Advice & Tips Cover Story January/February 2022 Resource Articles

Franchise System Trends

FranConnect president Keith Gerson explores what new franchisees can expect from franchisors in 2022 and beyond, from the rise of the “experience officer” to increased use of tech

By Keith Gerson, FranConnect

For a prospective franchisee, it’s important to carefully consider what franchise system will be a good fit with your background, business goals, and lifestyle. You also want to find a franchisor who is invested in driving franchise profitability, satisfaction, and longevity.

How do you know what to look for in a potential franchisor? As a leader in franchise management performance systems with more than 40 years’ experience as a franchisor, I see several key trends that smart franchisors are taking on. Here’s what’s on the horizon for franchise systems in 2022 and beyond.

Introducing the chief franchise experience officer (CFXO)

The next few years will likely see franchisors introducing the role of a chief franchise experience officer (CFXO), the executive who wakes up every morning thinking, “how do we continually improve and deliver a better experience for our franchisees, and why is that important?”Harvard Business Review makes the case that every company should have a chief experience officer (CXO)—so why not a CFXO?

The role of the CFXO isn’t too dissimilar to that of a chief customer officer. Specifically, the CFXO’s role is to engage the franchise organization in improving franchisee relationships, revenue, and profit. It’s also to create a persistent focus on the franchisee in the actions the franchisor takes to drive the organization to work together for optimum franchise experience delivery and to support and to serve as a change agent inside the franchise organization.

One area in need of a CFXO’s focus is that it’s often the highest franchise revenue contributors that are the most unhappy. It’s not unusual to hear a long-term, high performer lamenting the fact that they pay the most money in royalties and put the least demands on a franchise system, but get less relevant support than new franchisees and average performers.

The primary role of the CFXO will be to oversee every interaction that a franchisee has with the brand. This will be accomplished with tools like franchisee journey mapping, the process of creating a visual story of franchisees’ interactions with the brand. This exercise helps franchisors step into their franchisee’s shoes and see their business from the franchisee’s perspective.  

A move towards tiered support

Along with the introduction of CFXOs, it’s my belief that the franchisor of the future will evolve the present role of the franchise business consultant (aka operations manager, business coach, etc.) into the role of a high-performance coach that’s trained on understanding the principles of behavioral management, improving communications, conducting coaching analysis and problem resolution, building confidence, and conducting challenging discussions when needed. This evolved role will be that of a “franchise success coach” (FSC). 

The traditional franchise business consultant’s role is unique in that they wear multiple hats. They must understand the strategic initiatives of the franchisor to make sure these get deployed at the franchisee level. They also need to make the franchisee feel they’re there for them, to improve their business. The best franchise consultants meet these demands by being versatile—they’re analytical enough to understand the strengths and limitations of franchisees and their locations, and can adapt their approach accordingly. But it’s the rare “unicorn” that has all of these capabilities.

Because of this, it’s likely that tiered franchise support systems will become the norm in the future, in which success coaches are assigned to franchisees and rotated by the franchisee’s growth stage over the life of their time in the system, beginning with an assigned “right-start” specialist over the first year of a franchisees entrance into the franchise system. This timeframe can be modified to allow a franchisee to “graduate early” upon the successful completion of clearly articulated goals and tasks needed to advance.

Performance data in real time

Better data increases visibility and supports formal performance plans. One of the biggest differentiators among franchisors is the use of software that allows for granular analysis of franchise locations. Now and into the future, these solutions will aggregate key performance metrics into a single, easy-to-digest dashboard. This means the franchisor can use a single solution to monitor their franchisees, develop action plans, and track progress.

By having this capability, the FSC will have all of the necessary data at their fingertips, prior to going to a location or arriving at a virtual meeting. They’ll know the franchisee’s sales, customer satisfaction scores, labor costs, and other metrics.

More granular analysis leads, in turn, to more robust conversations with franchisees and more effective corrective action. When the FSC identifies a weakness—too-high food costs, for instance—they can have the franchisee take specific steps to address the problem. When they meet for a follow-up review, they’ll have the benefit of data to evaluate whether those actions moved the needle.

AI and Machine learning are also beginning to find their way into franchising, particularly in operations management. Franchisees will benefit as much as franchisors from AI-generated analysis of operational performance, which will lay out the requisite steps to address performance shortfalls.

Hybrid oversight will blend in-person and virtual visits

During the COVID-19 pandemic, many franchisors were pleasantly surprised to discover that converting in-person visits to virtual check-ins offers advantages. Less travel reduced expenses and enabled their field consultants to have more frequent, shorter touchpoints with their franchisees. That made it easier to course-correct, identify trends (positive and negative), and disseminate best practices more quickly.

Going into 2022 and beyond, many brands will elect to keep all their coaching virtual. Those in industries such as food service will hire food safety auditors to visit units in person. There’s value in that, particularly from a cost savings perspective, but it’s not necessarily the best option. Over time, there’s a risk that fully virtual oversight will lead to slips in brand consistency. Other brands are reverting to their pre-pandemic method of having FSCs do most or all their work in person.

Research is suggesting that the best approach is a hybrid one. Franchisees can expect that coaches will make visits in person for perhaps three-quarters of their touchpoints, with the remaining visits performed as virtual sessions focused on coaching.

Keith Gerson, CFE, brings 47 years of executive level expertise as a franchisor and franchisee with a proven track-record in building rapid-growth, and highly profitable franchise organizations. Over the last 10 years, Keith has served as president of Franchise Operations for FranConnect where he’s been able to work closely with hundreds of executive boards and franchise leadership teams.

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