10 Franchising Trends for the Year Ahead

By Greg Nathan posted December 21, 2020

"It was the best of times, it was the worst of times."  This opening line from Charles Dickens', A Tale of Two Cities, sums up my past year.

I am grateful for the loyalty of the FRI team, our suppliers, and the assistance provided by the Australian Government, which enabled us to keep going when most of our sales initially vanished. I know for many people in our global franchise community, this stress and anxiety continues. I'm also appreciative of the fantastic support and patience from clients and colleagues as we reinvented our brand this year, and adapted our products to meet the needs of the times. Several larger clients made a point of continuing with projects just to help us keep the cash flow flowing. I'm especially proud of the professional development programs we have delivered virtually to over 3,000 franchisor executives around the world, one way we could contribute to keeping people positive and focused.

The year has also had it challenges, including the exit of a several valued partners and staff. When you have run a business for 32 years, you learn to accept, adjust and accommodate these glitches with faith and tenacity.  And so as we approach 2021, I just wanted you to know we are delivering some of the best work we have ever done, thanks to our passionate team, our talented collaborators, and our loyal clients. We are also continuing to invest in several R&D projects that will bear fruit in the first quarter of 2021.

Last week I was delighted to receive a call from a client requesting a presentation on the big franchising trends. So here's my take on the year ahead.

#1: Stronger franchisees will expand. While the economic fall out from the pandemic has left many small businesses vulnerable, most franchisees will have a better chance of survival. However some will still need to close or sell, creating opportunities in networks for stronger franchisees to expand. I recommend franchisors have clear expandability criteria in place to ensure this growing cohort of multi-unit franchisees are suitable to run these additional businesses. 

#2: Growth will come from within. The best franchise networks have always recruited most new franchisees from within, through a culture of internal succession planning and career development opportunities for high potential staff. The trend will grow, as head offices need to shed experienced staff who want to stay within the group, and multi-unit franchisees (see #1 above) look for young, hungry partners to help them run newly acquired businesses.  

#3: Meetings will continue in virtual formats. While face to face conferences and forums will return in some markets, the majority of meetings will use a virtual or blended format. Blended meetings involve small gatherings of people linked together virtually through interactive platforms such as Zoom and Google Hangouts. These are cost effective and can be extremely engaging when used with competent facilitation processes. For instance, FRI's interactive virtual training this year for franchisors and franchisees, has received equal or better ratings than our face to face sessions.

#4: Performance will increasingly be metrics driven. Fast evolving technology is delivering easier access to real time business data. Smart franchisors are investing in business dashboards to monitor key financial metrics, as well as deeper reporting to understand important trends relating to customer habits. Not only will this provide fresh insights into how to improve the customer experience, it means franchisors and franchisees can use this data to work together and develop intelligent strategies to improve overall profitability. 

#5: Millennials will increasingly take over Support Offices. A growing number of franchisor support office departments are being led by a younger, new breed of leader. While they bring a refreshing openness to diversity and new ideas, the communication skills of this generation are biased to text based formats. They can be impatient with verbal communcations, and fragile when receiving criticism, which can cause tensions in relationships with older franchisees. Ensure your support office team receive regular professional development support in how to maintain empathetic, two-way franchise communications.

#6: Greater transparency, fairness and citizenship will be expected. In 1984, Twisted Sister screamed "We're not gonna take it anymore." Today, a new sense of social justice is sweeping the world, fueled by growing disillusionment in public institutions, and the short-sighted, self-serving behaviour of some businesses. Expect calls for more disclosure by franchisors on how marketing funds are spent, more transparency over decision-making processes, more fairness around fees and supplier rebates, more accountability around culture and behaviour, and more responsibility for the social and environmental impact of products. 

#7: FACs will shift their focus. Franchisees are increasingly becoming impatient with dysfunctional Franchise Advisory Councils that fail to give them a legitimate voice in the decision making process. The 'nodding dog' FAC that is expected to rubber stamp franchisor decisions will become a thing of the past, as will the adversarial franchisee association that spends much of its time and energy fighting with franchisor executives. A mature, collaborative style of FAC with a business development focus will increasingly become the norm.

#8: Field support will focus more on the customer. While field managers have traditionally been strong in the compliance and operational aspects of their roles, many struggle to provide useful business development advice to franchisees. Our research shows that, while the financial literacy of field managers is improving, their ability to coach franchisees on how to retain and grow their customer base is still poor. Many do not understand the basics of marketing or how to analyse customer buying patterns - essential skills for helping franchisees to rebuild their businesses. This will be an important new area of professional development for field managers.

# 9: Franchisee support will be more tailored. There is a growing realisation by franchisors that their franchisees are not all equal in terms of competence, size and support needs. For instance, over half of franchisees in most markets are now in the mature stage of their business life cycle, with 10 or more years under their belt, and many are developing substantial multi-unit operations. These people are operationally and business savvy and are looking for guidance on how to reinvent their businesses and keep themselves fresh and growing. Franchisors will increasingly need to categorise their franchise support into bands to suit the different needs of their franchisees.

#10: Franchisors will focus more on psychological well-being.  If there is one thing the pandemic has taught us all, it is the terrible impact that stress and uncertainty can have on people's mental health. We have for years been highlighting the important role that personal vitality, supportive social networks, and psychological resilience have for business success. Franchisees and franchisor support teams have been psychologically battered by ongoing operational uncertainty, social isolation and financial pressure. Smart franchisors will provide ongoing professional and personal development to rebuild the confidence and optimism of their teams. 

I hope you found these trends thought provoking and useful, and that you have a peaceful and restorative break over the Christmas period. I and my team at FRI look forward to serving you in the year ahead, either through our virtual professional development, workshops, our ACE Franchisee Satisfaction Survey, or our franchisee presentations.

Until next time.

Greg Nathan
Franchise Relationships Institute

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