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Key disruptions rocking the franchise space

By Merilee Kern

There are numerous disruptive trends that, if not adapted to, can make or break a franchise-based business
There are numerous disruptive trends that, if not adapted to, can make or break a franchise-based business

In the post-pandemic era, those operating in the franchise space—and the franchising trade at large—will experience a wave of major change.

Accelerated and elevated adoption of technology, consumer desire for more efficient and on-demand service, and appealing to employees are among the many industry pivots that are evolving.

These and other kinds of changes and challenges each have their own implications within the franchise industry.

“Amid all of the economic upside and the changes propelling the sector into new territory on multiple fronts, there are also numerous disruptive trends that, if not aptly adapted to, can become make-or-break factors for a franchise-based business,” said Jimmy St. Louis, chief executive officer at Franchise123.com—a franchise business multiple listing service (MLS) website connecting franchise buyers and
sellers globally.

According to St. Louis, here are a few key disruptive trends reshaping the franchise industry:

Transparency takes the lead

Accurate data and transparency has become a foundational requirement. The franchise development industry has never experienced the collective and global transparency of franchise data as it is now. Franchise brokers, consultants, and online franchise portals currently dominate this industry, but these outdated methods do not meet the needs of modern investors. No matter the investment, buyers expect transparency and comprehensive data to facilitate the vetting process. Franchise buyers do not just want to be sold something but want to invest in a business that assures they will thrive financially, professionally, and personally. Proper franchise selection has the biggest impact on whether a franchisee will succeed in any of these areas. Brokers and franchise portals not only limit the available options but may also guide a prospective buyer towards a brand unfit for their goals, objectives, and sensibilities.

Eagerness and enthusiasm can lead to hasty or high pressure-driven decisions and avoidable mistakes.
Eagerness and enthusiasm can lead to hasty or high pressure-driven decisions and avoidable mistakes.

Industry portals are perishing

Specialized industry lead generation and business development portals have long been the connector between franchisors seeking to engage with potential franchisees, and they are dying on the vine. Although consumers may not be aware, portals can be doing them a disservice. This is because of the business model where portals are compensated for leads created—inherently creating a bias and weighting interests toward the portals themselves versus prospective buyers. This means, as a franchise investor, a portal makes money whether people are actually interested in—or suited for—the brand they merely clicked on to check out. Beyond this dynamic, there are other problems with franchise portals.

Brands look to these portals to find qualified and interested buyers, but often waste their time, energy, and marketing dollars on leads that are often not pre-qualified, vetted, or properly funnelled toward applicable brands. The prospective franchisee is also often prematurely bombarded with phone calls even before they understand the brand. They are also left to organize their thoughts, perform research, and make their own investment decision. Franchisors have been lamenting they are paying too much per lead and heeding very limited results—eroding waning business development budgets. These dollars are now being allocated toward other lead generation methods with a more demonstrable return on investment (ROI).

Mass entry mishaps

In the wake of COVID-19, people are more wary than ever. Many have lost their jobs and their sense of stability in a traditional career path. Suddenly a 9-to-5 job and promise of a bi-weekly pay cheque does not feel reliable, and many people are also seeking more professional autonomy. The pandemic has accelerated an exodus from traditional careers and fueled the transition to freelancing, gig work, and entrepreneurship. Franchise businesses have become a very popular option for people looking to pursue a more entrepreneurial route while absorbing less risk. This wave of new buyers is seeking to capitalize on the ingrained support—and to leverage the power of an already established brand. However, this eagerness and enthusiasm can lead to hasty or high pressure-driven decisions and avoidable mistakes—with selecting the wrong franchise for their goals and personality paramount among them.

What does this mean for the future of franchising?

“These disruptions in particular are prompting key concerns for all contingents: inadequate access to mission critical information, cost inefficiencies, and misaligned interests among them,” notes St. Louis. “Franchisors are having immense difficultly finding qualified franchisees due to misaligned interests of portals. This as brokers and prospective new franchise buyers themselves are lacking a means to procure qualified information and efficiently connect with the right franchisors. This sector exemplifies the need for innovation, and we expect to see several technological solutions manifest over the next few years. Transparent and self-guided sales processes have already begun to dominate a multitude of industries, including everything from buying houses on platforms like Zillow and cars on Carvana, to shopping for insurance and more. Franchise development is long overdue for change; namely to establish a more innovative sales method truly aligning the interests of franchisors and franchisees alike, to the drastic benefit of all parties.”

Perhaps anything less than what St. Louis describes would be akin to shopping for a home without access to meaningful online data, leading to uninformed decision-making which only exacerbates risk. In today’s marketplace, namely the franchise trade, this kind of result is unnecessary, avoidable, and unacceptable. Today, one could not even imagine buying a home without suitable online resources.

Franchise businesses have become a very popular option for those weary of the 9-to-5 lifestyle.
Franchise businesses have become a very popular option for those weary of the 9-to-5 lifestyle.

Through Franchise123.com, a platform allowing prospective franchisees to access information, St. Louis hopes they can make a fully informed and unbiased decision about the franchise that will best meet their needs and help them achieve their goals as a business owner.

The website allows prospective franchisees to connect directly with franchisors. This structure allows for both parties to manage and store their respective custom data associated with franchise buying and selling, and to even execute the transition online.

According to a 2020 report from FRANdata1, assuming control of the COVID-19 pandemic comes this year, it is predicted by year-end, franchising will have recovered to nearly 2019 levels in most metrics: business growth, employment, economic outlook, and contribution to the GDP.

All this is largely founded on antiquated systems and processes widespread with shortcomings. Imagine the economic upswing were the franchise development space to operate in a more efficient and equitable manner. This is what St. Louis and other like-minded people are bent on making happen.

Merilee Kern, MBA, is a brand analyst, strategist, and futurist who reports on noteworthy industry change-makers, movers, shakers, and innovators across all B2B and B2C categories. This includes field experts and thought leaders, brands, products, services, destinations, and events. Kern is the founder, executive editor, and producer of “The Luxe List” as well as host of the nationally syndicated Savvy Living TV show. For more information, visit TheLuxeList.com and SavvyLiving.tv.

 

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