Franchise businesses were close to running short on cash as early as May due to the disruptions of the new coronavirus disease 2019 (COVID-19), according to an industry executive.
But Philippine Seven Corp., franchise holder of the 7-Eleven convenience stores chain in the Philippines, is optimistic of improvement moving forward.
Citing preliminary results of a survey of the Philippine Franchise Association, Philippine Seven president Jose Victor Paterno, said in a briefing half of respondents reported to have “less than six months of working capital” which retailers use to pay for rent, salaries of stocks and restock inventories.
In June, the company unveiled its P711-million credit line for its franchisees interest free and payable on a pay-when-able basis.
Under the credit line, 7-Eleven franchisees can borrow from the fund when needed, provided they pay down the credit line monthly when the franchisee’s situation improves.
Philippine Seven sums up the current business environment as fluid and that it continuously reviews its plans.
The company reduced its capital expenditures to P2 billion from an earlier P4 billion and cut its target store openings this year to 200 from the original 400 stores.
Philippine Seven currently has 2,864 stores in the Philippines, 349 of which were opened last year. The company also expanded to four new areas: Cagayan and Kalinga in North Luzon and Misamis Occidental and Surigao del Sur in Mindanao.
“However, due to the pandemic, expansion efforts will be on hold for the foreseeable future,” Paterno said.
Paterno said Philippine Seven has offered its franchisees which are yet to break ground in their locations to avail of its cashback program.
“We don’t believe it’s a good time to open stores. It won’t do well,” he said.
Paterno said Philippine Seven is mapping its stores by looking at the prospects of each location as the situation improves.
“We are trying to model where sales will go, depending on (factors like) are you near a school, when will offices be populated again,” he said.
“We recognized immediately the country’s (and the world’s) battle with COVID-19 would be long and painful. We remain highly confident in the worst case that we will get to the other side of this not just intact, but stronger,” Paterno said.
Paterno said the company expects its second quarter figures to be worse than first quarter.
But following the slow opening up of the economy, 7-Eleven stores have seen an improvement with average purchase up from the lockdown period.
Average sales, however, are still down compared to pre-COVID levels, Paterno said
“Customer count is down by more than half compared to the pre-COVID time,” he said.
About 30 percent of 7-Eleven stores were closed during the lockdown.
Following the slight re-opening in May, 95 percent percent of the store network are now open.
Paterno said the remaining 5 percent remained close because its sales “is not worth even the salaries of the staff.”
