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7 Things You Need to Know Before Becoming a Franchise Owner

Recently, I was sitting, drinking an iced latte macchiato at a well-known chain, when my wife said to me, “We spend so much time in here that maybe we should think of starting one ourselves.”

Which she promptly followed up with, “I’ve always wanted to run my own business, and let’s face it: How hard can making lattes be? Everywhere we go, [this chain is] opening a new franchise. So, it’s got to be an easier option than starting my own business right?”

Well, not exactly.

My wife is not the only one to think the way she does, given that franchise-growth rates in 2016 again exceeded non-franchise business growth rates and continue to increase by 2.6 percent per year. There’s reason for this, specifically the 300 franchise business lines that already cover ten distinct business areas (automotive, business services, commercial and residential services, lodging, personal services, quick service restaurants, real estate, retail food, retail products and services and table/full-service restaurants.

So, not only are there a lot of franchise categories and companies to choose among, but there are advantages to opening a franchise as opposed to starting your own business from scratch.

Still, those choices and advantages don’t mean a franchise is a guaranteed success. To get to that point, you still need to do your due diligence to increase your chances of making it work.

To better grasp the challenges of running a franchise, I met with Tom Portesy, CEO of MVF Expositions, which runs franchise expositions around the world. I asked Portesy his thoughts on what a new entrepreneur should know before taking on this challenge.

Here are the seven things he said to be aware of before you dive into that franchise opportunity.

1. How much will it cost?

The first thing to know is the total investment to get your franchise up and running. This should include the purchase costs, your opening inventory and the amount of working capital you are going to need before you break even. Understanding these costs is crucial, as you don’t want to run out of money when you are on the verge of success.

In addition, you also need to know how you are going to finance the business, as many people can actually afford a bigger franchise opportunity than they think.

2. What are you good at, and what are you passionate about?

You don’t have to love coffee to open your own franchise coffee shop. Nor do you have to do all the work.

When it comes to running that shop, you’re actually the business owner and can hire people to deliver the service or sell the products; you don’t have to do all of that yourself. Success is dependent on how well you work on the business, not just in the business. 

Still, not everyone is cut out to be a franchisee, to thrive within someone else’s system. “Before buying a franchise,” Portesy told me, “one of the most important questions to ask yourself is, “Do I have the right personality to be a franchisee? People are all different, and so are franchises.

“As a result, one of the worst mistakes you can make is buying a franchise when you are not suited to be a franchisee, or compatible with the business.”

3. How much time do you need to invest?

While starting a franchise is different from starting your own business, it is still a business, and you won’t be the first person who’s traded a 10-hour-a-day job he (or she) hated for a 16-hour-a-day job he hates.

So, make sure you understand what’s involved. There are seasonal franchises that require you to work especially hard at certain times of the year; but it’s still your business that you’re going to be running, and you need to be clear about how much time you will need to invest to make it a success.

4. What is the franchisor like?

Not all franchisors are the same, so you need to do your research and get to know everything you can about the franchisor. This includes things such as how long has this company been in business, what is its average success rate and how long do franchisees stay on average.

Just because a franchisor is new doesn’t mean it’s not a great opportunity, but the more you know, the better informed your decision can be.

5. What does it take to run a successful franchise?

When you do your due diligence, make sure that you speak to other franchisees and not just the most successful ones. Ask them:

  • What were the key success factors they found?  
  • What were some of the challenges, and how’d they overcome then?
  • If they were starting today, knowing what they now know, what would they do differently?
  • For those that failed, what were the factors that caused that to happen, e.g. poor location, weak marketing, etc? 
  • How long did it take for them to start to make a profit?

It’s great to learn from your mistakes. It’s even better if you can learn from those of others so that you don’t repeat them.

6. What kind of help does the franchisor provide?

When you take on a franchise, unlike starting your own business, you’re not alone, and that can be a great comfort. Just make sure you know how much support you will get from the franchisor, what other people’s experiences were and how much help the company offered those people when the going got tough. How much support did those other franchisees receive, or were they left to their own devices?

One of the hardest things is asking for help when things are going wrong. But if you know that the support will be there and that the franchisor is willing to help, the process will be a little easier.

7. What’s your end game?

I am a big fan of Stephen Covey’s “second habit” of highly successful people:  Start with the end in mind. 

plies to franchising. Before you take up your franchise, know and understand what your exit strategy is going to be. Are you planning to leave the franchise to your children, are you looking sell it or do you plan to just run it for a couple of years and then get out?

The better you know and understand your end game, the easier time you’ll have selecting the right kind of franchise opportunity, which fits you in the short term, and supports your long-term objectives.

Running a franchise can be a great way to start running your own business, but you need to understand why you are getting into it, what you are getting into, whom you’re getting into it with and of course how you plan to get out of it. The better you understand the answers to these questions, the better your probability of selecting the franchise segment and company with the best potential for you.

