How System-Wide Technology Can Help Franchise Brands Succeed

Written By GABBY WONG

In a series of pulse surveys we conducted in March and April, we evaluated the impact of Covid-19 on business continuity and financial performance across the franchise market. The survey yielded some surprising results about the attitudes and perceptions of market impacts, from the start of the pandemic to the seeds of recovery.

To be sure, Covid-19 is a once-in-a-lifetime crisis that has challenged franchise businesses in every area of leadership, engagement, and business operations. The uncertainty is profound, a a contrast to the normally growth-oriented, entrepreneurial focus that is a staple of franchising. In fact, our survey results suggest that as businesses move through the phases of the pandemic, from the shock of the sudden shutdown to the hardship of the immediate cash and revenue impacts, leaders are starting to settle into the uncertainty. Longitudinal analysis across our surveys shows that franchise businesses are projecting longer recovery times as a result of Covid-19. Specifically, the percentage of companies expecting a recovery time of over a year more than doubled from the previous month by 127% (see our blog from April 30, “The State of Franchising—What We Didn’t Realize a Month Ago”).

Managing uncertainty is not only the key to starting on the path to recovery, but it is critical to sustaining that recovery over time with a virus that experts predict is likely to come back in waves over the next 12 to 18 months. Should you fall short of delivering a safe and consistent environment, you will breach trust and lose the confidence of your consumer base. Information, data, planning, and standardizing processes and engagement across the franchise system are critical in managing through this period of uncertainty – a problem that can be uniquely solved by technology.

HOW CAN TECHNOLOGY HELP?

Franchise businesses face complexity and risk in managing across a complex web of ownership structures, multiple brand verticals, and diverse geographical territories. As location-based businesses, brands face a diversity of conditions across multiple locales. The virus affects each region, state, and city differently. Consumer demand, along with employee sentiment toward safety, will be highly localized. Further complicating this problem is the absence of a national approach. To get open and stay open, franchised businesses must be in a position to assess the environment at each locale, and against different state and local regulations.

Ownership structures and licensing agreements in franchising are complex, with multi-unit franchisees, single-unit franchisees, master franchises, joint ventures, and investor groups all participating with varying levels of ownership maturity. Engagement and support through recovery needs to be “context-sensitive” and tailored to the needs of each unit and owner. The specifics of each vertical must be considered as well, with the impacts of social distancing on business models, products, and consumer demand varying greatly.

And, given ongoing joint-employer concerns in franchising, brands must balance the immediate need to direct the franchisee in an emergency situation with a longer-term approach of coaching, training, and a focus on best practices in accordance with brand standards.

All of these recovery risks must be managed with reduced staff and resources at the brand level. As noted in our recent survey, roughly 54% of respondents have reduced head count at the corporate office by 20% or more.

TECHNOLOGY-BASED SOLUTIONS

Platform-oriented technology solutions that integrate interactions, information, and processes across the franchise system can help mitigate the business uncertainty associated with Covid-19 recovery. An enterprise-ready operational platform can improve decision-making by: 1. Integrating data and information from each region, state, and locale and across diverse sources of data to provide brands with the necessary situation awareness. This should include data from public health sources, social mobility data, consumer demand and sales data, employee perception data, customer experience feedback, and unit-level performance.

2. Providing executives and field resources with monitoring capabilities across the portfolio of franchisees, with realtime analytics and KPIs, to enable them to act quickly if necessary. This should include a centralized “command center” view to monitor segments of the system portfolio for financial performance, risk, safety incidents, the reemergence of Covid, and the path to recovery.

3. Increasing readiness by codifying best practices and creating standard processes, checklists, training, and published content across the system. This should include brand standards as well as state and local guidelines.

4. Improving the efficacy and coordination of limited field resources by assigning, managing, and tracking recommended playbooks from those field resources to the unit owners. This creates a “closed loop” from analytics to action-taking, and ultimately helps businesses assess the efficacy of franchise best practices and brand standards. As well, it is imperative during this critical period that brands create a highly engaged relationship with unit owners to drive more consistent and sustainable performance.

RECOVERY TECHNOLOGY PLAYBOOK

To support franchise systems in the process of growing, operating, and scaling their concepts as they navigate through the recovery over the long term, our recommended approach includes the following steps and activities:

• Assess franchisees’ readiness to reopen. Which units are in locales that are starting to reopen? Do you meet the criteria against state and local guidelines? Is consumer demand for reopening strong? Are employees ready, and are they willing to return to work? These are key questions to answer to determine if it is the right time to invest in reopening. Not all locations will be ready, and you do not want to make a costly mistake by reopening too soon.

• Manage the reopening process. Assist units to safely reopen by coaching them through the safety and regulatory guidelines of reopening post-Covid. Manage the reopening process against your brand standards.

• Conduct ongoing monitoring and engagement. Until we have a vaccine, the business risk of additional shutdowns will be high. Franchised businesses will have to keep a keen eye on monitoring unit performance against KPIs during this critical period. Standardizing playbooks and best practices will help leaders act quickly in the event that public health and safety issues arise. As well, franchisees will need a centralized portal to readily engage, crowd-source ideas, and ask for help from their peers and the corporate support team – all from a single pane of glass.

• Reignite franchise development activities. Many franchise brands are forecasting increased unit churn with lower-performing franchisees, but also an increase in qualified leads stemming from corporate layoffs. To drive stability, and ultimately recovery, franchise businesses must focus on keeping a steady and growing pipeline of highly qualified potential franchisees and manage the development, transfer, and termination processes carefully.

PLANTING THE SEEDS FOR SUSTAINED RECOVERY AND GROWTH

As we move into the third month of the Covid-19 crisis, we are seeing signs that the market and consumers are anxious to move toward quickly reopening and getting back to normalcy. Over time, reality will temper our expectations. It will not be a quick process. As leaders, our responsibility is to set the right expectations with our organizations and businesses, positioning our planning and strategy activities beyond reopening and toward a more sustained and longer-term view of recovery. As with most market adjustments, successful businesses will adapt to the constraints. Enterprise technology platforms can help bridge that gap and ultimately enable us to iterate, learn, and position our businesses for more success in the future once the pandemic subsides.

Gabby Wong is CEO of FranConnect, the leading franchise management software (FMS) provider. More than 140,000 franchisees and 700-plus brands, including 40 of the top 100 global franchises, use their services to grow, scale, and optimize their business through a connected and complete franchise system view of the business.