Evolving service sector opens up opportunity for big business
In my 35 years of experience within the franchise service sector, I have seen immense change in the way it operates.
There has been a shift, especially in the past 10 years, that has seen the sector evolve into a multifaceted one utilising multiple sales channels and markets. No longer are franchisees restricted to a purely service based business model, instead they are enjoying success through a combination of service, retail, commercial or e-commerce elements and it is paving the way for franchisees to build big businesses.
In the case of Poolwerx, this has been a transition from our franchisees being one man and his van servicing local pools, to our franchisees starting with this, but having a clear career path to build their businesses into much larger operations. While the low entry cost that historically made the service sector popular is still available, there are also investment levels offered for potential franchisees seeking multi-million dollar enterprises.
A similar pattern of development can be seen in many service franchises, and I believe key developments in technology, communication and changes in demography are responsible for shaping many of the ways the service sector has advanced.
Ultimately, the way consumers want to do business has transformed, which in turn has impacted what potential franchisees are seeking from business ownership now. Overall, the shift in the sector has been incredibly positive for the franchise industry with the service sector growing to account for around 27 per cent of the 1100 franchise businesses in Australia. While this means there is immense choice now, it can make the prospect of selecting the right one a real challenge. An examination of what has influenced the evolution of the sector can help a potential franchisee determine what a successful service business should offer today.
Developments in information technology have affected the industry in many ways, but one of the major outcomes has been a broadening of accessibility to customers.
The popularity of the internet, in particular growth of search engines like Google, has made it easier for consumers to find information about a brand but also for businesses to easily reach a wider market. E-commerce applications have been the natural extension of this growth in order to capture consumers at the initial source of their enquiry. Australia has led the way in cementing this as a necessary sales channel in business. In fact, studies have shown internet penetration in Australia was one of the highest in the Asia Pacific region, and we also had the third highest business to consumer e-commerce sales, with 80 per cent of internet users making purchases or orders online.*
Franchises, like ours, have embraced the technology changes and implemented sales channels that allow for online bookings and sales. It has not taken away from our core service elements but rather complimented it, widening the market reach and income stream for franchisees.
Technology has also improved the way businesses are managed and performance measured. The ‘Cloud’ has enabled franchisees to remotely manage their businesses more easily. Having systems that give them real time performance indicators no matter where they are, and enabling them to make changes to their business instantly as market need dictates. Overall, successful service based companies have foreseen the progress technology can provide and applied it accordingly across internal and external systems.
Communication and technology are closely interlinked and have progressed simultaneously, but the rise of social media and the introduction of the smart phone have had the greatest impact on the service sector.
Customers now have the power to make a purchase decision at any time, and with more than two-thirds of the population owning a smart device and spending 41 per cent of that time online, a franchise must be taking advantage of this with the right
website, sales channels and communication strategy.
Social media has become a norm in the communication mix and has undoubtedly increased the power of referral marketing, with research showing the most trusted source of brand information for consumers is online peer review. Social media allows an appraisal, good or bad, to be shared almost immediately with hundreds of people meaning a business in today’s service sector cannot afford to drop its performance. If they do they must be ready to combat it immediately. It is an effective communication tool that must be utilised to its full potential, particularly as it shows a business’ awareness of its changing target market.
Society is ever changing, but the increased cost of living and growth in housing affordability that we have seen in the last 10 years has shaped the priorities of customers and thus potential franchisees. People are working longer and income expectations are higher, leading people to want more from a business opportunity.
As a result the service sector, which was once primarily known for its low entry and respective returns, has had to seek ways to increase income opportunity, thus the hybrid model of retail/service has become popular. Poolwerx, for example, has progressed from its roots of a man-in-a-van to over 50 per cent of the group being hybrid, encompassing retail, online, residential and commercial servicing elements.
The service industry has always been challenging, exciting and rewarding. The developments that have taken place throughout my career have only made it more so. It has responded to the needs of the market from both a consumer and franchisee perspective.
Successful service businesses have adapted accordingly to the technology, communication and demographic changes, and are offering multiple income streams, sophisticated management systems and clear marketing and communication strategies.
I am under no illusion that in another 35 years’ time the service sector will have changed again, but it will undoubtedly continue to develop and be a successful choice for franchisees to make a solid living.
The following questions will help determine if the service franchise you are considering has joined the shift to big business:
• What web presence does the franchise have? Does it represent the brand well?
• How does it utilise the internet to capture customers online?
• Does it offer any online sales opportunities?
• Is the management system a comprehensive program that is accessible easily and remotely?
• Does it have a suitable customer relationship management system?
• How does it utilise technology to market to customers? E.g. email marketing, SMS marketing,
• How do they use social media at a national and local level? E.g. Facebook, twitter
• Is the website mobile compatible?
• What is the social media policy of the company?
• What sales training is offered?
• What is the current average tenure of a customer?
• What are the key performance indicators for a successful franchisee?
• What are the avenues for income in the business?
• What are the average terms for a return on investment for the franchise?
• How will the business help me achieve my lifestyle and financial goals?
John O’Brien is the founder and CEO of Poolwerx Corporation, the world’s leading swimming pool service company and largest franchised pool retail group. As an industry leader, John has advised the Australian Government on a variety of issues facing franchising and has also chaired the Australian, the Asia Pacific and the World Franchise Councils, all whilst building a brand that has twice been named Australia’s Franchisor of the Year.
Today, the Poolwerx group provides poolside services to an estimated 300,000 domestic pools, has a nationwide chain of retail stores and is the strongest player in the commercial pool maintenance sector in Australia. Its unique approach to franchising gives each and every franchise owner a career path from which to build a multi van, multi-store, multi-million dollar enterprise, a strategy that has seen sales growth maintained at over 10 per cent every year for the past 10, right through the GFC and beyond.
*yStats.com e-commerce report