By Gordon Tredgold

Original article from Entrepreneur.com, November 22, 2017

Most Franchises Struggle to Grow, but Then There’s the 20%

We routinely write about young franchise concepts because everybody likes to know what’s new in franchising, but a study released recently by Franchise Grade shows how long the odds are for those so-called emerging brands.

Just over 30 percent of brands that started four years ago had one or fewer locations, the study said, while 52 percent that started 10 years ago had 50 or fewer franchise locations, according to Ed Teixeira, COO for Franchise Grade, the market research company for franchising in Long Island.

But of course that leaves 20 percent, the percentage of franchises that started from six to 10 years ago and reached or surpassed 100 locations—in other words, the amount that causes prospective franchisees and emerging franchisors to keep on trying.

Emerging franchise systems are defined as having 100 franchised outlets or fewer and account for 71 percent of franchise systems in the United States. Fifty-seven percent of all franchise systems in the United States have 50 or fewer locations, the study says.

“We did it for a couple of reasons, not the least there’s been so much attention lately on emerging franchises,” said Teixeira, about why Franchise Grade did the study. He cited the Springboard event in Philadelphia in September that drew hundreds of emerging franchises, and the International Franchise Association’s offerings for young brands. “Last year the IFA had a workshop for emerging franchises,” after its annual convention, and it drew a standing-room only crowd. In early November the IFA is hosting an Emerging Franchisors Conference in Phoenix.

He said the stats aren’t depressing, as I had opined, “but rather just to show what the situation’s like.” Twenty percent are doing great, the study shows. “Unfortunately there are some others that either should not have franchised, or maybe should have waited until they had more units up and operating or more working capital,” he said.

“The whole idea of this is not only to shine a light on what these startups and emerging franchises look like, but what’s needed to get them off the mark, so to speak,” Teixeira said. “It’s always grow, grow, grow, which is important, but maybe there should be more focus on having a sound system in the first place.”

Franchise Grade has 2,500 FDDs or franchise disclosure documents in its database, and based its study on those franchises it could identify as start-ups. Part two of the study, expected to be completed in about a month, will drill down into industry sectors and compare systems’ growth patterns.

Original article by Beth Ewen

Published 10.24.17 on FranchiseTimes.com

Featured Client: DoubleDave’s Pizzaworks

DoubleDave’s Pizzaworks is a regional pizza chain based in Austin, with locations throughout Texas and into Oklahoma. The first restaurant was founded by David Davydd Miller in College Station in 1984. In addition to several varieties of fresh, hand-tossed, scratch-made pizza, the chain is famous for its delicious ‘Peproni Rolls.’ 

DoubleDave’s is currently seeking sites throughout the greater Austin area.

Real Estate Requirements:

  • 1,200 – 2,400 sf (3 prototype models)
  • Prefer 2nd gen restaurants
  • 3+ miles away from existing locations

Why Becoming a Franchisee Offers the Best of Both Worlds

Partnering with the right franchise can help an entrepreneur reach their dream of financial independence—without the common pitfalls.

According to the U.S. Census Bureau’s Survey of Entrepreneurs, the key drivers for entrepreneurship are earning more income and the desire to be one’s own boss.

No surprise there.

As the chief development officer for Überrito, I see that every day in my efforts to drive franchise sales and development for the company. My daily interactions are with highly motivated individuals looking to grow their income while maintaining their autonomy by working for themselves.

To be sure, the lure of independence and the ability to control one’s destiny has created many a entrepreneur.

However, there can be considerable unforeseen pitfalls along the way:

Lack of guidance: Many entrepreneurs will tell you, it can get lonely at the top. It helps to have someone with experience in all of the aforementioned areas—and many others—that can provide guidance and examples of what has worked and what has not—and why.

Building a customer base: Everyone thinks they are a marketing expert, but it is easier said than done. Marketing is part art and part science, and it’s important to get it right to be successful. When the time comes to develop and execute marketing strategies that will bring foot traffic to your door, and keep those customers coming back again and again in a crowded marketplace, having access to a team that has a strategy that is successful and repeatable is extremely valuable and is a key to success.  

When you consider the advent of Twitter, Facebook, Yelp, and more, there are countless ways to reach customers. Geotargeting and other methods can be much more precise in promoting your brand and measuring results. Social media is constantly evolving and while it can be extremely positive, there are also just as many ways for it to have a negative impact.  

It makes less sense to swim upstream alone in such a noisy, fragmented marketplace. Tapping into the marketing resources of a franchise enables entrepreneurs to focus on day-to-day operations, and, profitability.

Unforeseen start-up costs: A blank slate is difficult to build from. If you are negotiating a lease, or choosing a contractor to build a storefront—the margin for error is thin and will impact your business for years. It doesn’t take much to come out of the gate in a deeper hole than anticipated.

