Trends in commercial collaboration/franchising

Franchising is changing and must continue to evolve. The business model must be accurate. It needs to be distinctive at the front end, while the back-end processes must be well-organized. Herein lies an opportunity for the accountant/advisor. Additionally, transparency and managing expectations are crucial in the relationships between franchisor and franchisee. “Dictating is no longer appropriate.”

The franchising world is undergoing a reassessment. The market is dynamic. Where internet sales once played no role, retailers now must move with this development, being available to their customers anytime and anywhere. This is a change the franchising world has recognized too late, and it carries significant implications. Fees and the entire business model are changing, and these changes need to be integrated into the franchise agreement.

Flexible franchise agreement

Contracts are no longer viable for a standard five-year term. What is standard is the world around you changing, necessitating that you can update your business model and thus your franchise agreement in between, even if it is challenging. Take, for instance, the rise of supermarkets' so-called pick-up points. Here, consumers can collect their online-ordered groceries at any time they want. Groceries that come from the franchisor’s distribution center. This means that these pick-up points locally compete with the franchisee's shop. Clear agreements must be made about this.

Changing agreements is not easy, as evidenced by discussions at Bakker Bart, but also at HEMA and Albert Heijn. The rules of the game change during the match. This is why clear communication is essential. Dictating is no longer appropriate. Involve franchisees in developments, consult with one another, and ensure a win-win situation for both parties. This also requires more responsibility and a long-term vision from franchisees, not just short-term gain. In several well-known organizations, the negotiations about web shop agreements took too long, causing them to miss the market together.

The dynamics also highlight that franchisees need to be enterprising. They must follow the customer, always and everywhere. In almost all cases, having an engaged sales agent makes a big difference. Locally active entrepreneurs can achieve as much as 60 to 70 percent more turnover than passive franchisees.

Soft franchise is a myth

Soft franchising doesn’t work. The current times call for professional frameworks that are adhered to. Hard franchising (with firm = clear agreements) is the future. Expectations need to be well-managed by the franchisor, while there must be local flexibility to respond to customer desires. For instance, you might allow franchisees to keep ten percent of the assortment flexible. This way, they can apply local touches while staying within the business model's framework.

Professionalization

This all fits within the further professionalization that franchising must undergo. The necessity to truly change and professionalize is strongly present. Developments are advancing so quickly that it is necessary. And it is not just the public-facing part of the business model; the back-end processes also need to be in order. Know your KPIs (Key Performance Indicators). With this information, the franchise branch’s development can be monitored in comparison with past performance and colleagues within the organization and other industry participants. Only then can you provide excellent guidance as a franchisor.

Measuring is knowing. Here, the accountant/advisor can prove their worth. More than anyone else, they can help the entrepreneur in setting up and utilizing a good management information system effectively.

Trends in commercial franchising

Looking at franchising in Europe and North and South America, nine significant trends are noticeable:

1. The relationship between franchisor and franchisee is becoming more balanced, with more partnership and transparency developing.
2. Franchisors are increasingly moving toward multi-brand franchising: multiple brands under one parent organization.
3. Internationalization. More and more, franchisors opt for growth across different countries.
4. Franchisees are expanding with multi-unit and multi-brand franchising: more locations under one franchisee and often more than one franchise from different brands/organizations.
5. Micro franchising: the self-employed individual as a franchisee.
6. The rise of more service franchises, especially in healthcare. From medical specialists to elder care and childcare.
7. The role of the franchisor in financing franchisees is increasing. Globally, banks remain cautious about providing financing.
8. The rise, continued growth, and acceptance of e-commerce and mobile technology in franchise networks.
9. The role of social media: dissatisfied and unsuccessful franchisees are vocal on social media, attempting to impact the franchisor.