Will 2016 be a make-or-break year for franchising? Some pundits are predicting the end of the world — the franchising world anyway. Others are forecasting unprecedented growth. Who’s right? I’m leaning toward the second option — and that’s not just because, as a franchise consultant, I would say that.
I’m sick of trends. Every year I’ve written an article called ‘Top 10 Trends for 20XX’ [insert year]. But the thing about trends is that they wouldn’t be trends if they weren’t taking place over a relatively long period of time, which means that they’ve been pretty much the same for the last few years.
But these are challenging times for franchising — according to the news media, at least — and no doubt you’ll be wanting to know what changes may take place that will affect your franchise. So I’ve looked into my crystal ball and had the following visions of the future…
1. New laws which appear to discriminate against franchising will remain a hot topic … but nothing will happen
Not this year anyway. It’s an election year in the US — and everyone knows that nothing that looks as though it may cause job losses ever takes place in an election year. Surprise, surprise, the joint employee tussle between the National Labor Relations Board and McDonald’s has been delayed — on what seem to be nebulous grounds. Even if the case proceeds this year, McDonald’s will drag it out so they can continue to roll out their ‘Create Your Own Taste’ campaign, allowing customers to order customised burgers using touch panels that just happen to also reduce the need for counter staff. I wonder what innovations will appear in McDonald’s kitchen areas to reduce the number of human burger-builders they need?
2. Franchising will get disruptive again
Back in the fifties and sixties, franchising was a disruptive business model, threatening the existence of independent mom-and-pop stores and restaurants. Now it’s franchising’s turn to be disrupted — by the likes of equity-funded chains such as Starbucks and Chipotle, a more regulated labour market, and the on-demand economy.
But do you think franchising will take all this lying down? No, sir! Franchising is no slouch when it comes to adapting new business models and technology into its own business model. McDonald’s has started the ball rolling with its new self-ordering panels. If I owned a commercial cleaning franchise, I’d be thinking hard about robotics right now. If I owned a taxi or courier franchise, I’d be looking at how on-demand technology like Uber’s could streamline my operation and reduce my costs. And if I owned a fast-food or retail franchise, I’d be exploring better ways of getting my products to my customers, instead of them coming to me — including on-demand delivery services such as Postmates and drone delivery.
3. Franchising will morph into more hybrid models
As part of getting disruptive again, franchising will morph with other business models to create hybrids that meet the needs of customers and bring the cost of doing business down in unexpected ways. I am currently working with two clients who are developing on-demand services which they feel will be best managed at a local level by franchisees. Crowdfunding is now being used to finance both franchisors’ and franchisees’ businesses. SaaS, the Cloud and mobile technology are taking the cost out of computing and communications, and bringing franchise networks closer together. And as franchising changes shape, people will stop asking the stupid question ‘Is it franchising or not?’ and start discovering more and better franchise-related models.
4. Franchising will spread into business types you wouldn’t expect to be franchised
Once, lawyers, accountants, consultants and other professional services providers turned their noses up at the notion of franchising in their profession, but now a few have grasped the benefits and the rest have realised that their business model is no longer working for them. Independent builders were once the norm, building around 70% of the new homes in New Zealand, but now the same percentage of new homes is being built by building franchises. Renovation and handyman franchises are causing a similar shift in their segments of the building industry. Expect to see more franchises go where no franchise has gone before — and that includes new business types that don’t even exist yet.
5. Franchising will continue to grow
As finance becomes more available, more minorities and women become interested, new opportunities arise and the internationalisation of franchises continues, the continued growth of franchising is inevitable.
“We are forecasting that for the sixth consecutive year, franchise businesses will grow at rates that exceed the economy-wide growth of industries where franchises are concentrated,” said the International Franchise Association’s new President and CEO, Robert Cresanti. “Franchise businesses are showing tremendous capability to provide new jobs for working families and new businesses for first-time business owners across all sectors in local communities, despite the fact that franchisees are facing many new regulatory threats at all levels of government.”
The IFA is predicting that franchise businesses in the United States will account for a 3.1 percent growth in jobs, adding 278,000 direct jobs to the economy this year for a total of 9.1 million. Franchise confidence in New Zealand has bounced back up from a dip last July.