Ben Filmalter, the founder of Mugg & Bean entranced delegates of the 2014 Franchise Leadership Summit with his insights and anecdotes from his time in Charlotte, North Carolina. With more than 770 000 franchised establishments, the US is the undeniable global nerve centre for franchising and its follows that trends impacting this market will ultimately influence franchising in South Africa.
Filmalter moved to the US after the much publicised sale of Mugg & Bean to Famous Brands in 2010. The goal was to introduce the Mugg & Bean concept to this new market in a way that would suit a segment of this vast but very different market. In the past years he had devoted his time to studying restaurant franchise brands in the US – learning from both the well-established brands like Dunkin Donuts as well as rising brands such as Newks Eatery which are enjoying rapid growth.
It’s not all about food
Ray Kroc, McDonald’s first franchising agent, would not recognise the many guises which franchising has taken on in the US today. While the fast food and restaurant business remains core, a whole universe of interesting and largely service-related franchise concepts are emerging. These include exciting new brands clustered around the following areas:
- Home delivery – 1800 Flowers
- Single product franchises – The Savoury Spice Shop
- Home maintenance – Express Mobile Services
- Home-based healthcare – Visiting Angels
- Add-on franchises – For an example a Radio Shack franchise within an existing retail operation
- Franchises aimed at female consumers – Mom’s Corp
Many new ways to eat
Mr Kroc would undoubtedly also shake his head at the variety of franchise restaurant offshoots that are gaining ground. Fast casual, fresh casual, farm to fork, white tablecloth, dinner houses – each meeting a different segment of the market. Being so vast, different states have their own preferences and tastes. This means that franchisors looking to expand in the States also have to take regionality into account. A brand can be hugely successful, for example in Southern cooking, in one area but fail dismally in another; a lesson perhaps for South African franchisors looking to grow across Africa and other international markets.
Different market, similar challenges
US franchisors face many of the same challenges as local ones. With tougher economic times, food franchisors in the States are experiencing many of the same challenges as their South African counterparts including pressure on consumer spending, spiralling food costs and the struggle to secure good real estate.
While the US is a very different market to South Africa, Filmalter isolates four major trends shaping this market which will have an impact here:
1. The power of youth and energy
There is a powerful new species in Filmalter’s US galaxy. The youth which includes Millennials and Generation Z which follows on from them are having an enormous impact on society. Besides their massive spending power they also have sway on what brands succeed and fail. While the youth are the early adopters, older generations tend to follow on. Although we have a very different socio-economic environment we also have a massive youth bulge. South African franchisors also need to understand the youth, they do think very differently to the generations that precede them, in order to retain a competitive edge.
2. Embrace technology
It’s no longer enough to say that you are using Facebook or Twitter. Franchisors need to do more than simply put their toes into social media and indeed technology. Social media is powerful and pervasive and is simply unavoidable for most franchisors. But technology refers to more than social media and South African franchisors need to be aware of new developments. Technologies will have a profound impact on business – these could be systems which allows for greater efficiencies or those which enable companies to better understand customer data and applications directly impacting sales such as online ordering.
3. Creativity is not the sole property of marketing
Many franchisors believe that creativity is the responsibility of a handful of experts in the marketing department. Filmalter believes that creativity needs to flow throughout the organisations and leading brands in the US are embracing this idea. Yes, there is a cost related to instilling this mind-set change, but Filmalter believes that the rewards make the hassle worthwhile.
4. Community matters
No business can operate divorced from its environment. It’s simply not enough to provide a top product at the right price. Franchisors must create an emotional connection with customers. Easier said than done but Filmalter believes that that this is accomplished by showing both humanity and passion. Franchises must grow strong roots into the communities that they serve.