Furthermore, the amount of decisions to be made in terms of location, layout, and finishing touches can be paralyzing. If you are going to operate a storefront, it can be useful to rely on experts regarding items such as traffic flow, point-of-sale considerations and more.

Human Resources quagmires: Most entrepreneurs are driven by success. They like to set goals and then attain them. The endorphin rush from making a sale or achieving purchase goals is hard to beat.

But nothing disrupts such positive momentum more than navigating complex human resources issues. While these are important issues that must be resolved, they can become burdensome, and get in the way of making sales. They are often fraught with legal considerations and are best left to those who are up to date on labor laws and best practices.

Beyond managing current employees, attracting and hiring the right ones presents its own challenges. A national franchise can be a helpful resource on many of these issues.

Distribution and Inventory control: It is a simple concept that you cannot sell what you do not have. Yet one of the most critical mistakes a business owner can make is having an incorrect amount of inventory, whether that is having too much or not enough. This is critically important in the food-services industry where product can often have a very limited shelf life.  Over ordering product often results in spoilage while under ordering results in unhappy customers and a loss of sale.

Even if you do not have product that can spoil, all products have a shelf life to consider. Timing is everything and it is of great benefit to have an idea as to what to expect and what has worked for others.

Finding distributors to supply your raw material needs—especially if those needs include fresh food items—can be difficult and costly if you are operating alone. Having the purchasing power and relationships afforded by a franchise eliminates guesswork in choosing distributors and promotes favorable costs. 

Financing considerations also come into play here. Depending on the carrying cost it may be that alternative financing can be provided through a franchise, often at more competitive rates and terms than what a traditional bank offers.

This is a small sample and many of these misadventures can be mitigated when partnering with a proven franchise.

While these issues can pose a significant challenge to a startup, it is very likely these issues have already been considered and solved on a franchise level.

A franchisor is aware of all the nuances and challenges franchisees may encounter. Much of this knowledge is taken into consideration when removing or alleviating barriers to entry.  This experience also better positions franchisees for success due to the systems that have been tested and put in place.

A franchise only does well if its franchisees are doing well and it is in a franchise’s best interests to help its franchisees succeed.

Partnering with the right franchise provides a stronger likelihood of your reaching your dream of financial independence—without the common pitfalls that plague many entrepreneurs.

By Peter Ortiz, September 2017

Original Article from QSRMagazine.com

Peter Ortiz is the Chief Development Officer for Überrito, a fast-casual concept that is part of Mexican Restaurants Inc., which currently operates 47 Mexican restaurant locations across five brands: Überrito, Casa Ole, Monterey’s Little Mexico, Tortuga Mexican Kitchen, and Crazy Jose’s.

Franchise Businesses Expected to Grow Faster Than the Economy This Year

Eighty percent of franchisors, 64 percent of franchisees, and 76 percent of suppliers expect their business to do better in the next 12 months. This is according to the Franchise Business Economic Outlook Report released by the International Franchise Association.

Franchise Business Economic Outlook for 2017

Prepared by IHS Markit Economics for the International Franchise Association’s Franchise Education and Research Foundation, the report goes on to say franchise businesses are expected to grow faster than the economy in 2017.

Why the Positive Outlook?

In assessing the indicators driving the positive outlook for franchises, IHS highlighted several points. It is basing the growth on solid gains in consumer spending, residential investment, business fixed investment and exports.

Consumer spending, which franchises rely on, is projected to increase by 2.6 to 2.7 percent annual rates during the final two quarters of 2017. This is based on increases in household finances with gains in employment, real incomes, stock prices and home values.

The public sector is also going to play a role with the release of federal funds for surface transportation projects as well as defense and security. 

Challenges

The biggest concerns for franchisees are joint employer, tax reform, minimum wage, and health care costs.

A joint employer ruling was enacted during the Obama administration, and the ruling was particularly burdensome for small businesses. But the Labor Department rescinded the ruling under the Trump administration, and the Save Local Business Act is gaining traction with bipartisan support.

Robert Cresanti, International Franchise Association President and CEO, is positive about the Trump administration as it applies to businesses. Cresanti said in a release, “We’ve seen positive steps toward a more business friendly environment, such as rolling back unnecessary regulations, but there is still much work to be done. With a burdensome tax code and a confusing joint employer standard, franchise businesses are still competing with one arm tied behind our back.” 

Additional Data Points from the Report

The number of franchises is set to increase to 745,000 in 2017, an increase of 1.6 percent or close to 12,000 new establishments. This of course will increase the employment rate, growing the sector by 3.1 percent, which is much better than the 1.7 percent of total private nonfarm employment.

In terms of monetary output, franchises will generate $711 billion in nominal dollars, an increase of 5.3 percent in 2017.

Franchise businesses across 10 broad business lines were surveyed. Commercial and Residential Services is expected to grow at 3.0 percent, while personal businesses will experience even higher at 6.1 percent.

