Emerging trends in franchising

As well as developing into a truly international concept, business format franchising has managed to extend its reach into many different industry sectors and this trend is set to continue. Initially, the concept was the domain of fast-food operators. However, franchising can easily be adapted to the needs of almost any industry sector that requires an effective and efficient distribution channel. Today, a large variety of business sectors are expanding successfully under the umbrella of franchising.
Other trends are emerging that will affect all franchisors, no matter which industry sector they belong to. Some of these are discussed below.

Technology
A relatively new impetus for franchising comes from the need to keep up with technological advances. In addition to issues involving management control and internal communications, IT is becoming increasingly important in the field of Web-based selling.

Shift towards services
Populations in many of the more developed countries experience a shift towards 'rich in assets, short on time'. This drives the development of personal services franchisees, from pizza delivery to home cleaning, home repair services and even care for the bed-ridden or aged.

Growth prospects continue to look bright
Although franchising is extremely well established in the USA, observers report that the sector is at the threshold of a new growth spurt. This is a clear signal that other countries, where franchising has not reached even a third of the penetration levels recorded in the USA, can expect to see franchising take off like never before.

Franchise legislation
One major change that has taken place in franchising worldwide is in the field of legislation. While most countries initially accepted that franchising could be controlled through a combination of existing contract law and self-regulation, an increasing number are now moving towards specific franchisee legislation.

This has become necessary because the well-documented success of franchising has attracted a number of reckless or even fraudulent operators.

The USA was the first country to introduce specific franchisee legislation. More recently, Australia and several countries within the European Union followed suit, although it must be said that their legislation is less severe than that introduced in the USA.

Franchisee profile
In the past, franchisors preferred to attract franchisees who would be content to operate one unit hands-on. Many franchisors continue along this path but there is pressure on them to change their approach. With the notion of a job for life becoming increasingly obsolete, corporate managers are entering the franchisee arena as prospective franchisees. These individuals want a larger piece of the pie than one unit can offer them, and they have the expertise and the funds to support this.

Franchisors have been quick to realise that it is easier to grow the brand with the help of a smaller group of aggressive franchisees rather than with a large number of yesteryear's franchisees who were content to look after one unit as long as it earned them a reasonable living. This change in attitude creates significant new challenges.

• Not every type of business lends itself to multi-unit ownership. Unless systems, processes and workflows can be standardised, an absentee-owner could soon lose control. In effect, the franchisee network would soon find itself in a similar situation to a branch operation that depends on salaried managers.

• Not every franchisee is cut out to be a multi-unit owner. This demands advanced management skills and the willingness to play for high stakes. Individuals must be carefully assessed to ensure successful placement.

• Not every franchisor can handle multi-unit franchisees effectively.

• The calibre of franchisee who qualifies for multi-unit ownership is likely to be a no-nonsense person who expects 'top service plus' from the franchisor. This helps drive the growth of the brand but franchisors need to be adequately prepared for the challenges it poses.

• The danger exists that a very strong multi-unit franchisee begins to exert undue influence on the network's strategic direction. The franchisor must be on the lookout for this and reassert his/her leadership position the moment a challenge is presented.

• Another important trend in franchising is the inclusion of individuals who tended to play a lesser role in franchising in the past. Women are still a minority but catching up fast. In South Africa, the black majority which was formerly excluded from the economic mainstream is assuming an ever-increasing role. Franchising is the ideal vehicle for the implementation of sustainable BEE initiatives.

Fickle consumers
Traditionally, consumers expected branded offerings to be standardised and predictable and essentially, this has not changed. However, a new generation of consumers is emerging that expects a customised approach. For example, franchisors moving into foreign countries can no longer rely on blind acceptance of their standard offering by local consumers.

To maintain brand consistency under these circumstances can be extremely difficult. A middle-of-the road approach is usually best, but this requires careful testing of every aspect of image, product range and delivery mechanisms, this is where V 4 EDGE applies itself with its full heart and ensure that your product resurrects.