Living in a post-pandemic world has undoubtedly changed the way consumers go about their everyday lives. Over the past two years, many of us have found that our ambitions have changed or evolved in ways we might previously not have imagined. While on a personal level, we may have decided to take positive steps to improve our health and wellbeing, from a business perspective, goals that had previously been compartmentalized as long-term ambitions had to be realized even faster. Competitive brands have succeeded in speeding up digital transformations to reach customers for whom brand loyalty has dwindled and convenience is king.
Digital transformation and progression and meeting consumers’ changing expectations and needs have undoubtedly played a pivotal role in the growth of franchising in the past two years. In the face of enormous pressure and uncertainty, many franchisors have chosen an investment in new innovations over stagnation – optimizing processes and systems, breaking down silos, growing loyalty, helping communities, and working towards a better future.
In franchising, these opportunities – and our ability to jump to them – have resulted in tremendous growth and expansions. Furthermore, the pandemic unveiled a pool of talent ready to take the plunge in switching from employee to business owner.
“Whether potential franchisees are seizing the moment to enter or expand their franchise business, or folks are just poking their heads out into this post-pandemic world, franchising remains the constant,” says Justin Livingston, owner of Franchise Transformations. “During the pandemic, the franchise industry worked together as a whole to take on the challenges presented to so many businesses. It now remains, maybe more so than ever, the smart and safest path into business ownership.”
According to the 2022 Economic Forecast for Franchising, 2021 was an exceptional year for franchising in the U.S., and this recovery trend has continued in 2022, bolstered by a strengthening labor market and steady consumer spending. But while the franchising sector continues to trend upwards alongside overall economic progression in the U.S., the overall pace of growth has moderated (due to headwinds in the economy), to a steadier and more sustainable rate.
There are certainly challenges looming large on the horizon, not least of which are rising competition and upheaval caused by global events. The tsunami of troubling news surrounding the state of the global economy reflects the struggles of many consumers, who face myriad waves of financial obstacles – not least of which is an uncertain future.
According to a recent global report by Dynata, Staying Ahead of the Downturn, many people are pessimistic about economic conditions – and perception matters, as consumers have the power to influence economies. Almost half of those surveyed “strongly” or “very much” believe we’re entering a recession (regardless of official determinations or economists’ assessments) and 56 per cent said their national leaders aren’t doing enough to fight inflation. 53 per cent of consumers globally are struggling “at least slightly” to afford basic needs and almost one in four consumers globally think their personal finances will worsen. Furthermore, one in five consumers around the globe (around 19 per cent) feel “burdened” by debt, this number being higher in the U.S., Canada and Australia.
To cope with climbing costs and the threat of a downturn or recession, many consumers are re-evaluating their lifestyles and looking at ways to reduce their overall spending – especially on non-essential purchases – as well as exploring more thrifty means to save dollars, like the secondhand market.
1. Values still matter
But the picture isn’t as simple as those conveyed by general statistics. There are generational as well as national nuances in consumer behavior when it comes to spending decisions. While seven in every 10 Baby Boomers are spending less now on dining, entertainment, clothing, and travel than they were at the beginning of the year, many consumers – especially younger generations – remain willing to spend extra on products and services that reflect their values, or are perceived as healthier and/or environmentally friendly.
According to market research by Adyen (The Retail Report 2022), impact is an important loyalty driver in the U.K., with 63 per cent of consumers believing brands have a responsibility to ensure their stock is ethically sourced and produced, and 43 per cent preferring brands that stand up for causes they believe in. And 26 per cent want to donate to good causes while they’re paying. For example, the influential U.K. fast food restaurant, Leon, which runs around a third of its restaurants under a franchise agreement with HMSHost, integrated a donate-at-checkout feature into its in-store kiosks, enabling customers to donate directly to its charity partner Bags of Taste. This kind of brand authenticity and commitment to good causes is generating customer loyalty for Leon, along with many other businesses around the world, with eight in 10 of “values-driven” consumers saying they’re likely to continue to spend extra on items or services they consider higher-quality and healthier, even with a rising cost of living.