Franchise growth also varies according to region, but the top five States in the survey were, Utah, Florida, South Carolina, Washington, and Wisconsin with growth of 7.6, 7.0, 7.0, 6.7, and 6.5 percent respectively.

Original article from Small Business Trends

September 17, 2017 by Michael Guta

VitalityBowls 

The Retail Strategy is proud to represent Vitality Bowls, a rapidly growing brand with over 40 current locations throughout the country. Vitality Bowls specializes in making delicious açaí bowls, which are a thick blend of the açaí berry topped with organic granola and a selection of superfood ingredients. Additional antioxidant-rich menu items include smoothies, fresh juices, soups, salads and panini. All items on the menu are made fresh and in non-cross contamination kitchens to ensure that those with food allergies will feel safe eating at Vitality Bowls. No ingredient fillers such as ice, frozen yogurt, added sugar or artificial preservatives are used, giving the purest taste possible to each item.

Vitality Bowls is  currently seeking sites in Texas and throughout the US.

Real Estate Requirements:

800 – 1,500 sf 

Strong daytime population 

Proximity to daily needs generators

 

How to Become an Elite Restaurant Brand

Dreaming of your brand joining the QSR 50? These three milestones will help get you there.

In today’s limited-service landscape, competition is fierce, growth is key, and companies are doing everything they can to turn their brand into one of America’s elite.

But what does it mean to be elite in this industry? While there are countless paths to success, industry experts agree there are three sure-fire milestones that signify whether a brand is a limited-service heavyweight: 1,000 units, $1 billion in sales, and $2 million average unit volume (auv).

Want to join these exclusive clubs? Here’s what the companies who have been there and done that have to say about crossing these achievements off your brand’s bucket list.

Milestone No. 1: 1,000 Units

Atlanta-based Church’s Chicken is certainly no stranger to operating 1,000-plus units. That’s because the chicken concept crossed that threshold nearly 40 years ago when it opened its 1,000th unit in Phoenix. But even though the company now has 1,200 restaurants domestically and more than 500 abroad, executive vice president of international business and global development Tony Moralejo says the milestone continues to feel like validation for Church’s Chicken.

 

“To get to 1,000 restaurants, it means that you’ve arrived. You become this national player, and in many cases, you become a global brand,” he says. “It means essentially that you’ve established a brand presence that’s appealing to a wider consumer base, and that’s something to celebrate.”

Though Church’s reached this milestone long before Moralejo’s time with the brand, he says he continues to rely on four “Ps” to maintain unit growth: people, product, passion, and patience. “You don’t get to 1,000 restaurants overnight,” he says, noting that it can take decades for a brand to build the momentum it takes to reach 1,000 units. “You’ve got to have patience, especially when it comes to profit. There’s a difference between growth and profitable growth, and what both the franchisor and the franchisee should strive for is profitable growth.”

That’s why Moralejo says one of Church’s key growth priorities is to protect its franchisees at all costs—even from themselves when they want to expand in a risky way. “Sometimes as a franchisor, you have to learn to say no and protect the franchisees that operationally aren’t ready to expand,” he says. 

It was this emphasis on selecting the right franchisees, approving the best sites, and approaching growth cautiously that helped Firehouse Subs open its 1,000th location in 2016. “I can have the greatest brand in the world, but if I put it in the hands of a poor operator—or even put a great operator on a very bad site—it’s not going to be successful,” says CEO Don Fox. 

Though these factors ultimately helped Firehouse reach the 1,000-unit milestone, the company spent 22 years taking a slow-and-steady-wins-the-race approach that Fox says other brands should replicate when trying to grow unit count. “Be more focused on being the tortoise and not the hare,” he says. “If the lug nuts are starting to feel loose and the wheels are wobbling a little bit, don’t hesitate to slow down from time to time and recalibrate.”

While taking it one unit at a time is critical to Firehouse’s growth strategy, restaurant consultant Aaron Allen says advance preparation is also imperative if a brand hopes to reach the 1,000-unit mark and beyond. This includes putting a plan in place for infrastructure, market expansion, and a pipeline of talent that comes years and even decades ahead of achieving the desired unit count. 

Having a driving force aside from just unit growth is also helpful for keeping a brand on the right trajectory. For Firehouse Subs, what motivated growth was the opportunity to increase charitable donations through its Public Safety Foundation. 

“By virtue of our success and the generosity of our customers—which only happens because we have 1,000 restaurants for them to come to—we’ve donated over $25 million in equipment to police and fire departments,” Fox says. “We take the greatest satisfaction of our growth knowing that beyond the jobs and the careers and the profits we’ve made, we’ve made a real difference in saving people’s lives.”

Milestone No. 2: $1 Billion in Sales

Even within an $800 billion restaurant industry with more than 1 million locations operating in the U.S., only 29 limited-service brands reached the $1 billion sales milestone this year.

