Franchising as We Know it is Fraying Around the Edges. Do We Repair It or Start with a New Model?

Corina Vucic | FC Business Solutions

I started thinking about this article in late February, weeks before COVID-19 crisis got its grip on our economy, our businesses and our way of life.  At that time, I believed that our franchising system was in dire need of a shake-up, a re-think and an innovative re-boot.  What has happened in the meantime, is that the Coronavirus crisis has forced a lot of franchises to embrace inventive thinking and to display real agility in how they deliver their products and services - and that may be, in the long run, a blessing.

But let's rewind the clock and examine my thoughts pre-Coronavirus.

The traditional structure of franchising evolved from co-operatives and buying groups.  But the information, social media and communication booms mean that a single business can wield as much voice, can unearth the same competitive product pricing and can source the best operational systems, without paying for the privilege of joining a franchise.

How can you improve your current franchise offering, while setting yourself up for the next evolution in the franchising model?

 

Get the capital backing you need

Underfunding is the greatest challenge to growth. Sadly, there would be many franchisors who had a dream, invested in their set up and today are not seeing their expected returns or successes.  They chose to self-fund and not bring in a silent investor (or investors). Undercapitalised franchisors are limited in what they can achieve as far as innovation, franchise support and services offered.  They can't reinvest in their business, and standing-still does no business any favours.

 

Innovate every day

Innovation can't be put on the back burner until there is a crisis. Innovation needs to be on every agenda, should have a seat on the board, be part of the executive team and have a fixed (with a view to increasing) percentage of operating costs allocated to gathering intelligence on consumer behaviour, competitor benchmarking and investigating, then implementing the products of the future. 

 

Invest in technology

Unfortunately, a lot of technology investment is when franchisors are unable to delay the inevitable.  Why?  Lack of planning, lack of knowledge, lack of ability to access subject-matter experts.  Yes, technology evolves at light speed, and often you will have no sooner installed software when it needs an upgrade.  But with solid advice on what tech is on the horizon, a schedule of implementation and an open mind, you and your franchisees can reap the rewards.

 

Technology allows you to:

  • Perform repetitive tasks cost-effectively
  • Analyse your business (costs and performance) at a forensic level
  • Create a virtual marketplace
  • Communicate in a useful and engaging manner with all your constituents – franchisees and their staff
  • Market your brand to the world both for product or service consumption, and for franchise recruiting.
  • Nurture your end-clients and keeping them engaged

 

Slice and dice your data

Trends, pipelines, order quantities – the amount of data that most franchisors can access is enormous.  But you need the capability to mine it, slice and dice it and reveal the strategic nuggets that are hidden in the numbers.  Use the data for forward planning and share the data with your business owners.  Data provides everyone with an opportunity to tweak their offering and turn it into what your customers want.

 

Focus on what makes your brand "sticky"

What keeps your franchisees loyal to your brand?  It is quite simple.  It’s providing them with what they need to run a profitable and healthy small business.  This is not only a product or service that people demand, but also providing all the services that are required from a business back-end point-of-view: systems, procedures, policies and intelligent, knowledgeable support.

 

Check the pulse of the franchise

A pulse-check or health check needs to be carried out annually.  This should aim to uncover whether the services you are delivering are what your franchisees want.  Are you providing what they need or providing what you think they need?  The research and results will keep your leadership team focussed on innovating and refining your offering, so that it is always better than what your competitor offers.

 

Communication is KING

We live in a world of instant communication.  Your words can reach hundreds or thousands of people at once.  Unfortunately, instant comms also let rumour and innuendo rapidly travel and infect your group.  Dissent flourishes in a vacuum, so it's critical that you are communicating with your franchisees frequently. Communicate often and honestly with short, clear messages.  Everyone is a master of spotting spin, so hiding behind slick words that promise nothing and hide the truth will backfire quickly.  Make your communications appropriate, honest, informative, reliable and timely.

 

What’s next in franchising moving forward?

Undoubtedly the franchise of the future will embrace innovation, technology and the digital space. 

 

Communication Hubs.  These will be integral to a successful franchise in the future, with communication being between all team members within the brand’s community – not just the franchisee.  This transparency will promote trust, loyalty and engagement in the brand from all levels.

Learning Labs.  The franchisor should provide frequent online learning opportunities—snack-sized information that provides skills, information and engagement that can be accessed when needed.

