Both Uber and AirBnB have disrupted their respective traditional industries by providing modern, easy and cost effective solutions without owning a single asset on offer, i.e motor vehicles and hotels.
A critical component of disruption is the social ease of accessing traditionally inaccessible products and experiences. Similarly, the financial sector is faced with fintech or crowd-funding (online lending or investing without traditional financial systems) and Bitcoin (cryptocurrencies).
How does disruptive innovation impact the traditional franchise model?
The traditional franchise model has been lauded as one of the biggest innovations for many years, making business ownership accessible to many through pooled and replicable systems. However, the disruption of the franchise model is imminent as it may lose appeal to young entrepreneurs.
Related: 4 Types Of Business Models
Technological change and innovation
The biggest consideration for the traditional franchise model is the lethal combination of rapid rate of technical advancement, strong social movement and the ease of accessing traditional products and services such as global experiences (travel or food).
What this means is that the consumer is increasingly seeing value in using technology to research, purchase and consume both online and offline, and demands easy access to products and experiences they are able to share as a community.
Some other factors that may challenge the existing franchise models
- Many entrepreneurs are chasing the unicorn or creation of something exponential with rapid growth potential. Young entrepreneurs have an interest in creating and innovating new business concepts rather than replicating existing models.
- Standardised systems and protocols offered by franchise models are considered too restrictive to support disruptive innovation or create growth. Access to capital through fintech and similar platforms may be more supportive of innovative business concepts.
Smart contracts and the franchise model
According to the techies, smart contracts (or cryptocontracts) are an unending and continuously growing record system or software programme.
This programme not only allows legal contracts referred to as smart contracts to be prepared digitally but also to be executed, implemented and actively managed online and digitally. And this enables a digital legal system that will police, enforce and manage compliance in all aspects of lives through the Internet of everything.
What are smart contracts and how will they impact franchise arrangements?
Picture this scenario. You (Fred Franchisor) input all the terms of the franchise agreement with Felicia Franchisee into a computer software programme. The computer software, considering all history of parties and possible scenarios, generates the perfect franchise agreement quickly and cheaply.
The software then executes the franchise agreement through access to Felicia Franchisee’s bank account ensuring payment is made to Fred Franchisor on time and without breach until termination, applying securities and penalties where necessary.
This smart contract will also execute and manage the franchise supply chain, ensuring transfer of value only occurs once certain conditions have been met.
Smart contracts are essentially automated contracts written as computer programmes. These contacts are able to enforce themselves when certain conditions are met, eliminating the need to check compliance or require enforcement by lawyers or franchisors and franchisees.
Most futurists will bet on technological advancement, disruptive innovation and exponential growth as key trends over the next decade. Is the franchise business model the next big disruption? Or is it ready to embrace the shift in its archetype?
How Your Fast Food Franchise Can Attract Quality-Conscious Consumers
In a world where customers are becoming increasingly picky about where they dine and what they pick from a menu, it can be challenging to meet demands.
“Major foodborne illness incidents and outbreaks seem to be increasing. Even innocent or careless mistakes can sicken guests and ruin a restaurant’s reputation,” says Francine Shaw, President of Food Safety Training Solutions Inc. “Foodborne illnesses are 100% preventable and could be avoided if food service organisations adopted a food safety culture.”
Following a listeriosis scare in South Africa early in 2018, consumers have become more conscious about the foods they eat. Today’s customer is more concerned about the cleanliness of the food they buy over its taste.
“How food is sourced, prepared and served is uppermost with many diners demanding transparency when it comes to where they spend their hard-earned money.” – Franchise Association of South Africa (FASA)
The addition of more nutritious choices to your menu may be attracting health-conscious consumers, but it’s the quality of the regular – and perhaps popular – menu items that may win over consumers concerned with quality and not just calorie content.
Here’s how you can ensure your customers are at ease with having their next meal at any of your franchises nationwide:
1. Ensure everyone knows why and how it’s done
Even with buy-in from the top-tier, your food safety efforts will be futile if not incorporated into every training touch point and may appear to be optional, when they should be a priority, says Chris Boyles, vice president for The Steritech Institute. When you have well-trained workers who understand the ‘why’ behind food-quality policies, momentum is built and a culture of food safety is created.
“Through encouraging genuine, comprehensive behavioural shifts, your franchise will protect the brand, safeguard employees and sustain a reduction in risk,” Boyles adds.
2. Build food-quality impetus across the network
As a company that serves food to the public you’re in a position of great responsibility. It’s important to pass this message down to your franchisees too. “Co-operation between the franchisee and their employees in this regard cannot be stressed enough,” says Marcel Strauss, Managing Executive of The Fish & Chip Co. – which was voted the top fish brand in 2012.
To get your franchisees on board with tightened food safety regulations, ensure they’re aware of the looming food-quality changes you’re planning on implementing and the ROI for your brand. This enables them to make budgetary allowance for certain credentials and technology you may require to meet certain standards of food safety.
