11 Strategic Trends for Franchisors to Consider

Over the past few weeks, FRI's Founder, Greg Nathan, has been facilitating discussions with franchisor executives on trends impacting their networks. Here are 11 thought-provoking trends to emerge.

#1:Changes in franchisor ownership, often driven by private equity, is impacting on the culture of networks and the identity of franchisees. This can drive down the morale, performance and the value of a network if corporate executives fail to understand the significance of the history and culture of their new acquisitions.

#2: Associated with this is an increase in multi-branded 'umbrella' franchisors operating from a central services model. The desire for efficiency and market segment dominance behind this strategy can create a bureaucratic mindset in head offices, as well as confusion for franchisees and franchisor support teams about who is looking after their interests.

#3: The need to keep business models relevant, fresh and profitable is driving unprecedented amounts of change within networks, with new initiatives being rolled out every few months. This can create exhaustion, depletion of resources, and confusion over priorities. Getting buy-in to these initiatives is absolutely vital, but not easy, for franchisor executives.

#4: Associated with this are franchisee and franchisor executive burnout and mental exhaustion, driven by long working hours, 24/7 online connection to devices, and staffing shortages. Economic uncertainty and margin compression are also contributing to this emotional stress. 

#5: This leads us to the challenge of maintaining franchisee profitability and an acceptable ROI on set-up costs. Rising supply chain costs are driving innovation in fit-out design, staffing models, customer service options, product offers, and pricing structures. The goal is of course to maintain a great customer experience that also delivers acceptable margins to franchisees.

#6: Franchisor leaders and franchisees are also navigating how to best manage intergenerational teams that have different expectations, needs and values. For instance how to create team reliability and stability from an increasingly fickle workforce.  Franchisors are also struggling to get the working-from-home/office balance right so franchisees are getting a consistent level of support.

#7. Speaking of generations, succession planning for Baby Boomer franchisees is now a hot issue. While around 40% of franchises are still owned by Boomers, this will drop to under 10% in three years as they reach retirement age. Smart franchisors are providing guidelines on how to fairly value existing franchises so there is a win for sellers and buyers. Also facilitating pools of suitable young investors through career pathway programs, and access to finance through accreditation with reputable lenders.

#8. There is also growth in the use of best practice financial management dashboards, enabling franchisees to readily compare their financial performance with meaningful benchmarks. This access to useful data is driving systematic business improvement and greater satisfaction from mature franchisees.

#9. This systematisation of financial management is also making multi-unit franchising less risky for franchisees who want to expand and work more on their business. Over a third of franchisees are now multi-unit franchisees and this is consistently growing, as franchisees and franchisors appreciate the efficiencies of multi-unit operations, and the benefits of a "grow with who you know" philosophy. 

#10. While cybercrime and technology platform failure are alarming trends for all businesses, the brand damage this can cause to a franchise network is only now being recognised. The mismanagement or leakage of customer data from centralised databases, and the dependence on technology for day-to-day business operations mean franchisors need to increasingly invest in quality technology infrastructure. Who pays for this will become an interesting debate.

#11. Finally, while we are on the topic of technology, AI is increasingly becoming a wild card for franchise networks. The human side of the franchise relationship has traditionally been a source of competitive advantage for a well-run franchise network with a culture of collaboration and care for franchisee success. How AI will impact this is an interesting question.