While the world continues to respond to the current unpredictable economy, the resulting trends are opening doors of opportunity for the franchise industry over the next year.
Successful businesses tend to have the talent for spotting trends over fads. While a fad is a passing fancy, a trend points towards the future and opportunities. Exploring franchising trends that emerged in what will prove to be one of the most challenging economies we have ever seen, everyone in franchising can find opportunities like never before.
1. Cohesive partnerships
Franchising only works when franchisors get wealthy by helping their franchisees get wealthy. While this might sound obvious, the trick is creating a cohesive business that continues to succeed based on past success. When done right, franchises create a cycle, with franchisors actively promoting their franchisee’s success and franchisees wanting their franchisors to succeed. This keeps everyone focused on the same goal and avoids a dangerous “us versus them” mentality.
2. The ideal franchisor
Today, the ideal franchisor has 500-plus franchise units with fewer than 50 franchisees. Happy, successful franchisees will grow their businesses into larger territories. They focus on scaling their business exponentially, using free cash flow to reinvest into building more units. Large territory, multi-unit franchisees are the best way for a franchisor to operate a franchise business with less effort put into monitoring franchisees and a much higher return when they sell the company.
3. Long-term value
Historically, franchisors have regarded the franchise fee as the only source of revenue from a franchisee. Today, franchisors consider the long-term value of their franchisees. A franchisee pays royalties into the system that could equal millions of dollars over the lifetime of the business. Franchisors are focusing on nurturing their franchisees and providing the tools they need to succeed.
4. Private equity and professional investors
More private equity and professional investors see franchising as a way to earn steady, predictable revenue and profits. Investors can witness the snowball effect of compounded returns resulting from an investment that generates enough profit to reinvest successfully. More investors will see franchises as a self-perpetuating investment that generates profit to meet their long- term wealth-building goals.
5. COVID-driven needs and opportunities
2020 introduced a down cycle of scary proportions and brought opportunity. Ghost kitchens create opportunities for companies with the foresight to change their model. Off-premise sales are about the brand bringing their product to customers. The shift from dine-in and take out to new options such as curbside pick-up and Chipotle’s “chipotlanes”, has shown that scrappy business owners have innovated new ways to operate their businesses and change with the demands of society.
“As sad as COVID-19 is, it has created new opportunities”
Businesses can now start up for 50 to 80 per cent less than they would have in better days, opening in low-cost conversions of shuttered businesses or with smaller footprints. Smart franchisees take advantage of the great real estate deals and available labor force to grow their businesses. As sad as COVID-19 is, it has created new opportunities.
While the world continues to respond to the unpredictable economy of an ongoing pandemic, the resulting trends are opening doors of opportunity for the franchising industry in 2021. And don’t forget: franchising only works when you get wealthy by helping others get wealthy.
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