There are 48,600 franchise units in the U.K. and 935 business format franchise systems, double of what there was 20 years ago. The industry now contributes £17.2bn per annum to the U.K. GDP, employing 710,000 people, with 93 per cent of franchisees claiming profitability and less than 1 per cent of franchisors closing per year due to commercial failure.
These statistics by the 2018 bfa NatWest Franchise Survey prove that this sector, like in other countries, is a crowded marketplace. So, what does a brand do to stand out?
It isn’t just about having a great product or service or having a great marketing strategy. Sustainability isn’t just a buzzword anymore; customers and investors want to see proof in the pudding.
Johnny Pearce, director of sustainable resin driveway company Oltco explains: “As a franchisor myself, I have witnessed first-hand the positive impact that a sustainable offering has had on the business. Not only have we been able to offer something to potential franchisees that others could not, but we can also offer our franchisees a USP when selling our products and services.
“A sustainable offering with an environmental focus has helped ensure our franchisees are standing head and shoulders above competitors and is therefore providing a more profitable business opportunity.”
Show me the money
The financial benefits of a sustainable offering don’t just come in the form of standing out from competitors, as customers will always vote with their spending.
Environmental technology company GreenPrint’s Business of Sustainability Index, published last year, stated that 66 per cent of U.S. consumers and 80 per cent of young U.S. adults (ages 18-34) would pay more for sustainable products versus their less sustainable competitors. Recognizing the commercial as well as ethical importance of doing the right thing when it comes to the environment, many franchise brands are embracing sustainability.
This may not just be by offering an eco-friendly product or service like Oltco but through a purpose-driven approach to business like Creams Cafe.
Andy Malthouse, construction director at Creams Café explains: “For instance, we consider whether we can achieve the same lighting levels in our locations using more energy-efficient products. Our new Creams Cafe in Manchester’s Arndale Centre uses a different fitting with a greater reflective bezel around the lamp, producing more light. This allows us to leave more space between light fittings and so reduce our lighting by about 10 per cent. The lighting is on dimmer switches, so we have the option to adjust the strength, depending on environmental changes. Back-of-house, all our lights are on movements sensors so only come on when needed.”
All sorts of other considerations go into making Creams’ locations energy efficient. Andy continues: “If a unit has a high ceiling, we’ll put in a lower suspended ceiling in the back-of-house areas, significantly reducing the space we need to heat or cool. Back-of-house, we fit hygienic wall cladding and if we’ve dropped the ceiling height, we need less of this product too. That also means less adhesive, lower transport costs – it all makes a difference.
“We also only use shopfitting companies that can demonstrate they have a genuine commitment and interest in reducing our carbon footprint.”
Franchising for good
Brands also embrace sustainability, through their franchisees’ relationships with their local communities.
Franchising veteran and president of consultancy Franworth, Dave Keil, has turned his talents to the charitable world of non-profits. Having founded Franchise for Good in 2020 – the official non-profit division of Franworth – he now works directly with companies who are seeking guidance to achieve sustainable growth.
“Franchising is one of the most philanthropic businesses that I have been associated with,” he says. “Franchisees invest in their local communities; franchisors invest in larger causes.
“Although my work today has primarily been with non-profits to help them scale, my hope and partly the reason why I founded Franchise for Good is that I believe franchisors can give back in a different way – by leveraging a franchise model.
“The USP of Franchise for Good is allowing franchisors to leverage what we are best at – scaling. Often franchisors give back differently, by holding cleanup days or supporting people.
“My hope is that we leverage what we are best at, which could be partnering with a local non-profit organization and helping them to deploy the tools we use every day in franchising to scale and grow and market themselves better.”
Proof in the pudding
Pew Research Center found that Millennials (born between 1981 and 1996) are a quarter of the current U.S. population and tend to heavily research and dig deep online into claims of a brand before a purchase. The ‘thoughtful consumer’ is followed by the Gen- Zers (born 1997 onwards) – the age of influencers who are passionate about causes, especially the climate crisis thanks to the likes of Sir David Attenborough and Greta Thunberg.
