Franchising’s Evolution: Rising From Stereotypical Perceptions
The perception of the franchise industry continues to evolve every day.
By Ryan Patel
The perception of the term “franchise” has definitely evolved in all facets from 10 years ago to now.
All within the past several years, countries from all across the globe have sought and accepted a proliferation of franchise concepts from the United States and other developed countries. Franchises have been able to enter into many countries and grow at a rapid clip. In most situations, the existence of unique offerings has fed the entrepreneurial spirit among the locally based talent and has provided job creation in many nations along with stimulating and fulfilling consumer demand. The new franchise opportunities become the focus of local news stories and weave their way into daily conversations in the local regions between customers, friends and even students in the classroom.
How far has the term “franchise” come? The following are a few examples of how the stereotypical perceptions of a “franchise” from the past have evolved to the present day.
Past − Just a “mom and pop” operation that lacks sophistication.
There used to be a slight negative stigma in being a franchisee. It was perceived the opposite of a corporate institution and lacked the infrastructure, capacity and desire for growth. A customer could often distinguish if an operation was franchisee-operated. For example, a consumer could easily detect a franchise operation by the inconsistency of his experience from one store to the next. Franchises tended to project the perception that it was a local small shop in their respective towns rather than part of a larger “system” with well-developed standards.
Present − Global in scale, plan and infrastructure.
Franchisors now have at least nationwide or global goals in their sights that are being planned and scaled far beyond a single store. Meanwhile, franchisee groups are not just looking to be single-unit owners. Franchisors are often more interested in owners who are able to handle multiple stores and have the sophistication to build a portfolio of brands in different types of sectors. As franchisors continue to look for bigger groups, franchisees benefit when they build an infrastructure that they can leverage with more stores and with the addition of brands.
There has been an increase in the amount of rigor, detail and time being spent in the training of employees in franchise stores. Execution now not only ensures consistency of execution, but has resulted in franchisee-run stores, in many cases, functioning better than the corporate stores operated by franchisors. This leads franchisees to continue to push franchisors in different ways. In many cases, franchisees are looking for ways to add to their business, such as aggregating and applying the best practices developed from franchisee stores from around the world. Franchisees are continuing to grow in sophistication and consumer sensitivity; they demand high levels of performance from their fellow franchisees. They understand that poor experience in one store can cause customer discontent that will influence other stores in the brand, even affecting overall sales.
With technology advancement in social media, engaging consumers can be done faster. Each brand is trying to engage consumers more effectively, as the power of information is now easily accessible to all. Because of this, many brands are forced to pay close attention to specific details being shared instantaneously by the consumers all over the world on social media sites. A customer’s message broadcasted on these sites, whether positive or negative, gives the franchisee-owned stores the responsibility to respond appropriately and timely. In the past, feedback used to only be between the customer and the operator but now, a story can go viral instantly via social media and be shared with millions of people. When done right, the franchisor and franchisee can harness social media to their advantage: bringing in additional customers and increasing brand presence.
Past − Prior franchise experience deemed critical
Franchisors focused on those who had been in the franchise business in the past believing they will have a significantly higher rate of success than others who haven’t. Having experience in the franchise business does give a slight advantage, as it helps with understanding costs, how to work with a franchisor and franchise documentation.
Present − Advantage to all with transferrable entrepreneurial skills
Although it is great to have some franchise experience, there is an increasing trend that franchisees do not always have to have specific experience as determined in the past. Obviously having the right experience and values are still imperative in the eyes of the franchisors. But now, many franchisors place more value on an entrepreneurial and cultural fit to the brand within a larger population as a better attribute in franchisees now. Moreover, there are different factors and many reasons for those entering into franchises, from the economic situation to successes in other industries.
Readily accessible information is now available on franchising, which makes it easier to become an owner. This allows people to be better educated and acquainted with franchises much faster, along with understanding different business concepts in the process. Also, there have been more franchisees in systems which leads them to speak to all newcomers in sharing their lessons learned with particular brands. Prospective franchisees conducting their due diligence can seek ample information on the Internet. This initial diligence may lead to a smoother process and faster close rate for the right potential franchisee. Further, with better technology today, franchisors can instantly send relevant updates, such as training videos, new rollout information and specific financials, to the franchisee directly via mobile and handheld devices.
Past − Like follows like, when abroad
International markets usually had larger companies or concepts enter first. Many franchisors demanded international stores have the same look and feel from menu items to design. They did not want to change or did not have the resources to provide a tailored experience for each country.
Present − Like follows like, to a certain degree when abroad
It seems as if franchisees are no longer waiting for international concepts to open first. They are looking to gain the first advantage to secure being the market leader. The franchisees are using their local knowledge in building the brand by entrenching it in the market through its relationships, from securing strategic locations to setting up better purchase prices with the locals. Many are able to build stores with localized menus and designs to better integrate within the local culture and community. Where franchisors in the past have refrained from changing menus at all, they have now become more open in adjusting the offerings and services in franchise stores. As a result, there are many franchisor organizations that prefer not to build corporate stores abroad. This stems from the heighten risks and the search for other vehicles to enter markets with less exposure.
As a whole, the perception of the franchise industry continues to evolve each day. It will continue to bring excitement to what the future holds for all existing and new brands yet to be developed.
Ryan Patel is director of global real estate & business development for Pinkberry. Find him at fransocial.franchise.org.