Summa Franchise Consulting takes stock of the year ahead.
As a leading franchise consulting company, we are often asked by our clients around the world to assist them in making forecasts about various countries and markets in the global franchise marketplace in which they operate or want to operate.
Coming off of a tremendously challenging 2020, due to COVID-19 and its related impact, we see franchisors trying to understand a rapidly evolving and changing economic, social, technological, regulatory, and business environment – along with the marketplace ‘drivers’ that they can leverage to help them achieve success (or minimize the risks that could diminish success) during the upcoming year – and beyond.
First, as the COVID-19 virus is controlled through vaccine distribution, the global economy will spring back swiftly. Generally, franchising is a leading indicator of economic recovery in most markets and we are already seeing certain segments of our industry thriving.
Franchisors who are not planning for active franchise development programs during this year will likely find themselves behind their segmentation growth as business sentiment improves and commercial momentum grows.
Clearly, the marketplace will pick winners and losers – we see tremendous opportunity in all types of service businesses and certain real estate-oriented concepts. Mobile concepts generally continue to do well. Restaurant concepts with the proper service models can thrive. Retail businesses that can figure out how to add consumer value or an experience beyond their physical locations may thrive.
Second, the economic and franchise recovery will be uneven across the globe and some markets will recover much more substantially than others. Labor markets almost everywhere will have a difficult time creating the level of jobs needed to absorb the high percentage of unemployed created as an outcome during the pandemic.
“In the future, we expect a blend of in-person and distance events to comprise a part of ‘the next normal’ of franchise business”
The COVID-19 pandemic didn’t just impact low wage workers: combined with an acceleration in the adaptation of technology forced by the crisis, we are seeing talented and accomplished management, technical, marketing, salespeople, and even executive-level candidates from every industry seeking a franchise business to invest in rather than seeking another job.
Third, governmental aid flows in many forms, including a generally more considerate financing environment in many places for qualified investors. Many of those unemployed people will be seeking to control their lives through franchise business ownership, not re-employment.
This is a fairly typical part of the business cycle post-recession and franchise orders need to be putting processes, people, and resources in place to capture the best caliber of this potential candidate pool. Fewer people doing more work inside of companies are leading a workforce change that will expand our pool of available potential franchisees.
Fourth, retail and restaurant businesses that require a physical location to function will benefit from a quite changed commercial real estate market. In many places, a high percentage of restaurants and retail locations have permanently closed due to the pandemic.
This substantial amount of vacancy means that the real estate market should swing from being a seller’s market to a buyer’s market as we move closer to the end of the pandemic, which should spur development within these franchise categories.
Fifth, franchisees are increasingly becoming more sophisticated. We have been watching for several years the transition from the prototypical ‘baby boomer’ franchisee to a ‘millennial’ franchisee (the oldest of which are now in their early forties!) and they have quite a different expectation of the franchise or franchisee relationship.
Franchisors that focus on the success of their franchisees first will be the big winners. They are very focused on a parity-focused franchise relationship, are ‘data-driven’, want emotional engagement, use technology extremely well, and seek a high degree of communication. They are built for the 21st century.
Sixth, certain aspects of franchising are most likely forever changed. Expect more technology, more video conferencing for events like ‘discovery days’. In the future, we expect a blend of in-person and distance events to comprise a part of ‘the next normal’ of franchise business.
More content demand and more video in the franchise development process are a part of the future, as well as supporting your franchisees’ ongoing business operations. Smart franchisors are focused on both high-tech and high touch.
“Many of those unemployed people will be seeking to control their lives through franchise business ownership”
Seventh, despite the occasional assertion that franchising has never been more challenged, it is our view that good franchising companies with quality offerings have never had a more exciting market opportunity to drive growth with higher caliber franchisees in a dramatically improving environment by the end of this year.
Like the old investment adage “buy low, sell high” – there is a substantial opportunity to grow your franchise system in an accelerated marketplace of greater momentum as we see broader global economic recovery.
We also own the leading global franchise sales outsourcing firm, Franchise Dynamics, and are seeing these outcomes in working with our clients throughout a variety of concepts.
Our team has decades of experience working in franchising all over the world. For me, this is my sixth recession during my franchising career. While it sounds counterintuitive, I like recessions.
Sounds crazy, right? My reasoning is simple: I have an environment of many more qualified franchisees, generally easier access to capital, and less competition in an environment of higher demand. Strong franchisors with relevant offerings need to be preparing for a strong commercial franchising environment for the foreseeable future.
If you need help in either redefining your franchise offering, systems, or operations, some assistance in further developing your franchisee organization, or want to explore a ‘franchise sales organization’ (FSO) to grow your system or open new international markets, we’re delighted to help.
Robert Stidham is the founder and CEO of Summa Franchise Consulting and founder of Franchise Dynamics.
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