The impact of the Covid-19 pandemic on the labor shortage in franchise networks (Part 1)

F. Georges Sayegh, S.A.D., C. Adm. A., FCMC of Quebec and Ontario, is an expert-consultant in franchising and technology transfer. He is also the author of 18 books on franchises and related businesses. To reach him: gsayegh@gsayegh.com; Tel.: (514) 216-8458.

 

The COVID-19 outbreak has had major economic, political and social effects around the world, causing global disruption affecting business, financial, health and education systems and, more specifically, the franchise industry. Franchises have not been as affected in the last 100 years as they have today. The disruption has impacted supply chains, ongoing cash flow issues and labour shortages.

One of the conundrums of the pandemic economy scarred by labour shortages affecting airlines, restaurants, retail, slaughterhouses and other business owners in both Canada and the United States started well before Covid. Moreover, this explains, among other things, the shortage of labor in other areas, and companies are now suffering the backlash. The set of circumstances that led to this shortage long before Covid is as follows:

i) For years, large corporations have pressured senior management to increase profitability to support shareholder demands by providing them with a better return on investment;

ii) Managers, for their part, by moving forward with their annual bonuses since they were demonstrating positive results, squeezed lemon on their subordinates to increase production even more, while at the same time cutting staff in order to ensure ever greater profitability within the company;

iii) Some companies have opted to postpone capital investment in order to implement more appropriate computer systems and proceed with creating databases, thus enabling them to recruit the appropriate staff to meet their needs;

iv) Other companies have no plans to deal with aging staff. This social constraint has been handed down from one year to another, and the companies are now looking at a shortage of staff. They are therefore now faced with difficulties in their operations;

v) Ministers of finance pressured senior officials to produce even more, while making budget cuts at the same time;

vi) Ministers of immigration have created barriers against admitting new immigrants, a policy which does not take into account the aging population.

 

The impact of the COVID crisis on businesses today

a) Several industries facing shortages are affected by criticism from staff. As a result, they receive fewer applications despite attractive incentives. With so many businesses struggling with the shortage, many are wondering when – and if – this crisis will ever end;

b) The pandemic has caused many workers to question the type of work they want to do and, at the same time, where they want to work. Companies that interact directly with their customers such as hospitality businesses and the retail sector have suffered greatly from the lack of manpower and are facing a very tight labour market. A question that weighs heavily on the minds of many owners is what do today's workers want and how can franchise owners meet their needs and expectations?

c) Another cause that has kept people at home is the pandemic itself along with the ear of COVID-19. Job shortages that currently exist are low-wage jobs, particularly in the health care and food service sectors. “They are in contact with customers and therefore they deal directly with the pandemic.” "This situation makes it even more difficult for staff to justify returning to work and finding themselves in a potentially precarious situation."

d) This does not include workers with long Covid disease. They experience fatigue, shortness of breath, muscle pain, depression, persistent cough, joint pain, and chest pain to name but a few symptoms;

e) Workers in jobs that cannot be done from home and which require physical proximity to other people have paid a double price during the COVID-19 crisis by being exposed to a higher risk of loss of income when their hours were reduced or their jobs terminated. These workers were disproportionately young, poorly educated, migrant, from ethnic minorities, and employed in low-paying jobs;

f) Frontline workers – who have continued to work in their physical workplace and in close proximity to other people during the pandemic – are often in lower quality jobs. During the crisis, they reported greater job insecurity and lower overall health and mental well-being. Statistics from several countries show that they were indeed much more likely than other workers to be infected with COVID 19;

g) The COVID-19 pandemic has posed significant challenges to supply chains globally. Multiple nationwide shutdowns continue to slow or even temporarily halt the flow of raw materials and finished goods, disrupting manufacturing. However, the pandemic has not necessarily created new challenges for supply chains. In some areas, this has brought to light unprecedented vulnerabilities and, of course, many organizations have suffered staff shortages and losses due to COVID-19. Overall, this accelerated and amplified problems that already existed in the supply chain;

h) Many aging workers are now retiring or voluntarily leaving their jobs just as the demand for workers is increasing. Many people started to rethink their careers, priorities and life goals after the health crisis began. The pandemic has given them the opportunity to reflect on what is important to them;

i) Many migrant workers from Latin America, the Middle East and Central Asia left during the pandemic not to return, and the high rates of infection and death from their native countries forced them to stay there.

All of these elements and so many more show without a doubt that businesses and franchise networks have been hard hit by the COVID-19 pandemic. From supply chain management to persistent cash flow issues and labor shortages, franchise networks have been on the front lines of this roller coaster and faced the ongoing challenge of attracting and retaining employees.

 

What businesses should do

As for knowing when this shortage will end, it will now be necessary to realize that it is no longer a phenomenon that will disappear overnight. Employers will have to adapt to this new work climate and plan long-term solutions taking into account the realities the will have to face.

First of all, a new social phenomenon has made its appearance in recent years to th great misfortune of employers. Indeed, first called “influencers”, content creators have now become commonplace. All it takes is an idea for content, some talent, a little imagination and audacity to expose yourself on various social media platforms and almost immediately become a cybernetic celebrity. Then come the “followers”, the “sponsors”, publicity, recognition, etc. All this often brings the content creator a way of life much more comfortable and costly than that of a simple employee within a company. Content creators are not going away anytime soon and employers will be even more affected with the new generations to come.

These new realities are the ones we see in Gen Z – otherwise known as “early career talent.” These near-instantaneous successes achieved in a short period of time have this generation rejecting higher education, changing jobs at an unprecedented rate and demanding to work from their bedroom. We may feel like this generation is just looking for good wages, and in a world where everything can be bought with the touch of a finger, workplace gratification must be almost instantaneous. Therefore, for the future, an employer wishing to develop a prosperous business should, as much as possible, collaborate in harmony with his staff and comply with today's new realities by offering, in particular:

• The possibility of working from home. “This option should be offered.” People appreciate this form of work, especially in the context of the pandemic. This method has proven itself and is very popular with workers;
• Offer flexible hours. Another way to attract and retain employees is to offer flexible hours. Gen Z staff are attracted to this way of working;
• Create an encouraging and positive work environment for staff. "People who work for low wages, if they are in a pleasant environment, will be ready to compromise"; "People place higher value on the work environment than on the hourly wage."

Employers will have to find a way to make their employees feel valued, and in addition to the wages they offer, workers will start to come back. Employers must also “trust their employees and focus on creating an environment where they will enjoy working and not be tempted by another employer who pays a little more money.”

On another note, health authorities have been concerned in recent months about two worrisome epidemics. The first is hepatitis of mysterious origin which mainly affects children. The second is the emergence of cases of Monkeypox, a rare viral infectious disease found in several countries. It is caused by the Monkeypox virus transmitted mainly by rodents to humans, then from person to person by droplets or close contact.

There is also a new virus being currently discussed that has entered the international scientific and media scene with great fanfare. According to the Taipei Times media, several dozen people located in the Chinese provinces of Shandong and Henan have contracted a new virus of animal origin called “Langya” which in many respects resembles the Covid-19 epidemic causing fever, fatigue, cough. The symptoms of this “new” virus are unmistakably similar to those of SARS-CoV-2.

However, before the Coronavirus dominated the news, the previous decade saw the evolution of other health issues linked to viruses such as Ebola, Zika, dengue fever and measles.