Gen Z and Millennials, as well as consumers in China and U.S., are among those most likely to say they “almost always” or “often” pay more for something that represents their values. More than half of “values-driven” consumers also report frequently spending more on things that are local, sustainable, and have a brand that they perceive as “authentic”.
2. Choice is making consumers more discerning
The last few years have seen foundational shifts in consumer behavior, from the changing role of the store in the purchase journey, to shoppers willing to try new brands. A brand-new Think with Google report has unveiled data that proves consumers are window shopping online more, not only searching for specific items by a particular brand but also seeing what’s available more widely, with generic queries like ‘best takeaway’ growing faster than branded queries. Noted marketer and thought leader, Seth Godin, believes that online window shopping is both an opportunity and a risk for businesses: “What consumers have been taught over the past 10 years, but especially the past two, is that everything is a click away,” he remarks. “That’s good news, in that everyone can click over to you, but bad news because it means all the customers that you’re counting on can click over to your competitors. You’ve got to build a window worth looking at.”
Just as they do in brick-and-mortar stores, consumers want to inspect what they’re purchasing, and there’s been a more than 40 per cent increase in search interest on YouTube for terms containing ‘review’. Images, videos, and ads displayed on Google Search all help to build a 360-degree view of products and services.
More choice means more fickle consumers. With people spending more time window shopping online, they’re tempted by new brands more often. The online environment is also facilitating more brand trials than in-store. Seth believes that retailers are approaching this challenge in two different ways. Some are trying to be everything to everyone. However, the ones that will be the most successful take a different approach. “There are a whole other group of marketers who are paying attention to idiosyncrasy – to being unique, to being worth seeking out. Their brand loyalty isn’t going down, it’s going up,” he points out.
3. Omnichannel is the expectation
More shopping was done online during the pandemic, and that shift changed how people behave today. Consumers are now more likely to turn to the internet than a few years ago to do their shopping research, with 30 per cent of retail consumers saying they browse online most or every time they purchase in-store and 24 per cent going into a store most or every time they purchase online. Even when visiting the mall, consumers are searching online ahead of visits. As a result, omnichannel shopping is more widespread than ever.
Once they’ve narrowed down their options with online research, consumers are using the internet again to find out where to go – for example, “24-hour pizza restaurant near me”.
According to Cate Trotter, founder and head of trends at Insider Trends, omnichannel success is determined by designing online and offline channels that work together. We see a lot of retailers who think a lot about the flagship store, but then don’t think about how the flagship can link in with the app or mobile, and then how the mobile can enhance or personalize the in-store experience,” she explains.
Across the board, franchisors are striving to improve their omnichannel experiences – and it’s paying off. “We are seeing more and more consumers leveraging digital ordering channels to access our brands. As a result of this increased demand for accessibility, all brands are making major improvements across loyalty programs and digital channels, says Claiborne Irby, SVP, strategy and consumer insights at Focus Brands, the parent company of iconic brands Auntie Anne’s, Carvel, Cinnabon, Jamba, McAlister’s Deli, Moe’s Southwest Grill, and Schlotzsky’s. “We are using technology to deliver not just functional, but meaningful personalized experiences, and are using this to our advantage by building out enterprise functions with the goal of driving higher average checks and creating greater lifetime value for our customers.”
“Much like remote workers, remote consumers are here to stay,” agrees Monica Feid, COO of BizCom Public Relations. “If the pandemic taught us anything, it’s that convenience trumps loyalty.
The companies that understand that are the ones that will continue to prosper. Additionally, the rate at which companies innovated over the last two years addressed a growing demand to meet consumers wherever they are – online, through an app, via social media, and more. Buyers continue to look for that frictionless experience in a post-pandemic world. Consumers may return to older habits to some degree, but they absolutely expect to have a choice. Businesses have to communicate and promote a multitude of options for consumers to engage on their own terms. They have to look at this as an opportunity rather than a hurdle.
