Will I or won’t I? Trends Influencing Franchising Decisions
The Covid-19 pandemic was expected to devastate the economy – and the franchise industry.
It didn’t. Both the Australian and New Zealand economies bounced back strongly after taking hard hits when last year’s lockdowns went into effect. And many franchises found themselves better positioned to adapt than their competitors – especially those which already had drive-through, online and delivery facilities.
With the profound impact of the COVID pandemic on the economy, doing your own research before investing in a franchise is more important than ever. In particular, there are two more questions you must always ask:
- Adapt: How readily has the franchise adapted to the changes brought by the pandemic?
- Adopt: How readily has the franchise adopted the new opportunities brought by the pandemic?
The questions may seem the same, but they are different.
Question 1 is about being responsive. Responding to a situation – in this case, the pandemic – by making some changes to remain viable in a changing world.
We know that many business and technology trends that were under way before Covid-19 were accelerated by the pandemic. Zoom, e-commerce, 5G, artificial intelligence, cloud computing, cybersecurity, 3D printing and drones, among others.
Many franchises have been forced to accelerate their uptake of these trends just to keep up. The key words are forced and keep up. Nothing wrong with that. Most of these franchises were able to remain competitive. But the real key to long-term success is to look beyond survival.
Survival? That’s not enough
Question 2 is about being proactive, not just responsive. There’s a saying that the best way to predict the future is to create the future. The franchises which have proved to be the strongest and most sustainable over time have always been those who have anticipated future trends and problems – and acted to take advantage of the trends and avoid or solve the problems.
What does it take to be proactive?
The first step is to embrace uncertainty by cultivating the ability to detect signals that indicate unanticipated threats and opportunities. One of the ways to do this, if you’re a franchisor, is to listen to your franchisees. They are your early warning detectors in local markets. They know what your customers and competitors are doing – and can report that back to head office, if you encourage them to.
So if you’re considering buying into a franchise, ask about that. Ask how they manage their relationship with their franchisees and how they involve franchisees in strategic decision making. Ask about how they responded to the pandemic and how their leadership, strategy and culture may have changed as a result. Ask them how they have taken advantage of technology and innovation and integrated them into new processes, organisation models and ways of working.
And ask them if they have a ‘fix it before it breaks’ attitude.
How Covid-19 has impacted franchising
Although Australia and New Zealand have been less affected by Covid-19 than most other countries around the world, the social and economic impacts of the pandemic have still been far reaching. Aussies and Kiwis have become more worried about business failure, unemployment and healthcare. They are being more careful in their spending and in their contact with other people. Even when there are no lockdowns in force, many people are avoiding the gym, shopping centres and other places where crowds gather.
And that is having spinoff effects on business – including franchising.
Smart franchises finding opportunities in crisis
Smart franchises have looked to new consumer behaviours as an opportunity, not a threat. All franchisors know – or should know – that without successful franchisees, they wouldn’t exist. That’s why so many of them have provided additional support, deferred or reduced franchise fees and negotiated rent breaks for their franchisees.
But the smartest franchises have taken it even further.
In the face of pandemic closures and hygiene restrictions, franchises such as Snap, Anytime and Jetts Fitness had to be flexible, think quickly and pivot their business models to find other revenue opportunities and challenge the raft of new online home fitness technologies such as Peloton, Mirror and Tempo.
All went online, providing diet plans, body weight workouts, aerobics classes, live workouts and one-on-one meetings with trainers. Anytime Fitness had already become the first global fitness chain to offer virtual classes by New Zealand-based Les Mills, one of the most recognisable group fitness brands worldwide.
Food Services Franchises
Fast food franchises such as McDonald’s, Burger King and Wendy’s already had an enormous advantage during lockdowns – drive-throughs and home delivery services. Slightly-slower food franchises such as Domino’s and Pizza Hut had home delivery. In Australia, McDonald’s even began selling milk and bread through its drive-throughs.
The pandemic brought rapid change from these chains’ smaller competitors as they fought to catch up. Everyone went online, offering takeaway as well as online ordering and delivery – sometimes employing their own drivers but more often using third party services such as Menulog, Deliveroo and Uber Eats. As soon as they could, dine-in restaurants and cafes offered socially-distanced tables.
Tutoring franchises had been enjoying healthy growth but that growth was eclipsed by a multiplicity of online EduTech services once the pandemic struck. To combat that and continue to provide lessons for its students while schools and its Learning Centres were closed, my client Thinking2morrow started offering online classes. T2M’s competitive advantage: One-to-one tutoring from real people to support its personalised maths and English programmes. The move also rescued T2M’s first franchisee, who had opened her Learning Centre just two weeks before the first Covid-19 lockdown, and gave the fledgling franchise the opportunity to expand far beyond its normal catchment area.
When all of this is over, will everything go back to normal?
There’s been a lot of speculation about this – or what the ‘new normal’ might look like. Has Covid-19 transformed business forever – or will it revert back to ‘the good old days’?
Of course, we have no idea about what will happen in the aftermath of the pandemic, or how long that will take. But my view and that of many other seasoned consultants who have been through other recessions and disruptions over the years is that while things may ‘normalise’ somewhat, there is no going back.
The future belongs to those who seize it today.
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.