3. Tell your customers every chance you get
Give consumers a glimpse into your production process by including your quality mission statement on customer-facing materials such as your website, social media pages, profiles on external review sites and menus. “Use stories, images and videos to show your practices in action,” Katy Jones, Chief Marketing Officer at FoodLogiQ explains. “Take customers behind the scenes into internal discussions. Practice is the way you demonstrate your commitment.”
To incorporate quality and safety messaging into customer relations, you need collaboration between your food safety managers and marketing managers.
The Future Of Franchising Looks Smaller (And Fancier)
Franchises are adding smaller locations and reduced menu options, as niche markets emerge, to attract the customer of the future.
As the owner of a thriving franchise, you’re well aware of the fact that fluctuations in the world economy has both negative and positive effects on business. When it comes to your successful franchise, tough times could mean adopting new trends or seizing gaps, potentially resulting in a new franchise concept you wouldn’t have otherwise thought of.
“The buzz word in global franchising is ‘flexibility and adaptability’,” according to the Franchise Association of South Africa (FASA). “Whether a result of a need to inject some life into stagnant franchise brands or as a result of the new world order brought about by the recession, franchising is embracing alternative and options in a big way.”
You can do this by either devising innovative areas to franchise or allowing more flexible ways for franchisees to operate to help with their bottom line. FASA has earmarked these as some of the biggest franchising trends in 2018 and beyond:
Smaller, more cost-effective franchise models
When franchisees don’t have high franchise fees and start-up costs to worry about, they can focus more on what customers want, and deliver. The added benefit of smaller spaces include having fewer employees and reasonable rental.
Among the new frontiers in franchising are the food court losing its legacy as the preferred setting for food franchises, as service stations increase in popularity in the industry. A number of brands – like Steers, Debonairs and Mugg & Bean On-the-Go outlets – are co-locating with major fuel retailers to create fully-integrated accessible centres.
Niche markets are offering one-of-a-kind franchises
“The opportunity to get in on the ground floor of a new franchise trend is also on the rise,” notes FASA. This could be offering a unique gourmet food experience in your outlets or a ‘green’ space of energy saving technology in your operations.
“Consumers have gained control of what they want,” says Morné Cronjé, head of franchising at FNB Business. “It is no longer about what you have on the menu, but how your product or service can be tailor-made to what a customer really wants.”
Founded just five years ago (2013), RocoMamas boasts over 60 franchise outlets, clearly responding to the essence of this trend –allowing consumers to build their own burgers without having to pay for items they’d rather leave out.
Stay ahead of the game
For long-term success, franchisors who want to expand their business should start exploring beyond present circumstances and current predictions.
“2018 will no doubt bring its challenges, however for every challenge there is a window of opportunity to explore. We are advising franchisors to scrutinise these trends carefully, it can definitely give them a boost for 2018,” says Cronjé.
As Consumers’ Tastes Change Can Your Franchise Keep Up?
More of your customers are eating in, and if you’re not packaging, portioning and pricing your food accordingly, they’re heading to a retailer that does.
It’s generally believed that it’s cheaper to cook your own breakfast, lunch or supper than to go out and pay a much higher price for the same food in your fridge at home. But today’s consumer’s live fast-paced lifestyles – so food is becoming more about convenience.
31% of 6 022 middle-to-high income South African earners surveyed by BusinessTech, put eating out and entertainment at the top of their list of things they’re most willing to cut their spending on in 2018 to save money. Research by supermarket giant Pick n Pay correlates, reporting an increase in customers buying quality convenience food, not just to entertain at home, but for dining at home.
Consumers are empowered by variety
You’ve heard about the ‘fast casual generation’, aka Millennials? They are demanding healthy, affordable eating experiences. But do you know how this affects the future of the food industry, and your business in particular – because they’re not the only ones adapting their lifestyles.
An increasing number of food brands and chefs are compelled to create complete ranges of new, convenient meal options that are not only packaged, portioned and precooked attractively, but affordable too.
The fastest growing sector of retail foodservice for the past four years has been the convenience store sector. Non-traditional avenues of distribution are growing, gobbling market share while establishing new patterns of consumption, price points, and customer loyalty.
Shoppers are becoming value-focused
A savvy franchise would acknowledge that although pre-packaged and pre-cooked convenience food isn’t a new trend among consumers and supermarkets, it is gaining popularity. “Some of the most notable trends in 2017 were an increasing shift to convenience foods as customers looked for both value and convenience,” says Pick ‘n Pay’s Head of Marketing, John Bradshaw.
Value for money and healthier food choices will continue to be top of the convenience food list for consumer in 2018, as more shoppers cut down on luxuries.
“We’ve seen significant growth in the number of customers looking for an easy way to enjoy a good meal without the cost of eating out,” says Bradshaw.
But he cautions that South African shoppers have always been value-focused, and while the most significant shift Pick ‘n Pay has seen is how all its shoppers, no matter what their income levels, are watching their budgets.
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