By Brian Walker
CEO, Retail Doctor Group
Ultimately, only audiences decide what’s a franchise.
Australia has over 1100 franchisors, 65000 franchise units, and 8000 company-owned units*. The franchise sector has been flourishing since the 1970s with most growth occurring since the 1980s. Industry commentators note that it is now very mature.
A steep curve of growth supporting the growth scale play of these times, such as there is now a shop at every corner, decentralised brand expressed as local marketing, customer-data owned at each site and rigid geographical communities. Franchising is bounded by territories, controlled by operational compliance, with rapid expansion predicated upon available operators and all business done in the physical shops. The industry was at its zenith in the ’80s and ’90s.
In this industry, capital was and is used to build large fleets of shops on scale. These fleets carry different business information systems, with inventory mixes being ranged uniquely in many cases, albeit unable to aggregate to channel wide data.
Is this the aging rock band playing greatest hits to its adoring and aging fans? or Is this agile and adaptive sector ready to pivot seamlessly into the new world of retail?
Fast forward to today and into tomorrow…
Brands are increasingly centralised. Customers shop on all channels – a branded retail ecosystem, where social media dialogue and influences are the cornerstones of a central branded communications strategy. Large scale “omnichannel” deployment is anchored by integrating platforms such as Magenta or Shopify which drives data efficiency and integrity. Data is certainly an increasingly valuable asset (some would say the most valuable of all). Data is particularly critical in the application of artificial intelligence, predictive and personalising technologies or in improving search engine efficiencies.
From the consumer behaviour perspective, shopping done from the centre (The shop as the historical centrepiece) has evolved into a different form. Where consumers start and hope to complete their shopping journey nowadays are usually outside of a brand or retailer’s physical and digital space. The channels consumers use for shopping include, but not limited to, social media, messaging apps, and live streaming services. The challenge and opportunity are real enough for centrally controlled retail brands. How will our franchise partners adapt and stay agile amidst these profound changes in the way consumers behave?
Is this a summary of the challenges and opportunities for the franchising community?
How will a galaxy of satellite businesses successfully adapt its model to a more centralised retail ecosystem? Is its traditional economic model possibly not sustainable in terms of revenue margins or other metrics including capital funding? In other words, if businesses don’t need as many shops generally, whilst requiring much greater data centralisation and maintaining an omnichannel brand, how will the franchising sector emerge and adapt?
The franchising model is entrenched into our psyche, and it will certainly adapt. When and in what way will be fascinating to see.
*Statistic from International Trade Administration USA
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