One of these was Culver’s, which first crossed the billion-dollar threshold in 2014, when it had 500 units and 30 years of business under its belt. (The company did $1.3 billion in sales at just over 600 locations in 2016.) The decades of experience allowed Culver’s to build and reinforce one of the primary factors in its success: the company’s culture.

“As we grow, maintaining that culture is so important to us,” president and CEO Joe Koss says. The company is built on six core values—doing the right thing for its guests, franchisees, restaurant team members, the industry as a whole, and the communities it operates in, as well as conducting business in an ethically and socially responsible way—and Koss says getting the culture right before anything else helped set the stage for its strong sales growth over the years. 

Fellow burger brand Five Guys joined the $1 billion club five years ago, which founder Jerry Murrell says has been a boon for both recruiting franchisees and gaining access to additional capital. However, while many concepts look to menu innovation and headline-grabbing marketing tactics to help them surpass the $1 billion mark, Murrell says it was Five Guys’ dedication to sameness that pushed the brand beyond the finish line.
“Every day, people are coming at us with, ‘Why don’t you advertise? Why don’t you add a new item? Why don’t you wear a chicken suit? Why don’t you toot your own horn?’” Murrell says. “There are all kinds of things that come at you all the time, and you think maybe you’re doing something wrong. But we’ve been fortunate in the fact that we didn’t fall for any of that and stuck to our guns.” 

Allen says speed, convenience, replication, and ease of service are also crucial to helping drive sales over $1 billion, as is a brand’s measured approach to growth. “Plan like a $1 billion company, but expand and spend like an entrepreneurial company—a little bit more conservatively and cautiously,” he says. This means investing in innovative technology, up-to-date restaurant designs and prototypes, well-researched menu developments, and—as Five Guys can attest—hiring and investing in the right people at all levels of the company.

“I’ve been criticized by banks so much for paying our people too much money. But [employees] go home at night, and they have to worry about the business doing well, too,” Murrell says, adding that empowering franchisees and team members is also crucial for growth. “Whether it’s a district manager or just an hourly worker, give them some kind of ownership so that they feel like they’re part of the company.”

However, even with a strong culture, secure operations, and a dedication to supporting the team, some brands may struggle to reach the upper sales stratosphere—at least domestically.

“If the brand grows solidly, then eventually it may very well reach the $1 billion mark, but it might not all be in the United States,” says John Gordon, principal and founder of Pacific Management Consulting Group. “You may very well have to have international units in order to make it to that big number.”

Milestone No. 3: $2 Million AUV

Only six companies in this year’s QSR 50 managed an AUV of $2 million or higher. While this milestone is not exclusive to national companies—unlike 1,000 locations or $1 billion in sales, the $2 million AUV threshold is attainable to small-scale operations—it is coveted by major companies as a sign that the system is efficient, healthy, and thriving.

Culver’s hit $2 million AUV in 2014, the same year it reached the 500-unit mark and $1 billion in sales. “The most important for us, of any of those numbers, was hitting that $2 million AUV and growing restaurants’ average sales throughout the system,” Koss says. He adds that the brand was able to reach the milestone by focusing on a number of strategic priorities, including honing and evolving the menu, enhancing the quality of products, launching cause-marketing initiatives that helped Culver’s connect with the agricultural community, and going through a reimaging effort to keep facilities in like-new condition. 

El Pollo Loco is one brand that is oh-so-close to finally hitting $2 million in AUV. The company has implemented a number of strategies since 2011 that have helped the brand boost its AUV from $1.5 million to $1.988 million last year. From conducting in-depth consumer research and hiring fresh faces—including a new CMO, CFO, chief development officer, and executive chef—to refinancing its $300 million in debt, undergoing an IPO, re-engineering its menu, and developing two new store prototypes, the company’s comprehensive plan to spur growth and unit-level economics has quickly paid off.

In fact, many of El Pollo Loco’s 460 stores already bring in more than $2 million—and even $3 million—in sales each year, says president and CEO Steve Sather. Perhaps that’s because the brand isn’t what he calls “capacity constrained.” That means it does a robust, evenly split lunch and dinner business—thanks to family meal deals—while also offering drive-thru, takeout, and dining-room options.

Gordon says multiple sales platforms, both inside and outside of the store, are crucial for brands that hope to hit $2 million in AUV. Whether it’s breakfast, delivery, mobile ordering, or another approach altogether, “the brands that can adapt and find one or two additional things that they can be known for will succeed,” Gordon says.

Once El Pollo Loco does hit that mark, Sather doesn’t expect the company to stop or slow down. “The minute we average $2 million,” he says, “there’s no reason we shouldn’t be doing $2.5 million. So let’s keep moving on.”

