The franchise industry has become so competitive, franchisors are constantly seeking new ways to grow their brand beyond single-unit sales. Developing their concepts in order to attract more franchisees and differentiating from competitors is the new daily reality. And, they are looking beyond the United States to do it, too. For a new or emerging franchisor, keeping up with industry trends can be quite a challenge.
Franchise development through multi-unit sales continues to be a hot franchising trend in 2018. More companies are employing different models other than direct franchising, when the franchisee interacts directly with the franchisor. An increasing number of franchise companies are adopting traditional and intermediary models for expanding their franchise systems, including:
- Regional or Area Development Agreement
This is the classic development model whereby the franchisor sells the right to multiple units to be developed by the franchisee in a given area over an agreed upon timeframe. The franchisee signs both a development agreement with the franchisor that dictates the timelines, terms and representative area or territory that the agreement covers, as well as individual franchise agreements for each unit as they develop them.
- Regional Director or Area Representative Agreement
These models reduce the involvement of the franchisor to an extent. Instead, a franchisee purchases the rights to develop the brand in a region (each brand typically defines regions and areas differently). The regional franchisee assumes a role similar to the franchisor, selling single and multiple units in their assigned region, and providing limited support in exchange for a percentage of initial fees and potentially a portion of the royalties. The regional franchisee may also be required to own one or more units. The area representative model is similar but on a smaller scale. The franchisor maintains a contractual relationship with the regional director or area representative for their obligations and commitments on developing the territory. The franchisor also maintains a direct contractual relationship with each franchise sold through a standard franchise agreement. How the sales, training, and support are split typically between the franchisor and the area representative or regional director varies by deal and is negotiable.
Companies seeking to expand their franchise system overseas often use the master franchise model. It’s similar to the regional development model, except the master franchise usually has obtained rights to sell and support units in an entire country. More importantly, the contractual relationship with the franchisee falls under the master franchisor (or sub-franchisor) instead of remaining directly with the franchisor. Typically, the master franchisee will be a citizen of that country or at least fluent in the language and familiar with the laws for business ownership.
Tips for Staying Ahead of the Curve
But those are just the franchise growth trends in the United States and abroad. You still have to be aware of consumer trends and what’s shaping your individual industry. So, how do you find out about all these developing trends to keep your franchise company evolving and growing? There are several ways:
- Network in Your Industries
Establishing relationships with other colleagues in the franchise industry and your specific field is vital to keeping pace. Like you, they have their ears to the ground to find the same information. Through these relationships you can exchange ideas and knowledge about what may lay ahead. You can also pick up best practices from business leaders who have adapted and grown through other trends. Vendors are also great resources for insight into consumer behavior.
Conferences, conventions, and forums are filled with great minds and access to information. For example, the International Franchise Association annual convention hosts thousands of people, including other franchisors and leading experts in various sectors of franchising. It also offers seminars, roundtables and featured speakers. The IFA convention is one of the largest in the industry, but there are many more franchise industry events throughout the year that are worth attending.
- Communicate with Your Team
The team you’ve assembled to grow your business is as passionate about experiencing success as you are. More than likely, they are also monitoring changes in the industry that may affect your franchise brand. Hold regular meetings with your team to learn what they’re learning and develop strategies together. Implement team-building events that engenders a sense of ownership in the brand, which will help ensure members stay engaged and on the look-out for developing trends.
- Enlist a Franchise Advisor or Consultant
Experienced franchise advisors or consultants can help franchisors navigate the changing industry by developing strategies to help franchise systems cope. The right consultant will have experience in your niche industry as well as in franchising.
Networking, attending franchise events, seeking the help of your management team and working with a franchise advisor or consultant should allow you to anticipate new areas for growth before they're apparent and keep apprised of what’s happening in your niche industry.
Winmark Franchise Partners, with 30 years of franchise experience and more than 800 franchise owners representing more than 1,200 locations for five brands, can help you anticipate what’s ahead in the franchise industry and develop strategies to meet them. For more information, contact us here or at (844) 452-4600.