Embracing the new environment, franchisors look outside U.S. to grow

Andrae Marrocco

Franchisors globally have passed a turning point and are now capitalizing on shifting business conditions as they attempt to come to terms with the new normal. No one knows precisely what the business world will look like. Those with a glass half-empty outlook tend to use adjectives such as "volatile," "uncertain," "complex" and "ambiguous" in their discussions. Pundits of positivity see the pandemic bridging into a new season for many jurisdictions and believe that it could create unprecedented opportunity.

What we do know is that many international franchisors are embracing the new environment and are growing through new expansion opportunities, appealing and innovative ecommerce initiatives, and enhanced communication channels.

The time for growth is now

As the old and well-worn adage goes, change brings opportunity. Although COVID-19 has brought with it a myriad of unprecedented change and challenge, it has spurred opportunity for many international franchisors. Changing consumer demands and habits, together with access to cheaper capital, has created favorable conditions for international expansion.

One example is multi-brand franchisor United Franchise Group, which has been evaluating prospective owners and granting franchises to international candidates through the pandemic. Franchisors are discovering there is a larger pool of sophisticated investors looking for their new opportunity, and franchising is of appeal to many of them.

This resurging trend of international expansion is gaining momentum. Beyond traditional international franchise development, many franchisors are looking to hyper expand by way of acquisition of entire franchise systems (whether distressed or stagnant because of COVID-19). The trend is aligned with the statistics forecasted by the International Franchise Association and FRANdata, which call for continued growth of the sector, despite the economic uncertainty.

Ecommerce a differentiator

Unsurprisingly, franchise brands with strong ecommerce and online platforms, and the resources and vision to quickly deploy such platforms, have enjoyed a greater degree of success during the pandemic. With quarantine orders in place, franchisors were forced to adapt to continue serving their customers and, as mentioned in previous columns, this included online ordering, home delivery, curbside pickup and more.

Following the development and deployment of enhanced technology and infrastructure around ecommerce and online platforms over the better part of 2020, it would be remiss to think all customers will return to their old shopping habits.

A study by McKinsey & Company reveals most product categories in countries across the world experienced a 10 percent increase in their online customer base throughout the pandemic. Research and Markets published a global study in May outlining that a "double-digit share of online shoppers" were buying more digitally due to COVID-19, and that the share of ecommerce shoppers is projected to account for one-third of shoppers by 2024.

Keep it personal

In the midst of the ecommerce craze, some brands uphold the importance of personal connection. John Mansfield, chief revenue officer of Detail Garage, noted, "It is important to remember what built your brand in the first place. In the case of Detail Garage, we have always been committed to providing an experience that has a personal connection at its center. And while offering a ‘buy online, pick up curbside’ option has been an essential addition to our model especially during the height of COVID, we cannot use it as an excuse to lose sight of making those connections… albeit socially distanced connections."

He added ingenuity from franchisees has shown itself in a doubling down on social media efforts, offering special raffles and "even showing off their robot dance skills as they deliver curbside orders."

Enhanced collaboration

While it may have been expected that the pandemic conditions hindered communication and collaboration, many international franchisors have had the opposite experience. From the outset of the COVID-19 outbreak, as shared in previous columns, strong communication became more important than ever, with franchisors needing to push information to their franchisees at an unprecedented rate.

International franchisors have, over the course of the past several months, developed enhanced communication tools and protocols to connect with their franchisees across the globe, as well as assist franchisees in staying connected with customers.

Detail Garage learned some important lessons in shifting its channels of communication through the pandemic. "We learned that a key element of effective communications was recognizing that franchisees as individuals absorb information in different ways," said Mansfield. "Keeping this in mind, we worked to create multiple touchpoints ranging from monthly Zoom sessions, daily and weekly updates on our franchise portal and offering a digital Facebook-style forum to share ideas, questions and concerns. More than that though, in many cases it came down to making sure our team was available for a phone call or text."

The online shift has also been instrumental for discovery days, onboarding and training of prospective and new franchisees. With travel restrictions and social distancing rules in place for the near future, international franchisors turned to video conferencing and other online tools to bring on new franchise partners. This approach is lauded not only for its cost and time efficiency, but also the opportunity for broader collaboration. One example of this is that more franchisor representatives are able to participate in the online discovery days, onboarding and training.

In the midst of the ongoing change and challenge, international growth appears to be in the cards for the later part of 2020 and into 2021.

Andrae Marrocco is a partner and co-chair of the Franchise & Distribution Group in the Toronto office of McMillan LLP. His column World View covers  international franchising in each issue. Reach him  at andrae.marrocco@mcmillan.ca

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