A Peek into the Shape of Things to Come

You haven't heard from me for a few weeks as our CEO, Karli Furmage, and I have been at the International Franchise Association Convention and subsequently working with several USA clients. Because the USA franchising scene tends to be the shape of things to come, I thought you might enjoy a summary of some observations and trends.

Technology continues to drive efficiencies within franchise systems, whether this be in relation to benchmarking, training, marketing, recruitment or communication. Nine years ago I reckon 20% of vendors at the IFA convention were technology related companies. This year my guess is 80% plus of the 350 or so vendor companies were offering technology related solutions.

This brings us to the impact of the digital world on franchise systems. Domino’s Australian CEO, Don Meij, recently told me he saw Domino’s as now being as much a technology as a pizza company. Just as Domino’s has embraced technology to enhance their customer experience, most established retail franchise systems in the USA are now using the internet creatively, not just as an alternative sales distribution channel, but as a way to complement how customers are interfacing with their stores.

While on the topic of digital, social media continues to be the buzz word. For instance participants at the IFA convention were connected through a mobile app, enabling them to track events, connect with colleagues and keep up to date with convention news. And there were numerous sessions on how to use social media for business purposes. A concern that has emerged for many franchisors is how they can retain some semblance of “control” when they really have little, given social media puts the power largely in the hands of its users.

With regard to the mood in the USA, there appears to be mild optimism as the shock and devastation of the GFC subsides. Ironically the GFC did have a positive impact on the franchise sector. Faced with a decline in new franchise sales due to a virtual freeze in funding, franchisors were forced to look after their existing franchisees like never before. This has led to a laser focus on measuring and improving unit level profitability.

As a result, financial benchmarking is now a standard operational strategy in most franchise systems. While technology is making this a lot easier for franchisors and franchisees, the smarter franchise systems are using this transparency of data to drive performance. It is worth noting that many Australian companies, like Bakers Delight, have led the world in this area for years.

As the US economy moves in a more positive direction, the sale of new franchises is again increasing. While previously there was a heavy reliance on franchising portals for leads, franchisee recruitment is now largely being driven by good quality content on franchisor web sites, with franchisors using PR and social media to attract potential franchisees directly to their websites.

Speaking of franchisee growth, multi-unit franchising continues to go from strength to strength, with over half of all franchisees in the US now being run by multi-unit operators (compared to 23% in Australia). A recent multi-unit conference in the USA last week attracted over 1000 people. (By the way, registrations for our own National Multi-Unit Summit open this week. Watch this space.)

A final observation is the efforts of US franchisors to engage more with their franchisees and build more of a culture of collaboration. This has been driven by a need to get franchisee buy-in to relentless change, which has in turn been largely driven by the rapid shifts in technology mentioned above. I am proud to say this culture of engagement is something the Australian franchise sector has been doing well for years, and it positions Australian franchisors strongly as the inevitable waves of change hit.

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