Franchising in the New Year Embraces Tech, Sustainability and Business Realities
As we move into 2024, we see franchising undergoing significant transformations driven by technological advancements, changing consumer preferences, and a dynamic global economy. Maybe one of the most significant changes going into 2024 is the emergence of the COVID-era, which will create more and more reality checks that force us as businesspeople and consumers to take stock of what the longer-term, more down-to-earth environment looks like.
The future of franchising promises a blend of innovation, adaptability, and resilience as we continue to see a trend toward entrepreneurship and business ownership. Here, we will explore key trends and developments that are shaping the future of franchising in 2024 and offer insights into what aspiring franchisees and franchisors can expect in the years ahead.
Virtual and Augmented Reality: Enhancing Customer Experiences
In 2024, we anticipate an increased integration of virtual and augmented reality technologies within the franchising sector. Franchise brands are exploring immersive experiences for customers, allowing them to interact with products or services virtually before making a purchase. This technology not only enhances customer engagement but also provides a unique selling proposition for franchise brands. According to Fortune Business Insights, this market is expected to grow exponentially at a rate of over 50% per year up through 2030.
Artificial Intelligence (AI) in Operations
AI is here and just about anyone who isn’t living in a cave has started to find ways to integrate, leverage and utilize AI in all aspects of their business operations from marketing to customer service and everything in between. AI is becoming a game-changer in the operational aspects of franchising which will eventually create more operational systems allowing for absentee franchise ownership and effective multi-unit ownership. From predictive analytics for inventory management to AI-powered chatbots for customer service, franchises are leveraging artificial intelligence to streamline processes, reduce costs, and enhance efficiency.
Automation and Robotics
The integration of automation and robotics is reshaping the way franchises operate. From automated order processing to robotic assistance in food preparation, automation is not only improving operational speed but also addressing labor challenges faced by many franchise businesses. I can’t be the only one who has been served lunch at a restaurant by a waiter that looked like R2-D2. More and more aspects of every business can be transitioned to technology solutions cutting down costs and streamlining day to day operations.
Evolving Consumer Preferences: Health, Sustainability, and Personalization
Health and Wellness Focus
As health-conscious consumer trends continue to gain momentum, franchises are adapting by offering healthier menu options, transparent ingredient sourcing, and fitness-related services. The future of franchising is likely to see an increased emphasis on promoting well-being across various industry segments. Since COVID, more and more people care about what they eat and how they are treating their bodies and overall health. Franchises and businesses that serve this consumer trend will have great opportunities in 2024.
Sustainability Initiatives
Sustainable practices are becoming a non-negotiable aspect of business, and franchises are actively incorporating eco-friendly initiatives. From green construction materials to reducing single-use plastics, sustainability is not just a buzzword but a core component of franchise strategies in 2024.
Personalization and Customization
The era of one-size-fits-all approaches is fading, and franchises are embracing personalization and customization. From tailored product offerings to personalized marketing messages, franchises are leveraging data-driven insights to create more meaningful and individualized customer experiences. With the “AMAZON EFFECT” in full swing, people need a reason to leave their homes and visit your business. Make it exciting, memorable and give your customer an experience to drive traffic in 2024.
Businesses in today’s market should focus on the things that work, driving in new business, keeping returning customers and managing expenses.
No More Government Money
COVID-19 funding is essentially done as we enter 2024. Gone are the days of generous gift deposits to your bank account from the Federal Government and unless you haven’t utilized the ERC Tax Credit, you need to stop looking to the government for a revenue source at this point. It’s back to basics, generate revenues and manage expenses and run a good business model. 2024 will require businesses and franchises to focus on what works, what’s profitable and is good business and get away from focusing on government incentives.
The COVID funding programs, which are also either coming to an end or are sending out less “free” money, are those that put money in the market and give people cash flow that, in most cases, they spent freely and on things they may or may not purchase when they are using their own money. In 2024, every business that benefited from lavish spending related to government funds, including most, should reposition and structure for a more level-headed consumer and ensure that the value proposition is still there in today’s market.
Get back to basics. Businesses in today’s market should focus on the things that work, driving in new business, keeping returning customers and managing expenses. 2024 is a return to reality for a lot of businesses and consumers and will require good business decision-making and a hard look at the facts of today’s marketplace.
In 2024 and hopefully beyond, the labor constraints are starting to loosen up. The government payments to individuals caused problems for most industries in hiring and maintaining the workforce, particularly in food service and retail. With this trend coming to an end, getting good people to work is getting easier every week.
Flexible Business Models: Adapting to Changing Work Dynamics
Remote and Hybrid Work Models
The way businesses operate is undergoing a paradigm shift, and franchising is no exception. Remote work and hybrid models are influencing how franchise systems manage their workforce. Franchisors are implementing technology solutions to enable remote collaboration, training, and communication. According to ForbesAdvisor, the growing trend for working from home/virtual is not going away, and by 2025, 22% of the U.S. workforce will be home-based.
