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June 11, 2020TSG Press

Confessions of a SMB During COVID-19: Swimtastic (MCC 7299)

The Confessions of a SMB series focuses on the stories, struggles, and successes of small and medium businesses (SMBs) as they attempt to navigate the current economic climate. As 70% of merchant acquiring net revenue is attributed to SMBs, their performance greatly influences the payments industry. Previous articles in the series include features on an optometry practice as well as upscale and fast-casual restaurants.

In this interview, TSG’s Market Intelligence team-member Alex Ferguson sat down with Swimtastic Nebraska owners Sanjay Garapati & Dave Sall to learn more about the struggles their small business has faced dealing with the COVID-19 pandemic.

Swimtastic’s goal is to help swimmers of all ages and abilities learn to swim in a positive, safe, and loving environment.  Across all Swimtastic franchise locations nationally, over 325,000 kids have been given over 12 million lessons and Swimtastic is the official swim school provider of USA Swimming.

Garapati and Sall are business partners in three Swimtastic franchise locations across Nebraska. The Omaha and Lincoln metropolitan areas are urbanized locations of Eastern Nebraska that contain both the largest city and State Capitol of Nebraska and nearly 1.2 million estimated people.

TSG’s Alex Ferguson:
How has the COVID-19 pandemic impacted your sales and/or your general operations? Has it differed between locations?

Sanjay Garapati’s Answer: Our business is to teach young children, primarily toddlers, swimming skills and water safety skills, which require lot of physical contact with these children.  Because of the nature of the business and the social distancing mandates required by COVID-19, we had to completely halt our operations at all three Nebraska Swimtastic locations, starting March 16th. We have since re-opened with limited scheduling for swim lessons on June 1st, but from the middle of March to June 1st we had zero sales and no operations which forced us furlough all our staff.  That was a very difficult decision for us as some of these employees have been with us for several years, but luckily all those employees returned to work once we reopened.

Q: How are your Swimtastic locations currently operating? Are there specific Nebraska guidelines that need to be accommodated?

Sanjay: Our three Nebraska locations are currently operating on a restricted plan in terms of social distancing and the number of customers in our facility at one time.  We are currently operating under the swimming pool guidelines of 25% capacity, wellness checks prior to entering our facilities, and social distancing.

Q: What are some of the additional unanticipated struggles your business has had to face beyond a loss of customers due to COVID-19 restrictions?

Dave Sall’s Answer: Due to a lack of understanding of the COVID virus and conflicting information from various sources, it has been a struggle in terms of ensuring we have adequate staff available/comfortable with returning to teach swim lessons and also hesitation on the part of our customer base to return to swim lessons.

Q: How have you modified the operation of your business since reopening on June 1st? Are you taking any special measures outside of your normal business operation in order to stabilize revenue?

Sanjay’s Answer: In terms of stabilizing revenue, we were able to secure funds through the SBA programs in order to offset the lack of revenue for over two months and also provide the ability to bring people back to work before having any reliable revenue stream.

Q: Do you think your payment processing provider has the ability to help your business during the COVID-19 pandemic?  

Sanjay’s Answer: We have two different models for payment processing.  Two of the three locations are on Enhanced Service Model (ESM) offered by our franchisor which includes payments and billing.   Under this model, our franchisor acts as a Payment Facilitator for us.   In the second model, one of our locations has a direct processing account with the processor.  We have not seen any significant changes in either of those models from the payment processing.  Since we have not been receiving payments, the only thing our payment processor could do in my mind would be to waive processing fees, but that amount would likely be negligible and not have any impact one way or the other as to whether we can generate sufficient revenue.

Q: Has your payment processing provider contacted you since the COVID-19 pandemic began?

Sanjay’s Answer: Not that I am aware of.

Q: Do you feel there are enough resources available to you and your business provided by the government to help you weather the pandemic?

Sanjay’s Answer: Yes, for the most part.  The amounts provided in the SBA programs was limited because they ran out of funds. I also think larger “small businesses” took advantage of the programs which possibly impacted the amount of funds available.  EIDL loans helped us as well by providing us with much needed capital to allow us to operate under reduced capacity, but it is taking SBA a long time to process these applications.  For example, we applied for these loans at the same time for all three locations, but we received funds for only two of the three locations and still waiting to hear back from SBA regarding the status for the third location.

Q: Since the COVID-19 pandemic have you noticed a difference in the way customers are paying? i.e. have you seen an increase or decrease in the use of particular payment methods?

Dave’s Answer: For the most part (over 95%) our customers pay via credit card and that will likely not change.

Q: Do you have the ability to accept contactless payments? If so, have you encouraged your customers to use contactless payments? If not, do you wish you could accept contactless payments?

Dave’s Answer: We have the ability to accept contactless payments; but since over 95% of customers are either on monthly recurring billing model or paying for service through our online enrollment or over the phone, this isn’t much of a concern for us.

Q: Have you experienced an increase in fraudulent transactions or chargebacks at your business since the start of the pandemic?

Sanjay’s Answer: No.  We never had any issues with chargebacks to begin with, I think we had just one or maybe two chargebacks in the past 10-year period and we don’t anticipate that changing.

Q: Do you feel optimistic or pessimistic towards the future and the potential recovery of your business in the aftermath of the COVID-19 pandemic?

Dave’s Answer: We feel optimistic towards the future and recovery of our business if we can weather the next few months of lower than normal revenue.  Swimming is considered as a life skill, which makes everyone safer around water, it will always be something parents will look to provide for their children. Drowning is a leading cause of injury/death for children every year in America so swim lessons, especially for children, will always be necessary; we just need to weather the uncertainty parents may have about enrolling their kids.

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