Page 49 - RLI September 2019

thE stAtE of frAnchising
An outlook piece by America’s Best Franchises highlights
some key points on the current state of franchising and why
it’s such an exciting time for the industry:
• The economy is on the upswing – While increased wages
are beginning to affect franchise business owners’ bottom
line, the consequence just might be worth the reward. As
the unemployment rate continues to decrease and more
jobs are becoming available, consumers are becoming more
confident. And more spending means more money in the
franchisee and franchisor’s pockets.
• The internet is changing business practices - The internet
and rise of e-commerce present several opportunities and
challenges in the franchising space. It gives the franchisor much
more visibility and increases brand recognition at a speed that
was once nearly impossible. It also allows franchisors to build
and protect their market share by offering another way to
acquire new customers and stay engaged with existing ones.
• Multi-unit franchising is on the rise - The franchise industry
is seeing rapid growth in multi-unit franchising as well, and it’s
a trend that won’t be going anywhere any time soon. For the
first time, multi-unit franchise owners outnumber single-unit
franchisees. As opposed to relying on the success of one
location, multi-unit operators earn revenue from multiple
franchised units. More on multi-unit franchising shortly!
• Mergers & acquisitions are becoming more common -
As the economy strengthens, we can expect to see more
and more franchisors purchasing smaller, undercapitalised
franchises with poor brand recognition. Franchisors are
merging with or acquiring smaller companies in a lateral or
related industry. This gives them access to a new customer
base, increasing their market share. It also diversifies their
products and services, as well as reduces competition. thE topic of frAnchising franchise operators. From a franchisors perspective, multi-unit
A hot topic in the industry, franchising will also be on the franchising provides opportunities for accelerated growth; a
agenda at this year’s MAPIC event in Cannes with its own vehicle to penetrate new markets, capitalise on certain market
dedicated session entitled ‘Developing profitable multi-unit efficiencies, reduce the training, opening and operational
franchise models in a competitive environment.’ assistance typically provided to single-unit franchisees and a
Multi-unit franchisees are a dominant force in franchising. means to attract and reward productive franchisees.
They control more total units than their single-unit
counterparts and are increasingly adding and operating ExAmplEs of frAnchisEs
multiple franchise brands. So why go international? Maybe because even the
Franchising is a team effort. For any franchisor to succeed, mammoth US domestic market has less than 5 per cent
the vast majority of its franchisees (obviously all would be ideal, of the world’s potential customers! So then what are the
but it’s not a perfect world) must operate profitable individual biggest franchises in the world in 2019?
franchise units over the long-term. A brand’s success depends According to Franchise Direct who compiled its ranking
on an ongoing partnership between franchisor and franchisee. of the Top 100 Global Franchises, the top ten is completely
One of the most common sayings in the sector is: “Franchising taken by brands from the US, and they are the following:
means working for yourself, but not by yourself.”
Multi-unit franchisees purchase the rights to develop and 1. McDonalds
own multiple units in an exclusive territory. In a multi-unit 2. Burger King
operation, a franchisee will typically work less in the daily 3. Pizza Hut
operations of a single unit, instead focusing on the managing 4. Marriott International
of multiple locations at a higher level. 5. KFC
Multi-brand franchisees are also on the rise and they are 6. Dunkin’
exactly what they sound like. It is the opening up of several 7. 7-Eleven
franchises under different brand names. This is quite different 8. SUBWAY
than owning multiple franchise locations. Instead of operating 9. Domino’s
under one umbrella, each franchise operates individually. 10. Baskin-Robbins
Each brand might have a different concept. Each store might
have a different target market. Multi-brand franchising means The world is slowly changing and 2019 has already brought
having one operator opening very different businesses. us many new things. All industries have to adapt to the new
Co-branding, in which a franchisee operates two brands economic demands and so do franchises. Strategies will have
from the same location, has been described as the combining to change to stay on top of trends – both for doing business
and retaining of two or more brands to create a single, and finding employment.
unique product or service. No matter how you describe it, Franchising must be viewed as a commitment much like a
it’s a strategy that has really taken off in franchising and an marriage. A good match between franchisor and franchisee
increasing number of franchisors now offer several different sharing mutual goals over the long term is essential to the
brands, and provide incentives to franchisees to co-brand. success of each franchise unit, and thus the brand as a whole.
Diversification is a strategy that is being adopted and Sharing essential goals is a pivotal factor that must be considered
becoming more and more popular among multi-unit seriously by both parties before any contract is signed.

OCTOBER 2019 RETAIL & LEISURE INTERNATIONAL 49