaster Loan Program and offers a sounding board for best practices
  • Qdoba is postponing weekly royalty payments for eight weeks to protect cash flow where restaurants are adhering to the CDC guidelines for social distancing and the U.S. government’s mandate for dining room closures
  • Yum! established a Global Franchise Health and COVID-19 Support Team to help KFC, Pizza Hut, Taco Bell and The Habit Burger Grill franchisees navigate business continuity.[2]
Stress and Confusion Among Child Care Providers

There has been a drastic drop in student enrollment at child care centers since the COVID-19 pandemic began spreading, a situation affecting the revenue of many centers and leaving early childhood educators out of work or having to work from home. With the escalation of the crisis, 17 states ordered child care centers to close, except when they’re caring for the children of emergency workers or healthcare providers. FRANdata’s analysis shows that child service related franchise businesses are highly concentrated in Texas, California, Florida, and Illinois, while the foremost outbreaks of the pandemic are currently New York, New Jersey, Michigan, and California.

Data Source: http://www.hunt-institute.org/covid-19-resources/state-child-care-actions-covid-19/

Data Source: https://coronavirus.1point3acres.com/

Source: FRANdata Research

On the consumer side, working families need child care including those parents who work in essential services like healthcare, first responders, and those who work in other systems that we highly depend on such as grocery stores, pharmacies, and other services that are critical to the community particularly in today’s environment.

Child care providers are primarily small businesses and operate on a relatively thin margin. It’s been a hardship for every child care business owner. Many of them are now navigating the tough decision about whether or not to stay open. Nationally, of 9,000 child care providers who took part in a survey conducted by the National Association for the Education of Young Children, 30% said they would not be able to reopen after closing for more than two weeks without a lot of public investment and support. Another 17% said they would not survive closure of any time. Additionally, 16% indicated they would not make it more than a month and 25% were not sure how long they could remain closed and come out on the other side.[3]

For those centers that are currently closed, they are getting creative to think outside the box and handle the closing. Many early educators have started sending learning resources home and connecting to parents. According to the management of an early care school concept, many of their staff are working from home, but each staff person in all of their programs has a family that they’re assigned to. At least weekly, if not daily, they are reaching out to the family to talk to them about what they need and provide distance learning for the respective young children. They are also connecting with the area food support management to help with food provision and delivery. Many of the low-income families already have elements of crisis, so providing these critical components such family services support and health nutrition education over the phone makes a huge difference.

Some child care programs can be attached to colleges, businesses, or another type of organization that can provide some support at this time, but the majority are small facilities that may not have that sort of network and association to turn to. Most of them are facing financial difficulties and trying to figure out the best course of action. They are also looking for guidelines and wondering what they should specifically be doing, especially when it comes to social distancing and the importance of keeping small groups. They are thinking about and looking for soltuions to the big question: what does this look like in the field of child care?

Concern on the Post-Crisis

Child care is an important part of our economic and public health infrastructure. After the pandemic is over, many parents may find it difficult to re-enroll their children with the same care provider. Compared to public schools, private child care providers are in a worse financial position and may not be able to provide sick leave, paid vacation, or health benefits. If people are laid off, businesses are not able to pay their bills, after the crisis they may change their career and tend to do something else. Those child care centers may choose not to re-open.

To solve the child care dilemma, more funding is needed to support the system. Many states have implemented child care emergency plans and continued to pay the subsidiary providers whether the students are attending or not, to help sustain the providers during this period of time. For example, in Maine, the state also has included in their plan the ability to issue emergency temporary child care licenses. By Mar 23rd, 4 licenses have been granted statewide.[4]

The closure of child care centers has forced many families to change their routines during this difficult time, and the situation is highlighting the value of caregivers to the economy and the well-being of families. At the same time, it also underscores how vulnerable the system is.[5]

As we see, child care is being heavily affected in the current climate, but it isn’t the only sector facing challenges. In order to best assist franchisors and their franchisees across the country plan for the near future, FRANdata has developed a highly customized Brand Recovery Metric. Franchisors can now have a better idea where positive and negative conditions for economic recovery will be happening within their system. Through data that allows us to get down to the county level, it will enable franchisors to make plans down to the unit level. The hope is that the metric will further provide franchisors a plan of action for creating recovery strategies for their franchisees in order to hire, restart supply chains, and plan local marketing at the right time. Click here to find out more.

 

[1] Franchisors on the sale hunt despite COVID-19 crisis

https://www.fastcasual.com/news/franchisors-on-the-sale-hunt-despite-covid-19-crisis/

[2] Franchisors Waive Fees During COVID-19 Pandemic

https://hospitalitytech.com/franchisors-waive-fees-during-covid-19-pandemic

[3] Colorado child care centers fear for their survival as coronavirus brings closures, enrollment dips

https://coloradosun.com/2020/03/23/colorado-child-care-early-education-children-closing-coronavirus/

[4] COVID-19 Impacts: Child Care

https://www.mainepublic.org/post/covid-19-impacts-child-care

[5] How child care startups in the U.S. are helping families cope with the COVID-19 crisis

https://techcrunch.com/2020/03/27/how-child-care-startups-in-the-u-s-are-helping-families-cope-with-the-covid-19-crisis/

Archived by Category