THE 2001 FRANCHISE BUSINESS DEVELOPMENT FORECAST AND INDUSTRY TRENDS ANALYSIS

In 2001, franchise business development will see an expansion of approximately one percent growth over last year, bringing the total to 13 percent in the first year of the 21st Century. For the past decade, Franchise Recruiters Ltd. has exclusively conducted the Annual Franchise Business Development Survey.

This is the only survey of its kind in franchising and is the distinct benchmark for projecting total unit growth. It represents system expansion opinions and executive outlook estimates for development from the top 100 producing franchisors. These corporations form the major franchise industries generating annual increases in component structure across the United States and globally.

We learned that the new world economy is producing a commercial evolution where, "The human enterprise must not be ignored. Franchising is in an epoch of E-business, and that E does not necessarily represent electronics or technology. The E embodies employees!" We were advised, "Without employees a business is only a box filled with intellectual assets."

Individual care and attention must be given to existing franchisees. In an approach that has not been demonstrated so watchfully in previous surveys, franchisors emphasized that, "If we care about people and are personally concerned with the value of their lives, we must demonstrate that concern. People will do things they would never do for merely money alone." This insight was a universal fiber of interpretation from many franchise executives. "Capture the hearts of franchisees and employees, and you clarify the dignity of the business mission."

The use of technology within the franchise system in purchasing as well as in gathering and disseminating data to and from units continues to cycle high in the minds of franchise leadership. Information is power. "Investment in upgrading tech systems is with us for life," said one respondent. "We are creating a true learning environment for technological information. We must innovate or die."

Cash solid franchisors continue their prowl for mergers and take over targets, especially within industries that lend themselves to existing management oversight and development. Smaller systems and regional chains will find it increasingly difficult to secure financing. We were told that franchisors must control their real estate, build operating profits, continue to diversify, and provide more equity for loans.

Developing "life skills" is another objective that remains a constant with franchise managers. Franchisors train more people per year than does the entire U.S. government, including all branches of the military. Technology has seized center stage in education and instruction; however, "technology should not be at the expense of the human being." An inspiring assessment was provided in the study. "Learning is a partnership with everyone in the store, and everyone is a teacher and a student through life’s journey. Technology is simply a tool."

Franchisors declare they are willing to change attitudes and ways of doing business to make the workplace supportive to nontraditional workers. Savvy franchise systems provide language classes to teach English and Spanish and pay their workers for their efforts. Training manuals printed in various languages enhance productivity, build employee retention, and promote the workforce. Personnel can grow with the company as communications skills improve.

"Diversity is a business issue, not an HR topic," according to our surveyed decision-makers. "For diversity to succeed, the franchisor’s overall strategy and goals must be supported from the top down."

The U.S. has 38 million people between the ages of 15 and 24, the traditional age for hiring new workers into franchise organizations. Minority populations are increasing. Hispanic is up 35 percent; Asian-Pacific is up 40 percent; and African American is up 12 percent. In the next four years, the Department of Labor predicts that Hispanics will surpass African Americans as the nation’s largest minority group, and 85 percent of people entering the workforce will be women and minorities.

Workplace sensitivity issues are high on the minds of franchise management. Potentially litigious circumstances have become a product of our times. All chains are exposed to impending legal disasters. The following observation was noted in the survey: "No problem in this area of our business is small. They are painful, costly, and socially draining to any system." Franchisors are learning to create respectful work environments. "We must put in place a solid, caring corporate culture with consistent training and education along with clearly written rules, regulations, and easy to understand policies and procedures."

Keeping management teams in place, a problem exacerbated by the Internet, is a defined objective for franchise organizations. Some chains admit stores have not been built because management was too thinly stretched. "We have markets with zero unemployment that cannot support expansion even when the markets beg for consumer attention." More problems of this nature are predicted.

In this spandex tight labor pool, senior franchise managers are concerned with costly employee turnover. Recent surveys show that store operators themselves cause much of the worker unrest. The emotional and financial cost of chronic turnover is a huge drain on unit and system profits. Many times managers do not realize the root cause or what the costs are to rehire replacements. Some even believe turnover is inevitable. Moreover, the loss of managers is devastating to franchisees and franchisors alike. "Managers are valuable commodities," we were told. "They must become a part of the partnership. Otherwise, consistency and quality of the chain diminish, standards fall, and the business culture suffers. We end up competing with ourselves."

We were advised to listen to employees closest to the customer, and to create a workplace culture that is conducive to home and family desires and that reflects common values. "Think of your employees as stakeholders in the company."

Progressive franchisors are supporting system growth through the Internet by embracing two venues. Their own Web site is in constant update mode with fresh graphics and data available for franchise sales and consumer interaction. Most mature franchisors participate in over 16 on-line franchise-advertising sites. These electronic information centers, and electronic catalogs of franchising opportunities, help prospective franchisees learn more about the company. They link potential investors to franchise sales departments for one on one communications, and lead tracking.

A franchising totem at the paragon of leadership within a multi-national franchise system with over 10,000 units enlightened us in reference to our survey. "We are a different company every year. Every year we decide what the consumer wants and then we try like hell to give it to them. People sometimes get too serious about business. Business isn’t life itself: life is tragic, but business is not. There are no disasters in business that you can’t avoid - if you see them coming and make the adjustments. In franchising, if you understand markets, you can do as well in a down market as you can in an up market. You just need to learn how to bounce in a binge economy. After all, franchising is a work in progress!" ©