Bigger Winners And Losers In the Franchise World

I write on franchising and how current events will impact the model.  Opinions expressed by Forbes Contributors are their own.

The Anytime Fitness 4 P’s

The Search for Relevance

It is clear the world is in a historic shift with disruptive forces impacting global economies, traditional marketing models, and key tenants of the franchise model.  Franchise companies that have enjoyed solid success in decades past are scrambling to find relevance with their static approaches to find candidates, pyramid-based hierarchies that resist change at the corporate level and offers that provide customers with a compelling experience.  This likely creates the environment where there will be a large number of potential losers in franchising and some significant winners will emerge as well.  What are some of the deciding factors that will create the tipping point at the fulcrum of this tide?

Meeting the Generational Shift Demands

Given the size and influence of Millennial’s in the global marketplace, franchise concepts that become students of this mega-population will at least find a place on the dance floor if they are able to make strategic modifications that result in a convergence with their interests.  While the “experts” on Millennials abound and increase, their typical reactive prescriptions may be too little too late for many.  Often like a piece of candy, it tastes good when it’s in your mouth, but it has no lasting effect.  The focus on generational researchers could prove invaluable.  Their scholarship and longitudinal view should create a beneficial perspective for lasting transformation to a relevant concept for the next decade.  It is less about adapting to their interests and preferences and more about evolving a culture that becomes naturally attractive to them.

How Social Media is Changing the Conversation

When you try to imagine the impact of the global generational shift, picture an iceberg with 10% of its mass above the waterline, representing traditional communications.  The 90% of its mass below the waterline is what I call “The Conversation” where Millennials, and increasingly, the rest of us are communicating.  Franchisors with top-down, autocratic management teams will increasingly struggle to attract Millennials as franchisees and employees.  The use of traditional marketing such as email blasts, radio, television, direct mail and the like will continue their erosion of importance in gaining the attention of this increasing powerful sector coupled with increased costs as the unimagined spend more to get less.  The Conversation is taking place in anonymity for most leaving them wondering where their business is going, as Millennials rely deeply on the voices in their social networks.  Items as innocuous as an oil change, dinner plans and a clogged toilet rarely rise from their handheld to even consider any other input.  Simply acknowledging The Conversation is a start; figuring out how to be a part of it remains elusive.

The Tension Between Standards and Preference

Since franchising is based on consistency in virtually all aspects of the model, this stalwart component is now facing increased tension from the social and local penchant of Millennials who are seeking more independence, and the ability to see their imprint.  While franchise companies relish a homogeneous environment, it will have to give way to increasingly individual preferences of Millennial employees and franchisees.  Those that fail to chart this course will fade as their older workers, franchisees and customers make choices that reflect their local market and where they feel a social tie.  The depth of this adjustment cannot be overstated given the building evidence from numerous research efforts and documentation.  Yet, make no mistake, this will be the most difficult adjustment in franchising for established and mature brands.  The success they have enjoyed in the past is now at risk of degraded relevance unless they are willing to fundamentally change their model to intercept a new reality in the market.

An Increase in Winners and Losers

When looking across the franchise landscape there is a significant delta between those concepts that become iconic brands and those that sporadically dot the canvas.  Yet, the latter may have a decided advantage moving ahead if they embrace their competitive advantage to strip away the shackles of so many static franchise models and become preferred by the growing pool of young potential franchisees.  I would expect to see a larger number of concepts stalling out or retiring their development strategies if they persist with outdated approaches.  The real interesting movie over the next few years will be amongst major brands as they resist the demand to re-invent themselves for a new marketplace.  Some have enjoyed storied growth over the past decade, like Anytime Fitness, recently opening their 4,000th gym in Shanghai, China.  Many ask how can “another” gym experience such enviable growth?  Co-founders Chuck Runyon and Dave Mortensen seem to have a crystal ball on what the future of franchising would hold.  Their concept has blown past their direct competitors, as well as, drawn would-be franchisees from considering other concepts.

Dave Mortensen and Chuck Runyon, Co-Founders of Anytime Fitness

“Franchisees must be given the tools and support they need to be successful.  You don’t have to give them a brand-new tool kit every year.  But advances in technology, and ever-increasing customer expectations, require nearly every business model to evolve over time – even if it’s in subtle ways.  Businesses which are slow to recognize or anticipate changing marketplaces quickly die,” said Runyon.  Mortensen added, “If customers don’t believe they’re getting value from your company, then they won’t remain your customers very long.  In the fitness industry, we need to remove barriers to exercising.  Convenience and support are more important than pricing.  So, we’ll never stop focusing on convenience.  Our challenge is to find new and better ways to serve our customers’ needs, which means helping them achieve their fitness goals.  Technology can be a big part of the solution.  But nothing’s more important than genuinely caring about your customers – and proving it.”

The Search for a Formula

The use of models provides us with a more predictable outcome, and now a new model is needed to participate at a deep level in franchising experience.  The formula for success will include a keen awareness of how Millennials are shaping their world as consumers, workers and franchisees.  Based on those insights, franchise companies must figure out how to become part of The Conversation in a meaningful way.  There is little doubt it will include loosening of the reigns at the franchisee level with a decidedly local perspective.  The holy grail may well lie in finding a way to connect socially with stakeholders of the future.  At a minimum it will be a critical ingredient in who will win and who will lose in the future of franchising.

“Franchising can be done ‘well’ with systems-thinking, a disciplined approach and a commitment to the betterment of society.” – Dr. Ben Litalien, CFE