I think it’s fair to say that there’s never been more change happening in the franchise industry than right now. You have two choices: You can ignore change and kiss goodbye to your business, or you can embrace change and look for ways to leverage it to your advantage.
Here are the first two of 10 trends in franchising and what you need to do to keep your business ahead of the game.
1. The minimum wage, full employment economy
Unemployment is down to historic lows in many parts of the world, including the United States where the rate is 4%, Australia where it is 5% and New Zealand where the rate briefly touched 3.3% before rising to 4%.
This is both good and bad for franchising. A thriving economy means people will spend more freely, especially in the categories that dominate franchising – services, retail and quick-service and fast-food restaurants. But most of these categories tend to be labour intensive, which means that in a full-employment economy, which the current economy really is, it can be difficult to source sufficient labour.
This problem is made worse by the fact that labour costs are being driven up in many parts of Europe, the United States, Australia and New Zealand by increasing mandatory minimum wage levels and union activism.
What other franchises are doing:
- McDonald’s and other fast-food chains are replacing the order queue with self-service ordering touchscreen and mobile ordering
- They’re also exploring the use of robotics and other labour-saving devices in the back-of-house
- Many franchises are restructuring employees’ contracts to provide more flexibility around demand through job-sharing and casual contracts
- Fast-casual restaurants such as Chipotle and Paneer Bread make customers order at the counter to reduce wait service
What you need to do:
In response, many franchise systems have started to aggressively explore ways to reduce their reliance on labour. Even in services franchises, where most of their income is derived from the work that their people do rather than the sale of products, franchisors are investing in systems and methods that increase employee productivity and, in the case of some repetitive mundane tasks, replace employees entirely with machines and automation.
How I can help you:
I have made it my mission to help my clients identify and develop systems which will help them simplify and streamline their business and operations process with the aim of making their people more productive and taking cost out of their businesses. Although I am a strategist, not a technical person, I work with a network of people who are experts in developing and customising systems to meet my clients’ particular needs.
2. Futureproofing for recession
Pretty much everyone is predicting the next recession – the question is, when will it hit? Germany and Italy are already nearly there, and the ripple effect from that, trade wars, slowing economic growth and government policies are making the next recession look ever-closer for the rest of the world.
What other franchises are doing:
- Subway launched its $5 foot-long promotion franchise-wide when the GFC hit in 2008, seeing immediate sales spikes of up to 52% during the promotion compared with the prior year
- During the GFC, New Zealand’s Fastway Couriers ran a marketing campaign to promote the savings businesses could make by using Fastway Couriers – and saw sales jump by 22%
- Some of the franchisees of Abrakadoodle, a US-based children’s art tuition franchise, found that parents were struggling to pay for after-school programmes, so they approached schools to run their art classes for them on contract – very successfully, as it turned out
- The average annual profit of Australian chicken franchise Lenard’s rose 16% in the six months to 31 December 2008 due to the introduction of a new technology package which monitored financial performance and shared sales information among stores
What can you do to protect your franchise from the inevitable?
Well, if you’re in hair cutting, tax preparation, accounting, shipping, packaging, child and pet care, vehicle repair, home maintenance, computer-related services or used-goods retail, you’re already in an industry that has proven to be least affected by past recessions. If you’re in the hospitality industry, you could do what many did during the GFC and offer lower-cost meals and deals to your menu.
How I can help you:
I’m so committed to helping franchise and business owners to get through the next recession that I’ve written an article which you can see here
and will very soon be putting out a book
on how you can beat the bust and not only survive, but also thrive in the coming recession.
3. Going green and giving back to the community
I admit it – I was like a lot of people and thought that “green business” was very much a niche thing until I saw the results of a recent home renovation survey. The survey showed that sustainability, eco-friendliness and energy efficiency are priorities for more than 60% of homeowners looking to renovate.
No wonder green franchises are springing up everywhere.
What other franchises are doing:
- Giving its franchisees the distinction of being part of the first housing group to build to international green standards, Australian-based Green Homes claims to be New Zealand’s fastest growing new home franchise
- Started in 2007, New Zealand’s Green Cabs had the distinction of being the first taxi company to use only low-emission vehicles, a distinction they have built on with zero-emission electric vehicles and planting a tree for every fare they receive (270,000 planted to date)
- groOrganic Gardens, a franchise dedicated to helping people find an affordable way to grow their own produce organically, enlisted the help of the Kardashian family to promote their system for making money while doing good for the environment
- While there are hundreds of franchises which call themselves “green”, there are two categories I am a bit dubious about – the new cannabis franchises sprouting in the United States, and franchises which specialise in “beautifying your lawn” by spraying dead grass with green paint!
