Managing a Global Franchise System in the “New” World
The world as we knew it changed drastically with the outbreak of COVID-19. Although nobody knows what the future will bring, most would agree that it will be different, as the impact to both businesses and personal lives has been significant – globally. Continued change in consumer behavior, industries’ structure and competitive landscapes across the global economy are to be expected. The speed and nature of change will depend on many factors, particularly medical advances. While some changes might be temporary in nature, others will not; hence, it is prudent to assume constant change. Until a vaccine is available, there will continue to be physical distancing and/or stay-at-home periods, travel restrictions / limitations, and an enhanced need for customers’ and employees’ safety. These factors will require re-thinking and re-designing you support and management structure for your global franchise system.
To develop a framework, it is helpful to consider some questions that pertain to three critical areas:
- Financial: How to most rapidly recover your system revenues and profitability for both franchisor and franchisees? Which initiatives and projects will result in best ROI and paybacks?
- Operational: What operational changes are needed to adapt to change? How can you leverage and accelerate the use of beneficial technologies?
- Structural: What is the optimal organizational structure in this new environment? What changes are necessary to be nimble, yet agile?
Before expanding on these and developing your detailed plan, it is important to ensure you consider all stakeholders (customers, employees, franchisees, and franchisor), as well as all the key functional areas for your business.
While the specifics of a plan will be unique to each industry and franchise concept, the areas below will capture some general needs:
- Communications: More than ever, confidence in franchisor’s leadership is of utmost importance. Maintaining clear and constant communication and operating with transparency will be key. Consider developing a communications strategy and plan that addresses multiple audiences - including corporate, franchisees, customers, and vendors. At the minimum, your franchisees need timely and clear updates, clarity on points of contact for different needs, and basic crisis management guidelines.
- Product / Service Revenues: Quickly identify and align on the revenue drivers for your concept. These might differ from the pre-covid model, and will be driven by customer behavior, safety considerations and any governmental restrictions. Do you need to add new offerings and/or eliminate others? Franchisor and franchisees should align on these, as to maximize revenues while maintaining brand consistency.
- Training / SOPs: New / revised training and SOPs will be needed to support concept modification and safety procedures. In person training might also be limited by travel restrictions and/or budgets, so it is important to leverage a digital e-learning platform.
- Supply Chain: Optimizing your supply chain will likely also be an opportunity area. Some considerations to best support your system include ensuring tracing capabilities, establishing back up sources and leveraging technology (e.g. artificial intelligence and internet of things).
- Marketing: To stay relevant, many concepts might consider updating their marketing campaigns – including the messaging, relevant assets, and possibly revise budgets and media mix. As with training, having a digital platform will be more important than ever. Providing guidance and best practices on channel effectiveness is also well advised.
- Development: Regarding development, both the pace and approach might be impacted. With changes in industry structure and competitive landscapes, there could be opportunities to accelerate development; although some markets might require a slower development pace. The key metric will be net growth, as there might be opportunities to also optimize the existing portfolio. Franchisors might benefit from embracing a multi-channel development approach, focused on topline revenues rather than solely on unit count. As it pertains to physical units, is there an opportunity to re-think and redesign prototypes to adapt to market needs?
- Contractual Fees: For industries with high negative COVID impact, franchisors might need to consider temporary relief to franchisees. This could be structured in multiple ways, including temporary reduced royalties, marketing fees or other fees; or a reset or redefinition of development requirements.
- Remote Oversight – With reduced in-market support, driven by travel restrictions, maintaining engagement and providing oversight is critical; but might need to be done differently. Larger systems with local market teams might not be as impacted, but if supporting remotely from a different country, consider adapting new tools and technologies. These might include video conferencing platforms, cloud-based collaboration tools for projects, local third-party service providers (e.g. in country shoppers) and others.
The complexity of your plan and changes to your support system in the “new” normal will depend on your industry and company specifics. International markets will continue to offer growth and diversification opportunities; however, successful management and oversight of your global franchise systems will likely require rethinking and re-design.
Enrique Kaufer brings over 20 years of experience launching, growing and managing global businesses across various industries with companies including GNC, Jamba, PepsiCo and American Express. Find out more at expansion-consulting.com