Trends driving a not so bullet proof business model

One of the basic rules of business is that you do not go into a field of business that you know nothing about without teaming up with someone who is well versed in that side of the business.

The only time when this doesn’t apply is when you are dealing with a franchise. A successful franchisor will go out of their way to make sure that franchisees are well versed in the running of the business. In larger franchises such as Spur, many of the company’s more specialised skills (such as marketing) are housed at head office and are run on behalf of franchisees for a small fee.

But this does not mean that the franchise business model is bullet proof. If there was ever a time when bullet proof business models would be tested, it would be under current market conditions.  There are dynamics in the market that potential franchisees need to pay attention to. Ask Block Buster or anyone who owned a Musica store.

I recently read an article which discusses some of the important trends that are currently driving the franchise market.

A hazy crystal ball
The article points out that, three years ago, no one in the franchise industry could have predicted the sweeping changes and adaptations that have combined to create our new normal. But by and large, the franchise market has benefitted from its willingness to embrace change and manage expectations accordingly.

As 2022 begins, there are plenty of reasons to be hopeful for the continued growth and proliferation of the franchise business model. Not the least of which includes the millions of people who’ve re-evaluated their circumstances and decided they prefer a success story dictated on their own terms.

Unfortunately, no one can predict 2022. But here are four franchise trends we’ll likely see in the future of the industry.

Covid conveniences could be here to stay
The article adds that, while the restaurant and hospitality industry suffered immensely as a result of the pandemic, many of the sudden franchise solutions could be here to stay permanently.

Curbside pickup, innovative ordering and delivery options and a shift to expanded outdoor dining areas have been normalized. Other franchise industry trends, like the success of video conferencing, have improved communications between the franchisor and franchisee. The option of working from home is also a perk that many are loathe to give up without a fight. Don’t be surprised if these and other conveniences end up becoming a part of the franchise model.

Pivoting to a world more virtual
The article points out that, in the before times (Pre-Covid), a franchise brand would pride itself on the in-person training and support programs it developed to ensure its business model’s success. Many set up university-style campus learning programs over the span of a week or two, designed for intensive and immersive training.

But when public health concerns necessitated a change, brands quickly adapted their instruction to virtual platforms. Along the way, many franchisors and franchisees alike quickly discovered this lean and streamlined approach saved a lot of expense in the form of travel and accommodations. Now that this practice has become more commonplace, the trend of pivoting to virtual may be more commonplace.

Take a look at Nike as an example. The company invested heavily on online services and achieved a five year sales forecast in one calendar year.

An escalation of ESG efforts
The article points out that, from one generation to the next, franchise trends are always evolving. The increased focus on environmental, social and governance (ESG) policies has franchises rethinking the way they connect with their target market.

Franchise businesses have begun to weave this messaging into their brand pitch and operations, tailoring their efforts to meet the expectations of a more socially conscious audience. Factors such as diversity, inclusion, accountability and sustainable business practices have begun to take on the same importance as the brand’s value propositions.

A banner year for recruiting candidates
The article adds that the franchising industry has been one of the key beneficiaries of the Great Resignation, of which the final tally for 2021 has recently been released. According to the Bureau of Labour Statistics, approximately 68.9 million employees quit their jobs, were laid off or were discharged. Approximately two-thirds, around 47.4 million, did so voluntarily.

While many decided to seek greener pastures in a similar corporate role, the “I can’t take it anymore” crowd has been a boon to franchisors everywhere. These candidates no longer want a future determined by their employers, but rather a franchise business they themselves can own. With over 3,500 franchise concepts on the market today, competition for new franchisees should be intense and robust. But the sheer number of potential clients will likely make 2022 a growth year for recruiting the next generation of franchise ownership.

Create an enabling environment
As pointed out that the beginning of the article. The franchise model is a good model to follow as it is fairly proven. But the model is not bullet proof, the growth of online entertainment and improved access to the internet led to the downfall of both Blockbuster and Musica.

Traditionally, communication between the franchisor and franchisee is good with a lot of money spend on workshops that focus on professional development. As we read earlier, this shifted from in person events to online communication platforms.

How do we create an effective communication model in a digitised age?

Want collaboration? Instil a committee approach
The article points out that franchisees are the lifeblood of any franchise brand. The proven business model for franchisees to follow is the single best value proposition in your system, but some owners are so focused on their own operations that they miss opportunities to work together and achieve common goals. There are, however, other ideas you can initiate that are designed to foster a collaborative environment.

One such example is the committee approach, put in practice in many internal office settings. Many fans of the hit TV show The Office won’t soon forget the episode in which two rival Christmas Party committees vied for holiday celebration superiority. But what we’re talking about is much more essential. Some franchisors have set up committees of franchisees to oversee aspects of the business operations for the benefit of the system itself. With committees assigned to onboarding new owners, vendor/supplier reviews and marketing/promotions, franchisees who serve on these committees can freely share ideas and insights that help the brand move forward. Making committee assignments a badge of honour also means the franchisees who gain valuable experience and relevance in this setting will help them (and others) become better owners.

Retreat to go forward
The article adds that many franchisors have latched on to an effective tool for creating an environment for honest and open communication with their franchisees. They participate in annual retreats or getaways for the purpose of team building and improving collaboration and communication.

Where budgets for such events are concerned, an annual retreat doesn’t have to mean an all-expenses-paid weeklong trip to Caesar’s Palace in Las Vegas. Franchisors can create an offsite conference experience to fit almost any budget level. But if you do decide to implement this strategy, make sure it’s a setting that’s affordable to attend and appeals to your franchisees. You’ll discover a lot about your owners in a non-office setting and retreats are one of the most popular ways to encourage honest, direct and open communication on both ends of the franchising spectrum.

Moses Singo is a Partner at Genesis Corporate Solutions and is a Junior Business Rescue Practitioner.