What you need to do:
If you’re already offering healthy, organic, vegan, fair-trade, recycled, pre-loved or energy-saving choices, you’re already part of the green movement, and as the movement grows, more opportunities will appear.
If you’re not at least giving a nod toward eco-friendliness or giving back to your community, you may find that competitors who actually give a damn may start gaining an edge over your business.
How I can help you:
As a firm believer that no business can abrogate its responsibilities to the community it serves, I have made it my business to seek out ways of operating businesses more sustainably, efficiently and beneficially. Click here for a free Initial Consultation on how these may be applied to your business.
4. Focus on franchisees’ unit level economics
I saw in the results of a survey recently that some 70% of franchisors still don’t bother to monitor their franchisees’ profitability. Given the basic principles that franchisors cannot truly be successful unless their franchisees are, that profitability rather than revenue is the true measure of success and that you cannot manage what you do not measure, I find this appallingly negligent.
Bear in mind, though, that the Critical Success Factors in any franchise must include more than just franchisee profitability. CSFs vary by business type, but world-class franchises also monitor customer satisfaction and loyalty, brand recognition and employee satisfaction, not only across the network but also on a local level.
What other franchises are doing:
- The rise of cloud-based financial and point-of-sale management systems such as Xero and Vend has revolutionised franchise management around the world, enabling franchisors to check franchisee performance in real-time and provide guidance and support where necessary
- Anytime Fitness sees customer loyalty as a CSF, targeting a customer retention rate of 85%, and includes detailed guidance on “Member Retention” and “How to Handle Member Cancellations” in its franchise manual
- Recognising that employee satisfaction is integral to customer satisfaction, the new executive team of struggling US-based fast-food franchise Jack in the Box made it a CSF and after a 24-year absence from the Franchise 500® rankings, made a stunning comeback in the 2015 Franchise 500®, debuting at No. 4
What you need to do:
The best franchise candidates will always seek out and invest in brands with solid business fundamentals. Smart franchisors know that using franchise management tools to monitor and support their franchisees’ success is not being an intrusive “big brother” but will help to strengthen the business fundamentals of their entire networks.
How I can help you:
Some years ago I was involved in a best practice study tour of some of the world’s leading franchises. One of the learnings we came away with was that these franchises make it their business to understand the drivers of their franchisees’ businesses even better than their franchisees’ do. Since then, I’ve worked with developers to identify and create cloud-based systems that connect franchisors and franchisees for the benefit of both.
For a free Initial Consultation on how you can increase your franchisees’ performance and of course your own royalty revenue, contact me now.
I'm Robin La Pere, no ordinary business expansion and franchise consultant. I've been involved in franchising for more than 20 years, and I am one of the few franchise consultants I know who have a combination of franchise management, franchise ownership and franchise consulting experience. I understand the industry at every level and across a wide range of business types. I have worked with many franchise systems to improve, develop and innovate.
As a franchise consultant, I keep a close eye on news in the franchise industry, and in this article, I look at the trends which are impacting the industry and what you can do to take advantage of them in your business.
If you're looking to keep up with the latest developments in your franchise, or simply move into the future with greater confidence, I recommend you download my free e-book,
The Business Model Canvas for Franchisors, and
take advantage
of my free Initial Consultation to discuss some of the ways I can help you.
Download your free e-book
You have an existing business which has
grown and become profitable, but you want more. How do you expand, especially if you don't have much time or money?
Send me your email and I'll email you my e-book 3 Ways to Expand Your Business Using Other People's Time and Money (OPTM):
Download 3 Ways to Expand my Business Using OPTM
Relevant Articles
Download your free e-book
A major strength of franchising is that it’s based on tried and true business models. Trouble is, in this fast-changing business environment, what’s tried and true one year may be tired or irrelevant the next.
Not surprisingly, one out of three franchisors is concerned about the viability of their business model.
The 'Business Model Canvas' has emerged as a powerful tool for developing and updating business models. Recognising that franchise businesses differ in several ways from other business types, I have come up with a new version of the Business Model Canvas designed specifically for franchises.
Send me your email and I'll email you my e-book The Business Model Canvas for Franchisors:
