Future proofing your franchise

Sarah Stowe

How can franchisors overcome current challenges and forge ahead? Neil Soares, GM of DC Strategy looks at the issue.

We’ve witnessed a change in the importance of reducing costs as well as finding the right business locations develop into a higher priority for both the franchisor and franchisee.

Retail malls are evolving, and with rent at an all time high, franchisors and franchisees need to revise and determine where they are best placed to grow. Factors that need to be considered when revising the network plan and overcoming obstacles, include considering a potential change of format, reduction of ‘footprint’, or relocation to a more suitable area and space.

Additional changes we’ve observed in the market place include the way in which businesses provide services to customers, as well as simultaneously growing a network. UberEats & home delivery competitors have dramatically altered the way in which we dine and in many instances, the way customers experience food brands for the first time.

This paradigm shift has led to changes in store design, pressure for point of sale developers having to develop technology solutions to better manage this new customer and ordering format, as well as leaving franchisors left wondering how they manage the cost impact of engaging in these new platforms, whilst also leveraging the changing market dynamics. Some have considered charging a tiered royalty on these delivery sales versus the traditional over the counter in store transactions.

However, on some occasions, scenarios appear where a franchise agreement is silent on this factor, leading to conflict with franchise partners and a loss of opportunity in some instances.

What’s more the increase in globalisation has evolved and altered the demographic and cultural face of Australia as we know it. Whilst this presents numerous advantages as opposed to setbacks, the increase of globalisation can create challenges when finding, recruiting, engaging and training potential franchisees. This is often due to a lack of brand awareness and unclear messaging to its target audience.

Brands need to better communicate their offer to a broad demographic by using  multiple social and traditional media platforms. This not only poses challenges at a consumer engagement level, but also creates challenges with franchise partners when communicating the brand values and building best practices.

Embracing this diversity of cultures and understanding different ways to do and transact business, will hold franchisors in good stead to compete and grow. The need to evolve and adapt to our environment is crucial for franchise success. In order to grow as a business, diversity and flexibility is vital in both ongoing practices, as well as initial recruitment and outreach.

Thee recent changes to the vulnerable workers bill and the parliamentary enquiry into franchising has put the spotlight on the financial management of the franchise system. And, in particular, the financial viability of the franchisee.

No longer can franchisors ignore the profitability of their franchisees: they must now actively work towards understanding how they can gather data, analyse it in a meaningful manner to focus actions on improving franchisee’s profitability and network growth. Engaging specialist third party advice can be hugely beneficial for franchisors and franchisees to collaborate in finding solutions.

Franchising has always been about a relationship in which the franchisor and franchise act in good faith to grow their respective businesses whilst simultaneously building a brand of significant enterprise value.

Whilst many franchise agreements lack the specific ability to deal with a changing operating environment, or alternatively are so broad so as to try and capture all scenarios, the reality is: in a period of rapid change, there is a moral and ethical obligation for franchisor’s to act in good faith and negotiate with franchisees as to the best way to capitalise on the opportunities as they present themselves.