Original article from QSRMagazine.com

By Mary Avant, August 2017 

Experience: The Future Of In-Store Retail

Technology is not limited to online retail. Couldn’t it also save physical retail?
 
motionloft
 
by Jeff BarrettCEO Barrett Digital 
 

Have you ever tried to return a rug you purchased online? It’s bulky, hard to fit in your car, and the person at the FedEx store looks at you like you’re crazy when you wrap the whole thing in Saran Wrap like Jamie Foxx in “Booty Call.” Apparently you have to buy rug bags from a U-Haul store. Who knew?

That’s a very long and personal way of saying online retail is not perfect. Not yet.

A few weeks ago, I wrote about all the ways and reasons online companies are putting pressure on brick and mortar. And that fact hasn’t changed. Millennials’ increased desire for curation and delivery, the ease of starting a business with affiliate marketing, and the low barrier cost of not creating a physical store all exist and aren’t going anywhere.

But does that mean brick and mortar can’t compete? No. While its disadvantages are known and well-documented, it still has advantages. It’s immediate, it’s an experience, and it’s still easier to return an item if you don’t like it.

Amazon, with drone delivery, will try and reduce shipping time to a matter of hours, and that may tip the scales, especially when someone factors in travel and parking to a retail location. Augmented reality will do a much better job of letting people visualize a space so that online can compete with Pottery Barn (although I don’t know how you’ll be able to smell-test candles online).

But technology is not limited to online retail. Couldn’t it also save physical retail?

Motionloft, a Mark Cuban company, makes sensors that use computer vision technology to tell the difference between people, cars, and bikes. Retailers use its data to help build better attribution models, increase sales conversion, and trigger proximity marketing.

“The future of retail will embrace neural networks and machine learning devices to get more connected. Analysts will use customer footfall traffic and behavior data to create experiential shopping destinations,” Motionloft CEO Joyce Reitman told me. “Common paths customers take to get through stores will be fundamental for designing aisles and improving merchandising and inventory plans. Dwell time will be used to send highly targeted Bluetooth advertisements to customers’ mobile devices based on where they stand and for how long. The supply chain will be optimized to meet customer purchase patterns in real time.”

If I’m standing in an aisle wondering which peanut butter to buy and one of the brands sends a coupon to my phone, I’m choosing the one with the coupon.

According to Amati & Associates partner Marco Bevolo, Stefano Marzano, former CEO Philips Design, nailed it when he said the retail of the future will look much more like the retail of the past than the retail of today.

“Big data and the social media mobile revolution are on their way to extend personalization opportunities to high street retailers” Bevolo told me. “Retail, therefore, will know ‘you’ as based on your public profiles and data-tracked behaviors, as much as the old shop owner of 50 or 100 years ago in Italy would know every detail about every customer, in order to serve them best.” 

Easier said than done. “It will not be a smooth ride toward this future, as in five years the backlash of uberization of services will impact employment, categories, and infrastructure” he added. “This will require intervention by regulators and governing bodies, while cities and citizens will have to find their true authentic soul, beyond gentrification and class divide. Nevertheless, low-hanging fruits and short-term opportunities, from digital mirrors to systemic lighting controls, will already improve the shopping experience.”

The most interesting point in that quote is what happens to participation in the sharing economy when people aren’t making enough money participating or the companies themselves are still not turning a profit. I still think that’s both the present and the future, but it will adjust and fall back to the mean over time.

It also poses what I think will be the most important question of the 2020s: Will people choose convenience over the collective interest of their city, state, etc.? What do I mean? Some of these choices will be obvious. If you choose to have your groceries delivered, fewer people will be employed at the grocery store–although, since there is a driver, that’s a 1:1 trade right now.

If you choose to use a kiosk at a restaurant, that will eliminate fast-food jobs or servers. People won’t feel too badly about that, but those jobs are how many of us funded our high school life and maybe college. If you choose someday to ride in a self-driving Uber, that will eliminate taxi drivers.

Manufacturing is turning to fewer employees and more 3D printers. You can’t blame them. That’s a smart business decision. But it doesn’t take long to imagine a future where 10% to 20% of jobs may be eliminated by automation in the next 10 years. The consumer will save money and be excited, but what happens to the economy when 10% to 20% fewer people are able to buy things?

This is a worst-case scenario, obviously, but an important point to consider when discussing the future of retail. Retail is where we will see this first. We’re already seeing it.

Consumers will choose the best, cheapest, and most convenient option available more often than not. So you have to give them a reason to come to the store. When they are online, they expect personalization. We have the technology to bring that to the physical store experience. If people enable Bluetooth on their phones, physical retail can do a million things. Through alerts, AR, lighting, and music, physical retailers can take shoppers anywhere they want them to go and make it an experience.

 Published in CMO.com

 

 

IFA’s CEO Speaks Out on Future of Franchising

Franchising’s biggest ambassador says the industry has nothing but sunny skies ahead. 
 

