Jan 14, 2021

5 Bold Predictions For Franchising In 2021

Written by Keith Gerson, Nick Mecozzi, Ian Walsh

Forecasting the Year Ahead 

With 2020 now officially behind us, we decided to pull out our trusty crystal ball and look ahead to the biggest changes that will happen in Franchising in the year ahead. This post outlines our favorite predictions for 2021. We are confident in all of them, but it’s safe to say that we would not have predicted them 1 year ago. It should be interesting to look back at them a year from now to see which ones played out. 

  1. 2021 will be way more than a rebound year for franchising

    A combination of “employment disillusionment” and light at the end of the economic and pandemic tunnels will tempt many to re-evaluate their career situations and that typically is good news for Franchising… We predict that in a post COVID-19 world, Franchisors will see an increase in franchise sales of 40% or greater as compared to pre-pandemic levels as workers recognize that franchising provides greater control over one’s destiny compared to the layoffs and furloughs of 2020. This will be particularly true in industries that proved “pandemic-resistant”, like the commercial and residential services category and the QSR segment.

  2. AI and Machine Learning will go mainstream.

    Specifically in the areas of franchise sales development and end-customer acquisition. We already know that AI can help to achieve exponentially higher closing effectiveness without increasing ad spend or administrative expense. According to analysis from Automat, AI-driven text messages average a 54% read rate compared to email’s 16% read rate, and a 26% response rate compared to email’s 3% response rate. Early adopters have already seen great results in improving franchise sales efforts (check out our case study on Floor Coverings International). But moving into 2021, more franchise leaders will become aware of how Conversational AI creates a competitive advantage. Look for them to quickly make it a core element of their sales and marketing processes. (Oh, by the way, if you haven’t heard, we launched our own Conversational AI solution – check it out!)

  3. Franchise technology fees are on the rise.

    According to a FranConnect FDD study of 2400+ brands in 2019, the average of monthly flat-rate technology fees was only $140 per month per franchisee, usually a very small amount compared to Marketing and other fees. Many franchisors have realized that this is insufficient to set them up for success in the “next normal”.  We predict that these monthly fees will increase by more than 50% on average. Over half of franchisees already say that they derive the most value from the technology that franchisors provide, and 61% of franchisors are now charging tech fees. Increasing tech fees shouldn’t take a hard-sell if brands utilize technology to create greater efficiency, reduce costs or otherwise enable the brand to compete more effectively in the market.

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  4. Changes to Field Visits will be permanent.

    Remote work became the norm in 2020. The impact of the pandemic forced rapid evolutions in the technology and human acceptance of teleworking, videoconferencing and more. And despite well-documented trade-offs, the efficiency gains we have witnessed are making impressive contributions to the bottom line. But franchising has a specific standard operating procedure which can be drastically improved… field visits. The required travel to, from, and between visits typically turns 50% or more of a Consultant’s time into “dead space.” By reducing their travel, a typical field business consultant could double or triple their interactions with franchisees. We predict that franchisors will permanently restructure field visitations to expand span of control to at least 75-100 Franchisees per Franchise Business Consultant after realizing the effectiveness of virtual field visits.

  5. We will see a burst in M&A activity on the low-end of the market.

    Recent mergers and acquisitions have mostly involved large private equity firms and large mega-brands. This has resulted in extremely high multipliers, and great pressure on operators to achieve extremely aggressive goals in pursuit of Return on Investment. In 2021 we predict a shift towards portfolios comprised of smaller micro-emerging and emerging brands. (See our Blueprint For Emerging Franchise Brand Success) This shift will alleviate growth and profitability goals that have often been unrealistic and allow for easier territory-centric ‘tuck-ins’ which can avoid many challenges associated with competing acquired brands. 

Like what you’ve read here? Please share this on social media. Or better yet, if you disagree, share your own thoughts about the article, we’d love to engage in conversation about it!

And if you missed our List of FranConnect's Top 5 from 2020, get it here:   Read Now

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Keith Gerson, Nick Mecozzi, Ian Walsh

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