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The business model of the franchise has demonstrated its strengths: flexibility and adaptability. Yet franchisors identify three types of pitfalls that hinder innovation.

innovation

As part of the annual franchising survey, franchisors cite three main obstacles that they see limit their innovation.

 

1. Access to funding

“The first obstacle is l’more difficult access for their franchisees to financing. The adoption of stricter international prudential rules is leading the banking community to take greater precautions with respect to the SME / VSE risk, although it is not necessarily higher than in other market segments.

The consequence is that only projects with sufficient capital and a solid business plan (porté au sein d’un réseau connu et pérenne) are likely to find the credits needed to achieve them “says Jacques Gautrand in the Express.Structuring tools allow to set up a clear business plan and to highlight the referent ratios of the network.

Banks value networked business projects (franchise et commerce associé), because they know it’s a model that works, on which hasreferences and reporting tools facilitating the decision-making process of credit committees.

It is through the communication and animation of the commercial network that franchisors can offer franchisees opportunities to innovate. In fact, getting in touch with the right financial interlocutors and their support for change allows franchisees to test new projects. The flagship of the brand should not be the only place to innovate, the novelty must also come from franchisees. Make sure you give them the means to do it!

 

2. Access to information

The second obstacle mentioned by franchisors is the difficulty they encounter accessing and analyzing franchisee data. Indeed, cash or accounting systems are often disparate, franchisees do not always want to share all their information, manually entered data contain errors … etc. In order to innovate, it is crucial for any network to identify best practices in order to replicate it. For that, several consolidation and reporting tools are available and help highlight what makes some franchisees particularly successful.

It is worth noting that to identify best practices, franchisees must be grouped by common characteristics. Indeed, a successful franchisee in downtown LA can not be compared to a successful franchisee in a shopping center in the suburbs of New York. So how?

  1. gather all the information of the franchisees (operation, finance, customer satisfaction, training …)
  2. standardize available information and consolidate it
  3. determine the comparison criteria (location, concept, vintage, surface area, …)
  4. highlight the trends of the different comparison panels.
  5. communicate and implement new processes or tools.

Finally, access to information must not be solely for the franchisor. By sharing information with franchisees through peer-reviewed, anonymized panels, franchisees can look for themselves. Innovation can, and must, come from both sides.

 

3. Finding the right franchisees

“Third snag mentioned by the franchisors interviewed in the annual survey: the difficulty of recruiting quality franchisees.

This is problematic because it involves both the network selection process, the pool of candidates and their quality. However, most experts recognize that major retailers have professionalized and optimized their selection methods. The crisis has meanwhile increased the number of people leaving voluntarily or not the wage and caressing the project to start on their own …

Another observation: franchisors are more selective, more demanding … and candidates better informed, more qualified. The franchisors themselves confirm it: they consider them “more professional, ambitious, motivated and voluntary”, adds Jacques Gautrand.

It is now increasingly important to find the candidate who meets not only the financial requirements but also the values of the company. Certain tools already exist et allow to link offerers and applicants based on personality. Learn more… 

What are the expectations of franchisees?

In terms of innovation, franchisees have very specific expectations of their franchisor to develop the business. 19% of franchisees want click and collect to be developed, 31% for franchisees from the retail sector and 43% from the food sector. 19% want to put shelves in the point of sale to present the range of products and services. 16% would like to give customers the opportunity to start an online shopping cart and finalize it at the point of sale and 27% for the retail sector alone. That said, 34% of franchisees are satisfied with the innovations implemented by their franchisor and do not express any need or specific expectation in this area (+ 23%).

 

Innovation: What impact on the franchise model?

Among franchisors who have evolved their concept over the last 5 years (renovation of the architecture concept, new sales process, new services …) 8 out of 10 report that the impact on their turnover has been positive, of which 42 % have noticed this in the first year and even 22% in the first months!

 

References:

Gare aux obstacles susceptibles de brider la franchise” de Jacques Gautrand, 15 Décembre 2017, dans l’Express.

Synthèse 2016 Enquête annuelle de la Franchise Banque Populaire” de Banque Populaire, Décembre 2016.

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