Why innovation and technology matter when choosing a franchise opportunity
You could be excused for thinking that innovation and new technology pose a threat to franchising. After all, aren’t franchises losing customers to e-commerce, on-demand services, automation, robotics, online services and all the other new technology that is disrupting traditional businesses?
On the contrary, smart franchisors are turning that situation around and latching on to new technologies like kids in a candy shop. But what does that mean for franchisees?
Franchising already had an advantage
Let’s face it, many franchise systems already had a natural advantage when the COVID-19 pandemic hit. While independent businesses were closing their doors—sometimes for good—food service franchises were making the most of their drive-throughs and home delivery services, fitness franchises were offering online workouts, and retail franchises were shipping goods through e-commerce.
All of this flies in the face of the idea espoused by many industry commentators that franchising lags behind in innovation and technology. It was just a bit late in coming to the party.
Technology has become a driver of franchise success
“Franchising has become increasingly influential because it harnesses in a convenient package the drivers of contemporary business: brands, systems, training, ongoing support, management expertise, economies of scale, networking opportunities and technology,” says Australian franchise writer Sarah Stowe. “While all are critical factors, the latter is a more recent addition to the list.”
McDonald’s is a classic example. It could be argued that the franchise started adding healthy options such as salads and fruits to its menu only after years of pressure from doctors, nutritionists, parents and governments. But as soon as minimum wages began to rise around the world, they introduced online and kiosk ordering to slash their franchisees’ labour costs.
Franchising has the most to gain from innovation and technology
“Franchising is one of the business models that stands to gain the most from cloud computing and other digital solutions,” according to Tariq Farid, a tech geek who founded international fruit basket franchise Edible Arrangements.
With more than 1,000 franchisees in 12 countries, Farid credits much of the franchise’s success to technology such as point-of-sale, sales management and video training systems. Several years ago, Edible Arrangements delved into e-commerce and a mobile despatch app, and by 2019 more than 65 percent of the franchise’s business was coming from online orders delivered by the orderer’s closest franchisee.
But the moment when Edible Arrangement’s investment in technology really paid off was when the COVID-19 pandemic hit.
Technology helps franchises to adapt rapidly
“We realised that pivoting our business during this time of uncertainty was crucial in order to help our customers and the communities we serve,” says the company’s president, Cheikh Mboup. “As health concerns grew, we recognised that there were many people who would not be able to go to their local grocery stores to get what they needed in order to stay healthy. Expanding our delivery options and offering fresh produce would allow us to help alleviate some of the issues someone may face if he/she cannot go out during this time.”
Mboup puts Edible Arrangements’ ability to adapt rapidly to the new reality down to the franchise’s strong relationship with its franchisees and suppliers and leveraging the franchise’s existing technology.
“We were able to launch this initiative over the course of just three days,” he says. “Doing so required a chain of actions from contacting our vendor community and franchise partners to utilising our ecommerce platform.”
Will the uptake of new technology continue after COVID-19?
While there is no doubt that the scramble of businesses to survive in 2020 has accelerated the uptake of new business models and technology, many wonder whether this urgency will continue when the pandemic is over—or at least under control—and the world goes back to normal.
But what does ‘normal’ mean? Those franchisors who believe that the world will be different after COVID-19 need to imagine this new world and rethink how they will do business in it. Those who have invested in technology in order to survive will be looking for a strong return on that investment once the economy picks up again. And those who have made the shift into new business models will be more likely to ‘take two bob each way’ than to revert completely to their old model.
What technologies are most benefiting franchisees?
“The point of technology is to make life easy so franchisees can focus on growing their business, not running their business,” says Tariq Farid.
Cloud technology and mobile services have undoubtedly had the biggest impact on this. The major advantage of franchising is leveraging a successful business model into a repeatable engine for business growth for both franchisee and franchisor. Since the franchisor’s success depends on the success of the franchisees, the on-demand access made available through the cloud and mobile services to the all the shared resources needed across every aspect of this business model has become a critical success factor in franchising.
A Boston Consulting Group study of small and medium-sized enterprises (SMEs) found that 25 percent of businesses that use mobile services most intensively have revenues that grow up to twice as fast as their peers and create jobs up to eight times faster.
What are they key benefits of technology for franchisees?
Franchising is a relationship business, and technology helps drive the communication, service and collaboration that underpins strong relationships, both between franchisees and their customers, and franchisees and franchisors.
If you’re looking to buy a franchise, here are some of the key technology benefits you should look for:
- thorough information and transparency on the franchise opportunity offered through a dedicated recruitment website, social media pages and other online sources
- ability to contact and interact with the franchisor and the franchise support team through a range of media such as Zoom, Whatsapp, Teamviewer and email
- onboarding, training and support systems using technology to enhance engagement and learning, and enable you to learn at your own pace and revisit content any time you need to
- full suite of business systems, tools and resources available on a subscription basis to drive down start-up costs and streamline business, marketing and operations management
- online and mobile systems to enhance the customer experience, allow you to build stronger customer relationships and collect customer and market intelligence
- automated plant and equipment where applicable to speed processes and drive down labour costs
- systems to monitor, integrate and analyse market, performance and financial data within your franchised business and across the franchise organisation
- training on the use of data analysis for making informed decisions for the future with more accurate forecasting
The most important question to ask a franchisor
Of course, it is unlikely that all franchise systems will be able to offer all the technology benefits listed above, and if you’re a technophile, you’ll notice that I have left off new and emerging technology that is starting to make its mark in the franchising world—technology such as artificial intelligence (AI), robotics and blockchain.
If, on the other hand, you’re not really up to speed on modern technology, rest assured that in business, technology is your friend and any franchisor worth their salt will provide you with full training and support.
Any franchisor who tells you they have a ‘proven business model’ should be avoided like the plague—well, like COVID-19. In these fast-changing times, no business model can remain proven forever. Those franchises which not only survive but thrive in the future will be those which are agile and unafraid to adapt and evolve when they need to.
So the most important question to ask the franchisor if you are considering buying a franchise may be:
“What continuous processes do you have in place across your organisation to encourage and implement innovation and change for the sustainability of the franchise?”
Robin La Pere is a franchise consultant with more than 20 years’ experience as a franchise manager, CEO and owner as well as a consultant, coach and speaker on franchising. Based in Auckland, New Zealand, he works with clients throughout Australasia and internationally. He is a specialist in business model development, strategic planning, process improvement, innovation and franchise recruitment marketing.