Why franchisors need to prioritise innovation

By Nick Hall | 23 Aug 2018 View comments

For decades, the franchise model has served as an accessible, familiar and supportive basis from which to launch business ownership.

Where the traditional entrepreneur is required to develop processes and implement unique systems of operation, a franchise system caters to those who have aspirations of owning a business, but are less marketing and process savvy.

A recent shift in confidence however, has rocked the sector after reports that many franchise groups are sinking into administration.

Inside Franchise Business reported in July that embattled food retailer, SumoSalad Group had appointed Ferrier Hodgson as administrators, after it was reported that franchise group Aussie Farmers Direct had collapsed.

Katja Forbes, international director on the Interaction Design Association Board said Australian franchisees are going into administration because they are being left behind.

“This is in so many important areas like social media, customer experience and market research into new and futuristic decisions,” Forbes said.

“To stay ahead of competitors and customer demands, it’s crucial to constantly be aware of doing these things. A normal business can make decisions like this quickly and then get to market fast, but with a franchisee, there are a lot of channels that have to be taken first.”

Forbes suggested that while the franchise model provides support at all levels, it can sometime come at the cost of innovation.

“A franchisee cannot simply implement their own decision for better customer service or it won’t be uniform with all the rest of the franchisees,” Forbes said.

“They need to bring it up with the franchisor first, and it will likely take a long while for it to be addressed, as the franchisor typically has other priorities they are working on in head office. The result then is that franchisees are getting left behind by their competitors.”

The Australian retail and food retailing industries are some of the most competitive in the world, with high staff turnover and operating costs heightening the volatile nature of operation.

For all the positives that come with its uniform approach, the franchise model should reflect a local emphasis, that is based off market research and consumer demand argues Forbes.

“Whilst their competitors are agile and can adapt quickly to market demand, franchises are much slower – many even answerable to a head office overseas,” Forbes said.

Many countries have slightly different customer demands and trend, and as a result, negate the influence of a research group in the country of the head office.

“In this case, perhaps what is needed is an in-house UX designer who can make observations and suggestions across the board and then implement them quickly across all the franchises in an orderly fashion,” Forbes suggested.