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News Article

2,000 Franchises Closed Due to Pandemic

By Sofía Hanna | Wed, 04/07/2021 - 19:15

The pandemic has cost the Mexican retail and restaurant sector 16,000 jobs and over 2,000 franchises. In December 2020, companies were still plagued by uncertainty about whether there was going to be another COVID-19 shutdown. With more vaccines coming to the country, fewer businesses are expected to close as a new full lockdown becomes less probable. 

In a Forbes interview with the CEO of Gallàstegui Armella Franquicias, Juan Manuel Gallàstegui, it was pointed out that the pandemic hit this sector and the repercussions are greater than it seems as closed franchises include beverages, food, retail, clothing, accessories to health and beauty products. Jobs were also lost due to closures and those companies that did not close still had to cut down their payroll. On the upside, it was also possible to sell franchises, since many people saw an opportunity to invest their savings, settlements and inheritances. “There were new franchises but not at the expected levels. Around 50 new businesses started, which are few compared to the 200 that were added each year before the pandemic,” said Gallàstegui.

Nevertheless, he also mentioned that hopes for 2021 are high as interest in clothing, footwear, health, beauty, personal care and fast food consumption, among other areas, is increasing. Digitalization will continue to be an ongoing challenge for all franchises and for people in the retail sector because the entire network has to be renovated to participate in an online market.

The CEO of Alsea, Alberto Torrado, commented that his restaurants, including Starbucks, Vips, Domino’s, Burger King and Chilli’s, managed to temporarily change the conditions of their credit contracts until June 2022, reported by Forbes. This granted more financial flexibility so franchises could focus on gaining market share. “These renegotiations represent good news for the financial health of the company and shows the continued confidence of banks in the success of Alsea and its future. It allows us to continue with our strategic projects and organic growth, while maintaining our units in optimal conditions, making our loan payments and repayments in a timely manner,” mentioned Torrado.

Not all franchises had a bad 2020. Gallantdale, Master and Maple Bear managed to expand even more by adding new branches. Maple Bear, a hybrid bilingual school, managed to add four new branches that will be located in Puebla, Hermosillo, Querétaro and Metepec, which are added to Lomas Verdes and Chihuahua. Gallantdale, a uniform company for health workers, increased its production by 70 percent, which meant a 20 percent increase in its workforce. Master, a company that manages seven food brands, closed 2020 with 153 branches and it also reached extension agreements with shopping centers, reported El Financiero.

The data used in this article was sourced from:  
Forbes, El Financiero
Sofía Hanna Sofía Hanna Junior Journalist and Industry Analyst