Micro-Franchising and Pop-Up Ventures
Smaller, more agile business models are gaining traction in the franchising landscape. Micro-franchising, characterized by lower investment requirements and compact operations, allows for quicker scalability and adaptation to niche markets. Pop-up ventures are also becoming a popular way for franchises to test new locations and engage with diverse consumer bases.
Global Expansion and Localization: Navigating International Markets
Localization of Offerings
Franchises expanding globally are recognizing the importance of tailoring offerings to local tastes and preferences. The future of franchising involves a deep understanding of cultural nuances, culinary preferences, and market dynamics in each region. Brands are customizing menus and marketing strategies to resonate with diverse international audiences.
Digital Platforms for Global Outreach
The proliferation of digital platforms is facilitating global expansion for franchises. Whether through e-commerce, social media, or online delivery services, franchisors can reach a global audience with greater ease. Digital platforms also enable real-time communication and collaboration between franchisors and franchisees across borders.
Financial Technology (FinTech): Revolutionizing Franchise Finance
Blockchain for Transparency and Security
The adoption of blockchain technology brings increased transparency and security to financial transactions within the franchising sector. From supply chain management to franchise fee transactions, blockchain ensures a tamper-resistant and verifiable record of financial activities.
Digital Payment Solutions
The reliance on digital payment solutions is reshaping the financial landscape of franchising. Mobile payments, contactless transactions, and cryptocurrency acceptance are becoming standard practices. Franchises are integrating seamless payment options to enhance customer convenience and streamline financial operations.
Franchise Resilience and Crisis Preparedness
Adaptive Business Continuity Plans
The global landscape has demonstrated the importance of having robust business continuity plans. Franchises are proactively developing adaptive plans that can navigate unforeseen challenges, ensuring the continuity of operations during crises such as pandemics, economic downturns, or natural disasters.
Diversification Strategies
Franchises are exploring diversification strategies to enhance resilience. This includes diversifying product or service offerings, entering new markets, or exploring complementary business lines. Such strategies contribute to a more resilient and adaptable franchise ecosystem.
Education and Training: Empowering Franchisees for Success
Online Learning Platforms
The future of franchising involves leveraging online learning platforms for efficient and accessible training. Franchisees can benefit from on-demand training modules, virtual classrooms, and interactive resources that empower them with the knowledge and skills needed for success. Franchise Marketing Systems (FMS) has worked extensively with trainual to develop efficient online training systems through the LMS platform: It has made training more efficient, required less labor hours and franchisees have responded with positive feedback to these types of systems.
Focus on Soft Skills and Emotional Intelligence
Recognizing the importance of interpersonal skills, franchises are placing greater emphasis on soft skills and emotional intelligence in their training programs. This focus improves customer interactions, team dynamics, and overall franchise success.
Legal and Regulatory Landscape: Compliance and Adaptation
Digital Compliance
As franchises integrate digital technologies, compliance with data protection laws and cybersecurity regulations becomes paramount. Franchisors are investing in robust cybersecurity measures and ensuring that their franchisees adhere to digital compliance standards.
Regulatory Adaptation to New Business Models
The evolving nature of franchising business models is prompting regulators to adapt. Regulatory bodies are working with the industry to create frameworks that address the unique challenges and opportunities presented by emerging trends such as remote work, digital platforms, and innovative business models. One of the more recent changes in this area has been the Corporate Transparency Act, which was just enacted in January of 2024 and requires all owners to show ownership interest and disclose this in a report to the government.
Collaborative Ecosystems: Networking for Mutual Success
Franchise Collaborations
Collaborative ecosystems are emerging within the franchising sector, where franchises from different industries collaborate to create synergies. Co-branding ventures, shared marketing campaigns, and joint ventures are fostering a sense of community and mutual support.
Technology Partnerships
Franchises are increasingly forming partnerships with technology companies to harness the power of innovation. Whether through developing custom apps, implementing advanced analytics, or leveraging emerging technologies, technology partnerships are driving efficiency and competitiveness.
A Return to Traditional Franchise Industry Segment Growth
The service category of franchising has been on fire in a very big way over the last 4-5 years. It seems like everyone, including private equity firms have been so hot on service models that many other great industry segments have been sort of forgotten. 2024 will see a return to some of the more traditional franchise industry segments like experience-based retail, food service, fitness and automotive. People are coming back to these categories and investing in these franchise markets again, pay attention to these markets and look hard at brands that fit these profiles.
2024 and probably beyond, we see aggressive growth in these categories, which also leads to opportunities in multi-unit development franchising. As these segments increase in volume, so too will the increasing cost of commercial real estate as deals get competitive for prime locations. For operating models, the pressure on food costs, labor costs and operating expense management will continue to be relevant, but we see many of these supply chain issues which had put pressure on these segments becoming less significant and bringing back the margins we were used to.
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