Looking Back & Forward: Franchise Evolution and Future
Aug 06, 2024
In early July, I was invited to participate in the Franchise Interview Podcast hosted by Martin J. McDermott. Martin has been interviewing franchisors for over 17 years, and we had a really nice conversation about my franchise beginnings, growth, and what the American Franchise Academy stands for.
Knowing about my background and the almost four decades I’ve been involved in the franchise industry, he asked me how the franchising model has evolved over the years.
As I was answering him, I thought of writing this blog post so you can learn a little bit about the history of franchising and be aware of the trends shaping our industry. We also discussed some of the most common challenges owners face today and how they can adapt and take advantage of the opportunities franchises offer.
These are my thoughts on how franchising is different today compared to what it was like before.
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1. Who Runs the Business
Between 1960 and 1970, legacy franchise brands were mostly run by their founders. Tom Monaghan ran Domino’s, Fred DeLuca and Peter Buck operated their Subway shops, and William Rosenberg led Dunkin’ Donuts. The culture of those brands was solid because you could see the founders’ personalities, beliefs, and values.
Today, big brands are operated by private equity, and they have changed the game. They have turned franchising more into a money-making machine, leaving behind a lot of the passion these brands were born with.
Now, it is upon current leaders and CEOs to drive and create that ongoing passion and culture to keep that history and legacy up.
Don’t miss: "The Challenge Culture" from the Former Dunkin Chairman
2. Single-Unit vs. Multi-Unit Operations
Before, franchising was a way for entrepreneurs with hopes, dreams, and some funds to have their own little business. By buying a franchise and operating one unit, they would substitute their jobs and become their own boss.
Franchising was driven by single-unit operators, and a key franchise indicator was Annual Unit Growth. In the last decade, though, this has really switched.
Nowadays, the trend is to go multi-unit. Many brands focus on growing with their successful existing franchisees, allowing them to either open more units or acquire underperforming stores. Other brands seek new franchisees to sign multi-area agreements.
The percentage of units opened by existing franchisees has become a key indicator. This KPI proves that the brand has good operators, a network that trusts them, and a successful brand, which makes the franchise more attractive.
3. The Employee Revolution
The third change I perceive within the franchise industry is generational. Thirty years ago, employees had very different motivations, and what inspires today’s workforce is not the same, for the most part.
- Especially after COVID-19, people have different focuses and life aspirations, and they look for other things in a job, like flexibility and a purpose-driven culture.
As a leader, it is your job to discover those motivations and adapt your leadership style to this new generation of employees, led by Gen Z, also known as “Zoomers.” These efforts will bring new opportunities to your organization.
Want to know more? Download our Employee Revolution Handbook for free
4. A Wider Franchise Industry
Martin pointed out how the U.S. franchise industry had around 1,200 systems in the early 2000s.
- Nowadays, there are almost 4,000 different franchise systems to choose from in the United States alone.
There are also international investment opportunities from countries like Mexico (with almost 2,000 brands) or Brazil (with around 3,000 franchise brands).
These numbers reflect the diverse and expansive nature of the franchising industry, which includes a wide range of sectors.
- According to the 2024 Franchising Economic Outlook of the International Franchise Association (IFA), “personal services and quick service restaurants (QSRs) will experience higher growth than other industries this year.”
“It must be confusing for those who are interested in getting into franchising. How do you narrow it down to one? How do you get to that point, especially when there’s not even such a thing as a perfect franchise?” Martin asked.
View this video on how to choose the best franchise to learn my recommendations!
Martin asked me what I liked most about franchising. My answer: I really love the predictability of the franchise world. If you have systematic processes, procedures, and policies in place and execute them with a high level of excellence, you will have consistent results. And anybody who implements them can be successful.
For the past eight years, the American Franchise Academy has helped franchisees create, document, and apply business and management systems. We also train their teams and leaders to be successful.
We offer three training programs for franchisees, district managers, and unit managers or single-unit franchisees who want to make their franchises as profitable as possible. You are not alone in this journey! We can help you achieve your dream of business ownership through franchising.
LISTEN TO THIS PODCAST INTERVIEW on Spotify HERE.