“Little Caesars was contactless long before COVID when the Pizza Portal rolled out in 2018,” she adds. “Its popularity only continued to rise throughout the pandemic as consumers ordered pizzas through the mobile app, received notifications when it was ready for pickup, and safely entered their local Little Caesars to retrieve their order via the heated, self-serve Pizza Portal with a secure pin or QR code.
“And when 9Round, the world’s largest kickboxing franchise, launched 9Round Now, the virtual workouts allowed members to continue exercising. In fact, it even reached new consumers who didn’t have a 9Round gym in their local market. Today, the hybrid business model is alive and well, allowing 9Round members to workout inside the gym and literally anywhere else.”
Both businesses and consumers now have a taste for what’s possible with tech – and now there’s no going back. 61 per cent of consumers believe that retailers should deliver the same cross-channel flexibility they provided during the pandemic (The Retail Report 2022, Adyen), so it makes sense that linking online, in-app, and in-store payments with a single system – unified commerce – has proved to enhance both brand resilience and customer satisfaction. In fact, Adyen’s research shows that globally, unified commerce increases businesses’ performance by nine per cent.
“We want to offer our franchisees the best tools to run their businesses,” says Casper Mooyman, head of marketing at Dominos, a brand that has embraced this approach. “If you split out your online and in-store payments you have all these different systems and tools and reports from which the franchisee must collect the revenue per day, often by themselves. Unified commerce means we have a one-stop environment for franchisees to better understand what money they’ve made from which channels.”
4. Consumers are embracing YOLO like never before
According to global market research by Mintel, consumers are seeking sources of joy as the continuing pandemic and other local and global crises — from political unrest to environmental threats — have caused them anxiety and stress. “Consumers need to allow themselves to feel much-needed joy and happiness,” summarizes its Global Consumer Trends 2022 report. “Consumers are looking for fun and playfulness in all areas of life. They have a new sense of appreciation for finding joy in everyday things and being in the moment.”
International bar chain Coyote Ugly epitomizes this view. “People spent far too long at home during the pandemic going a bit stir-crazy,” says Justin Livingston. “As regulations lifted, the human need for interaction kicked into over-drive. Getting back out to bars and restaurants was more than just a night out, it was proof we were heading back to ‘normal’. A great night at the party that is Coyote Ugly proved to be a concept that translated across languages and cultures, as the need to connect has never been greater.”
The pandemic prompted us to hit the reset button in many different parts of our lives. It acted as a catalyst not only for business and digital innovation – somewhere in the background, it spurred a form of personal innovation too. According to the global GWA survey, Connecting the Dots: “What we’re seeing today are seismic changes in the collective mindset. In the past year, we’ve seen U.S. consumers feeling bolder, more adventurous, and empowered.”
Meanwhile, there’s a diminishing need to be careful and responsible – treating oneself and indulging are in the top three things that have become more important to consumers in the past year (39 per cent say this), behind saving money (53 per cent) and spending time with loved ones (47 per cent), signaling a pent-up desire to give in to temptations. “In practice, this may mean a number of things – from letting go of the safety net and normalizing quitting, to pursuing new experiences, ventures, and passions,” the report concludes. “One fruitful way for brands to stand out next year would be to align their messaging and tone of voice with this new outlook. You only live once (YOLO) campaigns that nurture consumers’ new aspirations are likely to resonate.”
A new era of convenience
Michael Parlapiano, managing director of The Culinary Edge
“We’re clearly entering a new era of convenience. The driver in the acceleration and growth of convenience is the fact that COVID cemented digital-first behavioral tendencies. Today’s consumer, especially Gen-Z, looks to digital ways of experiencing and ordering products as their first choice.
The pandemic actually enhanced this younger generation’s interest in F&B. Think TikTok food videos, more celeb partnerships over social, and time at home to experiment with food. The number of food influencers that came out of the last two years has been astronomical.
But this generation also has a short attention span, which contributes to their desire to have convenient experiences that are fast and efficient.
