HireQuest, Inc. (NASDAQ:HQI) Q1 2020 Earnings Conference Call - Final Transcript

a lot of down-line supply firms that will start picking up and then we'll get closer to normal.

Do you -- I think you said it. Do you usually have a big like summer hospitality surge that you are probably not going to see this year? Or is that -- how should we think about that piece of a business?

Yeah. So what I would say is, I would look at -- frankly, I would look at hospitality as a complete wipe out for the year. I can't -- listen, you start seeing -- if you start seeing people in the stands at baseball games or football games, then yes, you'll know that, we've probably gotten a piece of that business. But so long as stadiums stay empty and arenas stay empty and convention centers stay empty, that will be a wash out.

As far as the seasonality of it, that's actually -- each -- we do basketball arenas, we do baseball stadiums, we do football stadium. So, it's really pretty well scattered throughout the year. So, it's not really a seasonal -- there's not much of a seasonal effect on that.

Got it. And then, I guess, could you just really talk about the health of your franchisees? I'm sure some of them are probably don't have any business. Maybe some of them are hospitality oriented. Are you supporting them, what loans, etc., or discounts on the franchise fees? Just so, I guess, thinking more through, are these guys -- are you going to come out with the same number of franchisees at the end of the year? All else equal, unless you acquire more, will they be able to make it through this year?

The -- so, it's a sort of a multipart question. What I would say to you is that, number one, and what's probably the single most important effect at this point is the PPP loans. The vast majority of our franchisees have either been approved or have already been funded for PPP loans. And that's a big deal. And fortunately, one of the things you are reading about is how -- for some companies -- some companies have not even applied for them because payroll represents a relatively small portion of their expenses, whereas rent or certain other ones are -- they are a lot heavier on that. So the good news for us is that, our franchisees, typical franchisee, probably 75% to 80% of their costs is they're permanent personnel and therefore, these PPP loans are really, really effective. And therefore, as we modeled it out, they probably -- the PPP loan probably accounts for a good, even though they're designed to last for eight weeks, they really, probably blunt any negative effect of -- any negative effect on income from a drop of sales for probably four to five months. So the good news is, there's a fair bit of time for them to recover from that.

The other part is that,