Robert Cresanti
 

Franchising has been the quick-service restaurant industry’s best friend. The major national chains that have served America for generations—McDonald’s, Wendy’s, Burger King, Taco Bell, and Subway—all franchise at least 85 percent of their units. As a whole, the quick-service industry is by far the biggest driver in franchising; some 26 percent of all franchise establishments are quick serves, according to International Franchise Association (IFA) data, while 46 percent of franchising jobs stem from that industry.

But food service franchising has taken its lumps in recent years. The rising crop of fast-casual and fast-casual 2.0 chains across the country has largely rejected the franchise model, with companies citing concerns over quality control. And many of the business regulations conceived during the Obama administration—minimum-wage hikes, menu-labeling policies, and the joint-employer rule, for example—have been especially burdensome on franchisees.

Could it be that franchising is simply a model of the past? Certainly not, says Robert Cresanti, president and CEO of the IFA, a trade group representing franchisees all over the globe. We spoke with Cresanti to gauge the status of franchising—and how franchisees and franchisors alike are fine-tuning the model for the future.

 

What is the health of the franchising industry today?

We’re fully back and more since the recession. The statistics basically prove that we shed fewer jobs than the rest of the industries with whom we measure ourselves. We had fewer closures overall relative to others, where the system kind of endured around franchising. Have there been some problems? Yes, there were problems during the recession, and certainly economic down times tend to expose some of those weaknesses. But overall, as a system, from restaurants—which amount to almost 50 percent of all franchise units out there—all the way to the service industry side of things … it’s really strong performance.

Our economic statistics indicate that we’ve out-performed competing non-franchise market segments every year in growth, and that trend continues. We expect it to continue this year. So I think all is at an even keel at the moment. We’re also really anticipating and looking forward to opportunities that we haven’t had in the past eight years with the coming of Trump.

What do you think it is about the franchising industry that has helped keep it so healthy?

These [quick-serve] restaurants and other restaurants that have gotten their noses bloody in their local markets, they’ve perfected the business model; they’ve learned to adapt and survive and overcome. Those are hard lessons that an individual who’s not involved in franchising and who is opening up a [quick-serve] restaurant concept for the first time usually has to learn the hard way. The fact that you have a playbook that has a game plan in place for you, and a system where if you talk to another franchisee who’s had a problem like the one you’re experiencing and you share your troubles with him or her, you can find answers to business problems you’re confronted with.

I was on a radio show in Chicago, and someone asked me, “Aren’t you guys just a nightmare for small businesses?” And I said, “No, really successful small businesses oftentimes become franchises.” When they open their third and fourth store and realize they don’t have enough capital to open up the stores they think are needed, and they can hire the managers that are of sufficient quality to independently run those stores, that’s oftentimes when the brands look around and say, “What we need is an ownership culture.” And they then begin to open up those [franchise] opportunities. There are places for all of these businesses, franchised and not, along the food chain.

We see a lot of fast-casual companies talk about franchising as if it doesn’t match their quality offering. What do you say to those businesses that think franchising is something that is of lesser quality?

It’s the last refuge and argument for them to make. There are great-quality restaurants that are private and independent, and there are great restaurants that are franchised. When I travel across the country and I see a brand with which I am familiar and I know what to expect, I often seek that brand out. When I feel like I want to explore something new and different, I often seek that brand out. But I can tell you, when I’m on a difficult business trip somewhere, I’m going to park myself at an [Intercontinental] or at a Marriott hotel, or one of the brands I know, more often than I would go with a local hotel that I’ve never heard of before. That’s the case for most business travelers—not just American business travelers, but travelers all around the world. They come to expect a certain quality.

Everyone’s chasing millennials as customers. What do you see as millennials’ role in franchising?

There’s a sub-class inside of the millennial group that is just absolutely brilliant, and I’m seeing them all of the time. I’m seeing them as owners of some of the franchise restaurants already.

We have something that we call NextGen in Franchising. We do a FranShark Experience [similar to “Shark Tank”] at our convention every year. I can tell you that the judges who are judging these concepts that young people have brought to them have invested as much as $50,000 personally. They not only voted on who had the best and most exciting and probably most likely to be successful franchise concept, but they also walked off the stage and wrote a personal check to invest in their franchise and offered to be mentors to them.

There could certainly be a lot better education out there; it’s our daily battle, educating people on what franchising is and isn’t, and how the business model works. That is a continuing challenge for us. We’ve launched a series called “@Our Franchise,” and it tells a bunch of the stories of people who are to be emulated in franchising but aren’t necessarily household names.

I think we’re in decent shape on the millennial side. There is not a franchise system out there that is going to be successful in the next five to 10 years that doesn’t have a strategy to engage millennials as customers or to bring them on board as people who operate their systems. They better have a plan, or else they’re going to be finding themselves on the outside looking in.

