What Restaurant Franchising Will Look Like in 2021
Three areas for restaurants to focus on right now to be prepared.
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For restaurant founders looking to expand through franchising, the pandemic offers unique challenges, but for those who are prepared, the opportunities for expansion might never be better.
Restaurant owners (and other types of business owners) franchise for three reasons: Time. People. Money.
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Franchising allows for business expansion faster than other methods because the franchisee takes care of many of the time-consuming details. For example, in the current economic climate, a franchisee would be able to quickly identify bargains to be found in empty real estate shells in the local market. For the people element, there are many highly experienced displaced restaurant executives who would make great owner/operators, along with countless furloughed restaurant employees ready to staff a new franchise location. Franchising allows for expansion using other people's money, and funding for franchise buyers is available at historically attractive interest rates. We can expect that the lending incentives for small business, and aid to restaurants in particular, will continue during the coming months.
So, what should restaurant concept owners in a position to franchise or looking to continue their franchise programs be doing now? They should be focusing on three areas: financial stewardship, dependable yet flexible revenue streams and trust rankings.
Of course, any restaurateurs looking to franchise or to continue their franchise expansion need to be ever- mindful of what has happened to their bottom line in recent months. They need to assess where they are today and how to survive and thrive in a world where the rules may continue to shift. The stark reality, as reported by the National Restaurant Association, is that between March and June, eating and drinking place sales levels were down more than $116 billion from expectations, so restaurants must do all that they can now to contain costs while increasing revenues.
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Restaurant owners have no doubt spent these last months looking at every cost and trimming where they could. Some have opted for a restaurant audit to identify areas where costs can be better contained to increase unit-level performance while at the same time maintaining brand standards. Now, more than ever, operators need to be proactive in asking for discounts and favorable terms during this time when vendors to the industry might be willing to make deals. A procurement review can reveal opportunities for savings. However, be careful about making long term commitments for short term gain
Restaurants preparing to franchise will need to take a holistic look at the revenue side of the picture and examine sustainable ways to increase current revenue streams or develop new ones. Franchisees who will be investing in a franchise will be demanding a carefully researched system. We have seen how delivery and carry-out have been the lifeblood of many restaurants during the pandemic shutdowns and beyond. Some have even taken on the role of grocer by selling meat, produce and dairy directly to customers. A franchisor will need to analyze whether these alternative revenue streams will be allowed or required, temporary or permanent.
Franchisees will be looking to their franchisors for direction on "add-on sales" scripting and execution; food preparation and portion control; and production control opportunities. And franchisors need to keep in mind that some of the best ideas in franchising come from franchisees (breakfast at McDonald's for example). After all, they know their community and their customers best. The franchisor needs to strike the balance between encouraging franchisee ideas that can contribute to the bottom line and being careful the franchisee does not go rogue and dilute the brand.
The trust factor
As consumers, we all have our own ways – conscious or subconscious – of ranking our trust of a restaurant's operation. Now more than ever, future franchisees will be looking to attain a high level of trust before investing in a brand.
Restaurant franchisors must consider that today's customer views concepts much more intently, and trust is more important than ever. If your front-of-house personnel leaves something to be desired in terms of sanitation and social distancing compliance, your customers will naturally be skeptical about what is going on in the back of the house that they cannot see. At the same time, employees will need to trust their colleagues are keeping COVID-19 concerns top of mind even with side duties, such as cleaning, stocking and prep work.
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For the emerging or growing franchise system, all of these trust-influencing factors at the consumer and the franchisee level need to be considered and clearly set forth in the franchise operations manual, which almost certainly needs to be updated to reflect the COVID response. In the franchise space, care needs to be taken to assure expectations of employee behavior and training are clear and enforced, without tripping over joint employment and vicarious liability concerns.
The trust factor is further influenced by a brand's social media presence, so this must be monitored and nurtured continuously. Restaurant brands in the franchise space can use social media presence to show their involvement with communities they serve, their commitment to serve customers for the long haul and their appreciation for community support.
What is the payoff for restaurant franchisors who take the time to focus on the increasingly important aspects of financial planning, revenue generation, and trust-building? Along with the ability to continue to cultivate a loyal customer base, there will be an obvious and growing desire for franchisees who want to become part of a well-prepared restaurant concept's franchise family.