This article first appeared in Business Franchise Australia and New Zealand magazine.
Franchise vs Standalone Business
Is a franchise better than an independent business in a crisis?
These 5 lessons from the Covid-19 crisis show the advantages that owning a franchise can have over owning a stand-alone business.
Lesson 1: We’re all in this together
In business as in life and nature, there’s strength in numbers. We’re all stronger when we stand together, and that’s what franchising is all about – or should be all about.
The problem is that not all businesses have been affected by the pandemic with the same severity.
Travel agencies, retailers, entertainment services and restaurants have been among the hardest hit while many maintenance, technology and food delivery services have actually thrived.
Another problem has been that not all franchisors responded to the lockdown in the same way. Green Acres, one of New Zealand’s longest-established and largest lawnmowing and cleaning franchises, was reported to have continued to demand fees, even though most of their franchisees were no longer able to work and earn income.
But other franchisors set the standard for crisis management. McDonald’s is estimated to have foregone at least US$1 billion in deferred rent and royalty payments as sales slumped worldwide, and then gave franchisees US$210 million to rebuild sales as lockdowns began to ease in many corners of the globe.
The reason for all this apparent altruism is, of course, that franchisors understand that without franchisees, they don’t have a business. By helping their franchisees, they are helping themselves.
But many franchisors have realised that helping their franchisees financially is not enough. They know that if their franchises are to not only survive the Covid-19 crisis but position themselves for growth in the post-crisis world, they must fast-track technology development and product/service innovation and transform their business models.
And that means working more closely than ever with their franchisees to implement these changes. And even involving franchisees – who are closer to customers than the franchisors – in the change-making development and decision process.
Lesson 2: Provide strong leadership
The Covid-19 crisis is like nothing the franchise industry has ever seen before. There have been other pandemics but no one could have anticipated the far-reaching impact of this one on the entire world. So no one could have planned, let alone prepared for it.
Or could they?
They say history never repeats but it can offer lessons in dealing with similar situations. Australia and New Zealand are good examples. Both countries have experienced more than their fair share of catastrophic events, what with Australia’s bushfires and New Zealand’s earthquakes.
“[As a result] we've developed a very good crisis management approach,” says Chris Quin, chief executive of Foodstuffs, New Zealand’s largest supermarket cooperative. “The way people collaborate, take accountability and innovate is spectacular.”
Leadership is key to good crisis management, and best practice this far into the pandemic would indicate that communication, positivity, transparency, inclusiveness and forward thinking are the keys to effective leadership.
“Amidst the chaos of our world right now, our instinct may be to hunker down, wait it out, and weather the storm — essentially, hit pause,” says Michael Ruiz, CEO of Global Talent Solutions, a specialist executive search firm for the franchise industry. “But for business owners, and especially franchisors who have an entire network of partners to consider, hitting pause is the worst move to make. Now’s the time to keep swimming to stay alive.”
Lesson 3: Get closer to suppliers and customers
New Zealand Prime Minister Jacinda Ardern’s “we are here for you” approach to the pandemic has been widely lauded around the world. Given that anxiety and depression are now at pandemic levels themselves because of the crisis, business leaders as well as politicians have a role to play in the recovery by understanding and meeting their customers’ changing needs.
For leaders in the franchise industry, that has brought even greater recognition of the importance of getting closer to those who are closest to the franchises’ customers – their franchisees. For many whose supply chains have been disrupted or have the potential to be disrupted, it has also been imperative to get closer to their suppliers.
But how do you get closer during a lockdown or when everybody’s social distancing?
Here’s where the majority of franchises have several other advantages over most independent businesses. Because franchise networks are geographically widespread, many have already developed smart ways to keep in touch using Zoom and other technology for remote communication. Many also use centralised financial, point of sale and customer relationship management systems to monitor their markets and their franchisees’ performance so they can provide management guidance where required.
The prevalence of drive-throughs, e-commerce and delivery services in franchised businesses has also given them a greater head-start over independent businesses during the crisis.
These advantages combined with the fact that franchises with their group buying power tend to have strong relationships with suppliers have made franchising an even more attractive option for would-be entrepreneurs, even during these difficult times.
Lesson 4: Be prepared to pivot
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.
Lesson 5: Get ready for growth
There’s a danger that while franchise leaders are intently focused on dealing with current challenges, they will lose sight of their overall vision. But because the crisis is so deep and pervasive, many businesses can already see that their future will be quite different from the past, says veteran corporate leader, Rob Campbell.
“Executive teams and boards have swung into action, in my experience, remarkably quickly and effectively,” he says. “Many of them are change agents already remaking their businesses… they’re also working on how to emerge as better businesses.”
The question is: What will the world look like once the pandemic is over or at least contained? Once again, smart franchisors are working with consultants and government bodies to envisage future scenarios and using them to develop possible strategies. Just as importantly, they are collaborating with their franchisees, suppliers and other partners in order to become more agile, rapidly assessing changing situations and then pivoting to take advantage of them and become stronger businesses.
Whether you own or manage an existing franchise system, are thinking about franchising your existing business or are considering buying a franchise business, now is the time to obtain expert help.
I have a track record of success in all aspects of starting and developing franchises and improving and innovating in existing franchises.
Contact me for a confidential, no obligation Initial Consultation on +64 9 360 6063 or email robin@noordinary.co.nz.
I look forward to hearing from you.
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.
My business advisory services have been approved under the New Zealand Government's Covid-19 Support scheme. Which means if you're a business owner or manager and need some help – and who doesn't in these troubled times? – you may be entitled to a grant for full funding.
In this article, which was first published in
Business Franchise Australia and New Zealand magazine, I look at 5 advantages that franchise businesses have over stand-alone businesses which are of particular relevance in times of crisis, whether pandemic or recession or both.
If you're thinking of starting your own business, I recommend you consider these advantages carefully. Especially if you have never been in business before or are nervous about going it alone. Even seasoned business people buy into franchises because they recognise the advantages of scale, branding and group buying power.
If you are a franchisor, this article points out what you need to be doing to fully capitalise on the advantages of franchising in your own franchise. Often it takes an objective third party, an experienced franchise consultant like me, to spot areas where you could improve or innovate for the benefit of your franchisees as well as yourself. And it's often easier for a third party to work with franchisees to implement change in a franchise, some thing I have had substantial success with.
Don't hesitate to contact me for a free Initial Consultation
to chat in confidence about your needs.
What my clients say about me
"Robin had a significant and positive impact on Signature Homes as a whole, as evidenced by the fact that our business became one of the fastest growing businesses in New Zealand, winning a Deloittes Fast 50 Business Award, seeing total sales soar by more than 500% over a five-year period, and assisting to establish Signature Homes as a leader in the New Zealand housing industry.
"Such was Robin’s commitment to and impact on the business that he became more than just a consultant to, but as much a trusted ‘partner’ in, the business’s development."
Gavin Hunt, Owner, Signature Homes
[My note: I later helped Signature Homes win four awards in the 2016/17 New Zealand Franchise Awards, including the Supreme Franchise Award.]
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