This means that a franchisor that not only highlights their sustainable efforts but can actively demonstrate their reduced impact on the environment is more likely to build a loyal following and by extension enjoy the associated financial gains.
A franchisor must also think of the ‘thoughtful Millennial’ from an investor’s perspective. The bfa survey found that there are more younger people than ever taking up a career in franchising, and for the most part, they are second-generation franchisees.
Currently, 18 per cent of all franchisees are under the age of 30, a significant rise from the previous survey in 2015; meaning this percentage is only going to get larger. Savvy franchisors should thus plan ahead to make sure they can demonstrate their sustainability efforts if they want to attract these investors.
“From my own perspective as a franchisor, we have seen around 70 per cent of our franchisees come on board because of our sustainable product offering, with many stating that it was the deciding factor that helped them choose Oltco over another franchising opportunity,” Johnny says.
Taking a proactive approach to saving the planet is more important than ever and consumers demanding environmentally friendly products, services and manufacturing systems means businesses must follow suit.
The eco-conscious hospitality investor
There is no going back for the green movement. It is more than a personal choice; being eco-conscious for the average hospitality investor makes good business sense too, especially when it comes to longevity and prosperity of their business. While many are not fully eco-friendly or carbon-neutral yet, it’s important to take these steps to stay ahead of competitors.
Environmental, social and governance framework
When it comes to a brand’s environmental, social and governance (ESG) strategy, a responsible brand considers its impact on the environment and its community – and how that could be improved. Othman Shoukat, managing director at Creams Cafe, explains why: “Any business which is unwilling to understand its impact or rather is unwilling to communicate key ESG considerations to their consumers, will harm the overall sustainability of the hospitality sector.
“When a company provides the market with misleading information to help them seem more ecologically friendly – also called greenwashing – in fact, encourages consumers to choose a less sustainable option. Having a transparent corporate social responsibility (CSR) policy and sustainability framework in place, as we do at Creams, ensures everyone is on the same page – both the business and its consumer are working towards a greener future together.”
A sustainable supply chain
The vitality of the supply chain has had its moment in the spotlight of late. And to a hospitality investor, judging its sustainability is a key component of making the final decision – does the business rely solely on suppliers for products and services and what could impact an interruption of supply? If the business has in-house production facilities, where are its base ingredients sourced from and what is their impact on the environment? – These types of questions naturally come from both savvy investors and customers nowadays. From eco-friendly ingredients to making sure workers are paid fairly, the supply chain of a business – and how it impacts both social and natural environments – is a giveaway to how sustainable they are.
It’s just good business
The big picture
Deloitte’s 2021 Sustainable Consumer Research found that four out of five U.K. consumers adopted more sustainable lifestyle choices during COVID-19. This means that customers are more likely to engage with a brand that they know practices sustainably.
Recruitment and retention rates
Making sustainability a priority doesn’t just help brands attract more customers, but also likely increases retention and recruitment rates. As people like to work with and for brands that want to make a positive impact in their communities, a brand that can prove its intentions in this area becomes an attractive option for potential franchisees and employees.
Increase productivity and reduce costs
Often adopting sustainable practices means streamlining your operations, which increases efficiency and ultimately reduces costs. Andy Malthouse, construction director at Creams Cafe, says: “Any difference we can make will have a positive effect on the environment but also help to reduce energy consumption in our restaurants, reducing our franchise partners’ ongoing running costs.
“Our focus is primarily on sustainability – but we feel a financial benefit will ultimately follow from good practices.”
A growing market
NatWest research found that 73.5 per cent of people agree that sustainability is important – these include customers, employees, franchisees and investors. Savvy franchisors will recognize that this isn’t just a buzz word anymore and will do what is necessary to take advantage of this growing segment.
Improving the environment
Traditionally, the success of a business has been defined by its profits, but that shouldn’t be the only factor. When setting up a small business or a franchise, being able to do good for the community is often a key factor and adopting sustainable improvements matters as this ultimately protects the environment.