7 trends changing the face of franchising

There are seven trends that could have an impact on your business.

Earlier this week I asked a senior franchisor executive what his biggest challenges were.

Without hesitation he responded “Declining sales and people”. While the meaning of declining sales is clear, I asked him to explain what he meant about “people”.

He said he was concerned many of their younger managers did not yet have the skills to effectively lead and influence franchisees. I nodded because this is an important issue I’ve observed in many franchise networks. It is also the first of seven trends that are possibly impacting on your business. Here they are, along with some questions to get you thinking about how to put your organisation on the front foot.

1. A new generation is moving into leadership roles

Polls I’ve been taking at gatherings of franchisor executives, and our own survey data, indicate around 20 percent of franchisor executives and 10 percent of franchisees are from Gen Y, and this is growing exponentially. There is also consistent evidence this group does not have the same level of verbal communication and influencing skills of their Gen X and Baby Boomer bosses. To be effective, franchisor executives must build credibility.

Do you have mentoring plans in place to help your younger managers develop these leadership skills?

2. Increases in multi-unit and entrepreneurial franchisees

In most countries, a growing percentage of franchisees are operating multiple units or territories and are now generating the majority of franchise sector revenues. There are also a growing number of larger, well established franchisees playing a significant role in most franchise networks. Our research shows these people are stronger leaders, are more proactive and have higher business acumen. This means they also have more sophisticated support needs.

Do your operations people have the skills and confidence to provide this type of support?

3. Changes in franchisor ownership and the merging of brands

Globally we are seeing an increase in mergers of brands, as well as changes in ownership of franchise networks. This can create confusion and insecurity in franchisees who have signed up longterm with one brand or leadership group, but now find themselves in the care of a new regime. If you want your franchisees to be focused on delivering a great customer experience, they need certainty of direction and leadership with a commitment to the longterm. Stability of the operations people who know the business can be a great help. Do you have a stable, committed support team?

4. A tipping point of franchisees entering the “maturation” stage

Our franchisee tracking research shows the majority of franchisees are now moving into what we call the Maturation stage, with tenures of over six years. These people can become tired, complacent and confused about whether they should stay or go. They need a particular type of coaching from operations people to keep them engaged, committed and reinvesting in their business. Sometimes they will need to be assisted with an exit or succession plan.

Are you having these conversations with your more mature franchisees?

5. Margin compression from rising costs and flattening sales

This is a growing concern in many groups we work with as it can lead to a significant proportion of franchisees becoming financially and personally distressed. Franchisees are increasingly looking to their franchisors for more effective support with local marketing to drive sales and business analytics to improve internal productivity.

Do your operations people have these skills as well as the positive energy to work effectively in these challenging environments?

6. Field managers needing to move from cops to coaches

Data from our franchisee satisfaction surveys shows franchisees are rating their operations support people as strong on compliance and operational skills, but significantly weaker on business acumen, coaching and marketing. Operations people who are strong in these latter areas can add vital additional value to a franchisee’s performance.

How does your team rate?

7. Franchisee push back from change overload

Rapid social and technology changes are continuing to impact on customer buying patterns. To stay relevant franchise networks are having to innovate like never before. These ongoing changes are creating stress and uncertainty, not only for franchisees, but also for operations people. This is because they are bearing the brunt of the inevitable franchisee resistance and resentment that comes from having change thrust on you.

Is your franchisor team equipped with the skills to get franchisee buy-in on vital changes that need to be implemented?

Riding these waves of change

These trends are bringing fresh challenges to the franchising model. They are also mostly to do with leadership and people.

Franchisors that embrace these trends as opportunities, and invest in their people, will ride these changes like a surfer rides a big wave. Franchisors that ignore them are likely to be dumped, not only by their franchisees but by their customers too.