By Joseph Pisani
The food services industry in Canada has been on quite the growth kick. According to Statistics Canada, annual sales of food and beverage services rose 5.2 per cent between 2017 and 2018. Quick service restaurants specifically, jumped up just over five per cent during that same period. With such growth and demand in Canada’s food industry, entrepreneurs have an opportunity to tap into a growing segment.
But despite the level of growth, the industry is in the midst of change driven by Canadian consumers whose food habits are altering. Canadians are turning more to healthier food options, ethnic meal choices, and plant-based alternatives, and they care more about how their food is sourced. These changing habits coincide with a change in behaviour—consumers are now looking for food at the click of a button. Taken together, both may have an impact on food franchisees and how they are able to tap into the market to scale, grow, and stay competitive in this environment.
For those operating a food franchise, three core pillars will help them gain customers and increase revenue in today’s market.
Yes, it is delivery
With the introduction of app-based food delivery services, customers may be spending less time eating in an actual location and just looking to have food delivered to them. This can present a good opportunity to cut back costs. If, as a franchisee, one is looking to take advantage of the surge in customers looking for delivery, look at smaller physical locations. There is no need to have seating for 20 people if the majority of customers are simply picking up food or asking for delivery. Plus, reducing the physical landscape of the franchise will save money on monthly rent, utilities, and wages.
Delivery can also be a good way for a franchisee to boost their sales and get food in front of more customers.
To do this, franchisees should check the agreement that is in place with the franchisor. Typically, the franchisor will make money off sales and not what the franchisee takes in. If delivery is a big part of the business model, a franchisee should look to negotiate the agreement with the franchisor to take this into account.
As a franchise owner, it is important to determine the direction one is looking to take their franchise. If a core component of the model is going to be delivery, having a small physical location is a financially sound strategy.
However, if delivery is just a part of the business model or not a part at all, the physical location does come into play. Engaging the community around the location can have a big impact on driving traffic to the franchise and increasing sales. A food franchise can be a local destination for patrons.
If residents of the local community are avid fans of a particular sports team, look to set up special offers during times when a team is playing. If the sports team has afternoon games, attracting customers during those times can help with what may be a slower period.
Engaging in the community can go a long way to help being seen in the community as a destination. Consider sponsoring local sports teams—whether it is a school or workplace—and look to cater events. The more the franchise is involved in the community, the more brand awareness it will create; this, in turn, should help attract customers.
Hours of operation
Hours of operation might not seem like a significant decision, but they can be a competitive factor. When considering hours, think about what will make it more convenient for customers—opening earlier in the morning or staying open later in the evening on weekdays, for instance. Competitive hours of operation will depend on whether the franchise is located in an urban or rural-focused market and how the business is structured.
Being open for an extra hour in the morning can mean capturing the morning rush, but this comes down to a bit of number crunching. For instance, additional hours might cost more in wages and utilities, so it is important to understand if this would be beneficial for the franchise. It is a good idea for a franchisee to try to determine how many customers they anticipate will visit, how many will actually make a purchase, and how much they will need to sell to them. On the other side, one can look at the cost of being open and then make a determination if it would be a profitable move.
Food franchises are on the rise and, with careful planning, can be an excellent opportunity for creating a successful business .
With the introduction of app-based food delivery services, customers may be spending less time eating in an actual location and just looking to have food delivered to them.
Joseph Pisani is the director of North American industry sectors, franchise finance for the Bank of Montreal (BMO). For more information, visit www.bmo.com/franchising.