Virtual Coaching Models.  Online coaching will be refined and embraced with far greater frequency moving forward.  This model will provide valuable help in much shorter timeframes.

 

It will be interesting to see where franchising lands, courtesy of COVID-19, in 2021.

 

I asked three successful franchisors what they thought were the key strategies to keep franchises flourishing and evolving.

 

Deb Farnworth-Wood, Director, F-W & W Pty Ltd

 

What’s the next version of franchising that will keep the industry alive?

I like the idea of a flexible franchise that is built on a collaborative approach where the entire group benefits. Franchisors need to make their money from the success of their franchisees, not through additional charges. 

 

Where should the franchisor set franchisee profitability on the priority scale?

Franchisee profitability is absolutely critical to the income of the franchisor, so good benchmarking practices are vital. 

 

Social media – should it be locally owned or driven by the franchisor?

In the beauty industry, everyone who cares about their looks seems to be a social media expert by default, and it’s an incredibly powerful tool for our business. But there would be some franchising areas where there is no innate social media experience within their stakeholders, in which case the franchisor should be providing useful, frequent content. 

 

What's the critical weapon to keeping a franchise community in the circle of trust all the time?

I believe there is real power in group meetings, that problems are better solved collectively rather than individually.  The franchisor needs to be viewed as being down in the trenches with the franchisee.

 

What’s the one piece of technology that no franchise system can afford to ignore?

A fully integrated real-time system that allows the franchisor to have a good overview of all elements of the business, at all times, with fast feedback to the franchisees of emerging performance indicators and trends.

 

Caique Ponzi, CEO, Naked Foods

 

What’s the next version of franchising that will keep the industry alive?

The future within the franchise system is franchisor and franchisees working together to achieve one common goal – success and brand recognition. I believe providing adjacent revenue streams for franchisees will become increasingly important.

Looking a little further in the future, for food supply franchises, I can see ATM sized outlets in shopping centres that will provide a large format touch screen for clients to use.  Online offerings with the machine being able to dispense taste samples.  Your order will be sent to the nearest franchisee to fill and deliver to the customer’s house.

 

Where should the franchisor set franchisee profitability on the priority scale?

Profitability and lifestyle are the key metrics that a franchisee should measure success against.

A brand of the future must be able to provide the customer with more than price and product; there needs to be a wow factor added to the customer journey.

 

Social media – should it be locally owned or driven by the franchisor?

Social media allows the store owner to develop area-specific relationships which help customers choose to purchase from them as a local business, backed by the brand. The franchisor should provide workshops to provide the necessary skills.

 

What’s the key weapon to keeping a franchise community in the circle of trust all the time?

Franchisees cannot be left in the dark. They must know what is happening within the brand and how they can be part of it. Developing trusted people within the franchisee community to bounce ideas off, to unearth potential problems, is critical.

 

What’s the one piece of technology that no franchise system can afford to ignore?

We have recently introduced the Ops Central platform, and that now houses all of the information a franchisee needs to operate a business. New team members can also be inducted using the tools it provides.

 

Scott Enno, CEO, Flooring Xtra

 

What’s the next version of franchising that will keep the industry alive?

I think all franchises should have all support systems provided by the franchisor,  HR, compliance, accounting etc. This allows the franchisee to concentrate on their core business and the key drivers of profitability.

 

Where should the franchisor set franchisee profitability on the priority scale?

Profit is definitely not the only benchmark; work/life balance is very important; along with the satisfaction that comes through owning your own business. Too much focus on profit alone can be unhealthy, and lead to short term decisions that backfire in the long term.

 

Social media – should it be locally owned or driven by the franchisor?

It is too essential in a world that moves too quick, for this to not be administered by the franchisor. The software will continue to make it efficient for franchisors to manage many social media pages centrally.

 

What’s the key weapon to keeping a franchise community in the circle of trust all the time? What’s the one piece of technology that no franchise system can afford to ignore?

I think the technology will likely be different in each system, but unconditionally it will revolve around efficient communications. The amount of information that we need to send out today, versus 10 years ago, is much greater, and this will continue to increase with the higher compliance requirements being placed on franchisors. Franchisees will need to receive and digest a lot of information daily, and most franchisees are working in their businesses full time, so the franchisor needs to distil the critical information into small, digestible pieces.