How do you think the franchise industry has evolved over the course of the last decade? What direction do you see things moving in?

One thing that seemed to appear out of thin air was the union activity around the joint-employer issue. That has been a high-arching threat in the franchise space—an attempt to basically treat all of these owners of local businesses as though they were run and owned by one entity. As one of the protesters at one point said to us, “We won’t quit until Ronald McDonald sits at the table with us and negotiates for all of the McDonald’s restaurants in the United States.” Well, that’s an interesting concept, except if you know nothing about franchising, you should still know that most of those stores are not owned by Ronald McDonald or by the McDonald’s Corporation, but rather are individually owned, locally.

That’s been a building dark cloud over what we’re doing. A small business owner can’t look over his or her shoulder and say, “Get my general counsel out here; she needs to take on the federal government for me.” They don’t have a general counsel. They can’t call their head of HR because they are their head of HR.

Despite these pressures over the last 10 years, we’ve continued to grow, and it’s one of the reasons why I’m so excited about the possibilities that we see when the regulatory pressure from the federal government level … might begin to abate, at least a little bit.

What do you see as being the primary challenges to franchisees today?

Finding competent and capable people to assume jobs is the No. 1 complaint I hear from people in the day-to-day operation. The workforce we have access to is not well trained, and we have to do a tremendous amount of training. When we recruit people into restaurants, we don’t require a high school degree, because the people we hire that are good and smart people sometimes come from very challenged family lives and, often, failing school systems. We provide them with an opportunity to learn how to do a few basic steps to help themselves and feed their families, and then to open up opportunities to greater jobs—cashier jobs, manager jobs, cook jobs, transportation jobs. That pipeline needs to be acknowledged and understood.

We have some franchises, by the way, that only hire people that have master’s degrees because they work for hospitals and do blood samples and so forth, and they’re doing very precise and careful things. But from soup to nuts, finding people who are qualified to work and take up a job without a huge amount of additional training—although we do it anyway—is the No. 1 challenge I see.

What direction is franchising heading, and how do you see it changing in the coming years?

With Trump, we’ll have to wait and see. These are very challenging things that he’s undertaking. This is not little league baseball. This is the major leagues he’s stepped into. I think Trump gets a number of mulligans, and he’s a fairly smart and sophisticated businessman, and hopefully he’ll be able to convert those skills into the political arena here in D.C. I have every confidence that he can and will.

One of the things that’s interesting about franchising and challenging to what our traditional business model has been is the concentration of multi unit franchises in the marketplace. I think we all have to acknowledge that there was a time when people worked their way up from the back of the house, ultimately to rise and own their own franchise. With some of the larger brands that are out there that are sort of platinum-plated brands, I think it becomes harder and harder every year for someone who’s got just barely enough money to buy one franchise to get into one of those places. It means that you’re going to have to come up with investments or opportunities in franchises that may not be your first choice.

A lot of the larger brands know what regulatory burdens are out there right now at the state and federal level and even internationally, and they’re looking for people who are very experienced in this space, who already have several hundred stores. I think one of the long oars in the boat going forward is this intensification of multi unit franchising. I know many of those multi unit franchisees, and they’re very sophisticated and good businessmen, and I can understand why franchisors seek them out. It’s their ability to develop the brand.

I can tell you that the franchisees that come into these spaces, especially the multi unit guys—but also the little guys—often come up with very innovative ideas that the brand adopts and then redistributes out to the brand. Not all of the wisdom resides in the hands of the franchisors, and I think the good brands are flexible.

 Published July 2017  in QSR Magazine by Sam Oches

 

 

 

 

Raising Cane’s named fastest-growing US restaurant chain

 
 
Raising_Canes_Chicken_
 

Raising Cane’s is the No. 1 fastest-growing restaurant chain in the U.S., according to a recent ranking by the Nation’s Restaurant News.

The chicken finger chain, founded in Baton Rouge at the corner of Highland Road and State Street, took the top spot on the list, with sales topping $640.5 million in 2016.

NRN released its Top 10 fastest growing chains ranking in June. The list is part of the magazine’s annual Top 100 report, which ranks the food service industry’s largest restaurant chains and parent companies.

Though small when compared with competition like Chick-fil-A, Raising Cane’s last year saw its sales increase on 25.9%.

“The Louisiana-born brand, which rose from fourth place among sales growth chains in the preceding year, proved once again that a simple menu punctuated with Cane’s Sauce and Texas toast could continue to fuel sales,” NRN says.

Raising Cane’s also had the largest sales growth based on unit count—23.5%—among NRN’s Top 100. The restaurant opened 59 new restaurants during the past year and was named Business Report’s 2016 Company of the Year for businesses with 100 or more employees.

See the full ranking and read a Business Report feature on Raising Cane’s.

 Published July 2017  in the Greater Baton Rouge Business Report