Joint-Employer, Technology, and Gen Z: What Lies Ahead for Franchising in 2021 and beyond?

The COVID-19 pandemic has had an unprecedented impact on the Canadian franchising industry, but as the rollout of vaccines amps up, so does the anticipation of economic improvements in 2021. Here, the leaders of both the Canadian Franchise Association (CFA) and International Franchise Association (IFA) share their thoughts about the North American franchise industry’s post-pandemic future. 

Drawing on their experience and expertise in franchising as heads of the world’s largest franchise associations, franchise brand leaders, industry advocates, and franchise veterans, Sherry McNeil, president and CEO of the CFA, and Catherine Monson, IFA chair and CEO of FASTSIGNS International, examine how businesses across North America reacted to the pandemic in 2020 before looking ahead to what we can expect from both an industry and brand point of view in 2021 and beyond.

Change Happens Fast: Be Ready
The COVID-19 pandemic hit the global economy hard and fast. In March 2020, the CFA was busy preparing for its annual National Convention in Montreal that was scheduled to take place in April. As the Association prepared for its flagship event, the seriousness of the pandemic began to set in. Initially, the CFA prepared to hold the April event with extra safety precautions, but as time went on, it became more and more clear that COVID-19 wasn’t going to be just a blip on the world’s radar.

Almost overnight, the COVID-19 pandemic flipped the world and the Canadian franchising industry upside down. While one day was spent preparing for the annual in-person Convention, the next found the Association and the world working from home as provinces throughout the country went into “lockdown.” If there’s one lesson the pandemic has taught us so far, explains McNeil, it’s the importance of being able to adapt to big changes, quickly.

“Innovation was our north star,” says McNeil. “We took parts of our strategic plan that were 36 months out and moved them to the next three weeks. We went virtual, digital, online, with absolutely everything. We closed our office on Friday, March 13, 2020, and on the Monday, we launched our first online webinar. We did online webinars every day for months to give our members the support they needed.”

Change also happened quickly for the IFA, impacting Monson on both fronts: as the chair of an association and CEO of a large franchise system. Thankfully, however, FASTSIGNS had already begun making the shift to prepare its franchisees and their employees to operate remotely. The franchise already had online collaboration tools like Google Workspace deployed across their system for more than four years. After receiving a warning about the seriousness of COVID-19 from a colleague who sits on the board of a major franchise brand in China, FASTSIGNS put together a guide for franchisees to help their employees work remotely.

“I was pushing for this stuff so that when it came, we were ready,” explains Monson. “We sent the information to our franchisees so that their inside sales, outside sales, and graphic designers could work remotely.”

The Ongoing Issue of Joint-Employer
Both McNeil and Monson agree: the issue of franchisors being deemed to be “joint” or “common” employers with their franchisees continues to hold back the franchising industry in both Canada and the United States.

The joint-employer status of franchised businesses in Canada concerns the CFA deeply because it is a direct challenge to the nature of the franchisor/franchisee relationship – two independent parties coming together in a relationship governed by a contract, containing terms that are clearly defined. McNeil believes this is a concern because franchisees continue to be treated differently than any other small business owner. It is punitive and unfair to remove the discretion that franchisees currently enjoy while operating their businesses, she says.

When it comes to the economy’s recovery from the COVID-19 pandemic, the government at all levels in both Canada and the United States should be focusing on growth, which in the franchising industry, is impeded by its joint-employer status.

McNeil explains that when it comes to growing the economy, the government should be focused on creating an environment that is friendly to small business owners, allowing them to open profitable businesses that serve local communities.

“We continue to work with the government at all levels, right down to municipal, to try to educate them about the franchise business model: the franchisor-franchisee relationship is different than employee-employer,” says McNeil. “The government still thinks of franchising as big businesses and we keep trying to break it down for them that it truly is small business ownership at the local community level. The one thing that I see potentially impeding recovery is joint-employer status.”

Monson agrees and adds that a big step towards fighting franchising’s joint-employer status is getting franchisees involved in advocacy efforts.

“Having those franchisees call their representatives to develop relationships is far more powerful than having me as the CEO saying, ‘here’s how my franchisees are thinking,’” Monson explains. “All politics is local, so I would encourage you (franchisors) and all your folks, if you’re the CEO of a franchise organization in Canada, to get your franchisees engaged with the CFA. Ask the CFA what your franchisees can do, who they should be calling, and what are their talking points.”

What’s Ahead? Despite Setbacks, Franchising is Growing  
While the COVID-19 pandemic has certainly taken a toll on the Canadian economy, franchising remains a viable option for entrepreneurs looking to find success as a business owner. With so many challenges impacting the business landscape in Canada and throughout the world, it’s easy to understand why entering into a proven system backed by the support of a strong head office team – which franchising provides – is a great option for starting a business, even in the late stages of a global pandemic that has turned our world upside down.

According to RBC’s March 2021 Macroeconomic Outlook, the outlook for the global economy has improved significantly as vaccine production and distribution ramps up. The report expects the global economy’s real GDP to increase by 5.5 per cent in 2021. For Canada, 2020 ended on a high note, recovering from the largest economic decline since the Great Depression to grow at a robust 9.6 per cent annualized pace in the final three months of the year, clipping the output lost due to the pandemic to 3.2 per cent. This momentum is expected to continue throughout 2021.

Monson points out that she has seen a continued desire amongst the public for franchise ownership throughout the pandemic. With a real estate market that is seeing great availability and low prices, franchising is an excellent option for Canadians and Americans who want to be in business for themselves, but not by themselves.

“We are going to have huge pent-up demand from the public to go out to eat, go on vacation, go on a trip, buy things, get outside,” says Monson. “So, what that means is we need to make sure that our franchisees are able to staff up for when that demand hits. You don’t want to disappoint a customer and not be ready with that demand.”

McNeil echoes Monson’s sentiments from a Canadian perspective, pointing to a noticeable uptick in online searches for franchising opportunities through 2020 and 2021. On LookforaFranchise.ca – the official online franchise directory of the CFA – the Association saw a sharp decline in web traffic following the World Health Organization’s (WHO) declaration of COVID-19 as a global pandemic in March 2020. Since then, however, the online directory has seen traffic return to pre-COVID levels of roughly 8,000 visitors/month.

One thing to look out for as the economy recovers, McNeil says, is the rise of Generation Z. While millennials are generally recognized as those born in the late 1980s, Generation Z represents the next generation of prospective franchisees. Generation Z, also referred to as “zoomers,” proceed millennials as those born in the mid-to-late 1990s.

“As both franchisees and consumers, franchisors should appeal to this new group. Generation Z represents individuals who are focused. They are ambitious, they are highly entrepreneurial, and they are more online and more digital than any other generation,” says McNeil. “Franchisors will want to plant seeds with Gen Z [to let them know] that franchising is an opportunity for them in future. We need to engage them. They are a great resource for us as employees, but also as potential franchisees.”

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