To meet this demand and necessity for digital accessibility, operators are increasingly turning to technology. Today, you’re as likely to hear a CEO of a major F&B brand talk about their ‘tech stack’ as they are about their menu and offering. This embrace of technology has benefits on both sides: making the digital and product experience better and quicker for the guest, and the back-of-house operation more efficient and streamlined.
As brands continue to shrink their dining rooms, we’ll see kiosks proliferate for the in-store order experience, allowing guests to browse and customize their orders, and get their food more quickly, all without interfacing with a human being.
The key to success in this new era will be learning ways to hit the sweet spot between being able to provide unique branded experiences and frictionless convenience across all touchpoints and channels.”
We’re invested in listening to our consumers
Claiborne Irby is SVP, strategy and consumer insights at Focus Brands
“Over the past three years, we turned on and enhanced tools to listen to the voice of our customers. We have a team dedicated to analyzing this consumer data to better understand their needs. As a result, we have stronger insight into how to win with our customers, and we’re using these insights to create better experiences at our brands’ restaurants, bakeries, and ice cream shops. Some elements at the top of the list: delivering an exceptional digital experience regardless of whether it’s a pickup, delivery, or tableside order and delivering more personalized offers and loyalty benefits to grow and deepen our relationships with our millions of customers.”
Future of franchising is tech
Jamie Izaks, president of All Points Public Relations
“In 2023, we will see more tangible results of the hiring crunch within franchise businesses. This will be seen in franchise business models that will reduce the need for human capital by introducing fresh automation innovation. Robotics and other forms of computerized interaction will become more visible. Franchise businesses in the restaurant and retail sectors have been testing technology in 2022 and it will become more mainstream in 2023 through franchise system training, as processes and best practices are formalized for nationwide or possibly global rollouts.”
A customer-centric drive-thru model
Justin Livingston, CFE, owner of Franchise Transformations
“Ziggi’s coffee was a setup for success when entering the pandemic. With a commitment to simple, high-speed, high-quality, low-contact drive-thrus, where the customer experience is a key differentiator, the pandemic provided an opportunity to focus on the existing processes. With systems already in place, Ziggi’s was able to help people in need of a treat or looking for a bit of normalcy in the days when life was anything but normal.
Post-pandemic, a focus on technology – both in stores for franchisee communication and training and the release of a state-of-the-art app – has helped support the customer focus and allowed Ziggi’s to be the best part of their customer’s day. Ziggi’s has pioneered how to be customer-centric in the coffee drive-thru space, challenging cold box style ordering and replacing it with a familiar, more interactive, approach.
Economizing can bring improvement
Debra Vilcris, president Fishman Public Relations
“Our restaurant clients across the fast-casual, QSR, snack & treat and full-service dining categories have gone through a heck of a few years. We’ve been super impressed with their resiliency. While none were unscathed, every single one came back in 2022 with a ‘new and improved’ brand and operations.
The key trends we saw this year and will continue to see next year were across-the-board investments and increased focus on e-commerce, robotics and technology to improve both the on-premise and off-premise customer experience. We also saw and continue to see an increase in our brands creating ghost kitchens and continuing to refine those.
On the franchising side of things, we’ve seen almost all of our brands shrink their footprints and/or make more efficient use of space, allowing them to offer flexible models to potential franchisees. For example, many full-service dining brands are rolling out smaller, fast-casual versions of themselves.
Clearly, due to the labor shortage, all of our clients are doing whatever they can to boost employee happiness from work-life balance to improved pay and benefits. In addition, we are seeing more diversity of menus, in terms of offering more culturally-influenced items from around the world.
Due to inflation and rising food costs, we’ve also seen our brands get very creative, such as utilizing alternative meat cuts and making use of ‘overlooked’ ingredients. They’ve also been more concerned with sustainability and zero-waste. All of these are good things that emerged from recent trends, but hopefully are here to stay.”
Charlotte Smith is an editor and writer for Global Franchise