Trends

On many occasions during the past year, I've seen and heard the past 10 years dubbed as "The Lost Decade." From a stock market perspective--with prices essentially flat between 2000 and 2010--it's not hard to understand why. Upon writing this article, the annualized return on the S&P 500 over the past 10 years was -0.68 percent, versus the average return of 6.28 percent since 1929 (according to FactSet Data Systems). Interestingly, over a similar time frame, aggregate corporate profits have doubled while total household net worth is about 50 percent higher.

While the stock market seems to say we've made no progress, economic statistics indicate otherwise. So why the disparity? For a better understanding, enter our lessons learned from the past decade...

Using retirement plans to fund growth

Refugees from corporate America seeking capital to open a franchise business are tapping into their retirement plans to fund their fledgling businesses. So are multi-unit franchisees seeking to expand.

Take Patricia Preztunik, a multi-unit franchisee in Northern New Jersey who signed on with BrightStar Healthcare in May 2009. With four territories today, she purchased two up front, then two more, one at a time.

Preztunik says she spent six to eight months doing research before starting her own business. "I'd been looking at doing something for a few years. I had friends who had, but I had not taken the plunge," she says.

She rolled over funds from her corporate 401(k) after speaking with a business attorney, who informed her of the possibility of using it as start-up capital to fund her new business...

Shiny objects marketing is a simple principle, ancient in origin and easy to apply. From open-air markets in Nepal to the local mall, everyone tries to make their product or service stand out. Yet many savvy entrepreneurs fail to grasp the full meaning of this elementary skill and run into difficulties when trying to put it into practice.

It's common to see businesses touting their product, brand, or service. But putting a spotlight on your professional offering does not necessarily make it a shiny object. To truly make your product sparkle, it must sparkle for the ideal client in ways that make them come back, again and again. Bottom line is that it's not about your shiny object - it's about your customer's shiny object. And this means understanding where shiny objects come from and what a "shiny object" is for your customer...

Being a part of YouTube is no longer something franchise businesses can control. Chances are, you're there, whether you created the content or not.

First, how do you use this channel to your advantage? Second, and more important, how do you ensure consistent, positive branding when you are no longer exclusively in control of the messaging? And third, should you even try?

These are common questions. And while the first two don't come with black-and-white answers, there are proven guidelines to follow to make YouTube a positive and profitable marketing initiative for your business franchise. The answer to the third question, of course, is Yes.

It takes more than television commercials and crazy cat videos...

Jim Sullivan keeps an eye on business trends and market shifts. His livelihood depends on it. In fact, the very mission of his organization, Sullivision.com, is to design and deliver operations and leadership training programs for companies - including many franchises. He's worked with brands like McDonald's, Panera Bread, Regis Corp., Jiffy Lube, Applebee's, Domino's, and Dunkin' Brands.

Sullivan has been particularly keyed in on emerging technologies that are changing the way businesses are operating today. We asked his to share some of his current observations and insight into how these trends could shape the way multi-unit franchisees do business in 2011 and beyond. Here's what he told us.

From your perspective, what are the key trends that will affect franchise companies in 2011?
JS: I think the biggest trend will be social media's impact on the way zees and zors market, train, recruit, and even sell...

5 secrets proven to attract customers and make your franchise more profitable

In marketing, there are two basic ways to sell a potential customer. You can try to convince or argue them into buying your product (the classic salesman technique), or you can discover what it is that naturally appeals to them about your product or service, and use it to attract them, like a magnet. I call this latter approach, Shiny Objects Marketing. Everyone is attracted to shiny objects. We can't help it - it's in our DNA. The truly successful franchisee discovers the shiny object hidden in their product or service and puts it out in front of their customers, for all to see.

But simply finding and displaying your product's shiny object isn't enough...

Subway stalwart sees three trends changing the multi-unit franchising landscape

Just like any business, the franchising business is one that I have seen evolve tremendously over the past 30 years. While many of the cornerstones and crucial elements - product, simplicity, control, and support - remain the same, so much is changing.

Today there are at least three key areas that are altering the face of franchising. First, business is moving at lightning speed with the emergence of social media outlets, texting, and mobile Internet access. Second, the economy, while challenging, is providing a number of different opportunities for many. And third, an enhanced concern for our health and environment has created a niche and need for "green" and organic products...

When a franchise unit or organization runs into trouble, what does your franchisor do to help? Unfortunately, according to several multi-unit operators we spoke with, not much, not enough, nothing at all--and sometimes worse, demanding future royalty payments for closed units, or refusing to allow franchisees to shut or relocate distressed units.

What should franchisors do? In an ideal world, anything and everything they can to protect the brand--which means keeping units not only open, but profitable. Certainly there are operators who aren't making the grade and never will, despite help from the franchisor. These operators should be assisted in making a quick and graceful exit.

Sometimes temporary external circumstances that are no fault of the operator can cause a unit's bottom line to turn from black to red: Hurricane Katrina, a food scare, or a YouTube video showing employees behaving badly, for example; or changed demographics at an older location, construction that blocks access, or the exit of an anchor tenant from a once-thriving mall...

It's often the case that the weaknesses of a system are not obvious until that system is catastrophically overloaded. That's when most breakdowns or failures occur. Overloaded electrical systems start fires, overloaded computer systems crash, and overloaded human beings suffer nervous breakdowns.

In the same vein, today we find that the economic upheaval of the past 30-plus months has exposed the weaknesses and faults in most management-level employee hiring systems--especially in the multi-unit franchise world.

The dearth of job openings and the flood of applicants for each one, combined with the drawbacks of poorly managed "promote from within" policies, have exposed a number of system flaws that inevitably lead to faulty decisions that have a negative impact on the operation's bottom line...

All franchise brands strive to deliver a remarkable customer experience. Why? Because that's how you win customer loyalty.

Customer loyalty shows up in greater share of the customer's wallet and higher frequency of purchase. Loyal customers spend more per average transaction, and they send referrals to you through the enthusiastic stories they tell, based on doing business with you. You can market all you want, but in the end, customers believe and talk about what they experience.

Same-store sales growth, most important for multi-unit operators, is built on the shoulders of an ever-increasing base of loyal customers. Since a superior customer experience is the foundation for loyalty, franchisees should constantly assess their performance through the eyes of customers...

Gift cards can be an important component of customer loyalty programs. They can help attract customers, driving sales and brand awareness. New federal rules governing the use of gift cards have recently gone into effect. You certainly should be aware of and comply with the new laws.

Last year when President Obama signed the Credit Card Act of 2009 ("the Act") into law, the nation's attention largely focused on those provisions of the law that aim to change the way credit card companies do business with consumers. However, since the Act imposes requirements on gift card issuers, it also changed the way many retailers and franchise companies will do business with consumers.

Federal regulations implementing the Act's gift card requirements were issued on March 23, 2010 and became effective on August 22, 2010...

As noted in the last issue, investing is not for the faint of heart. It takes time and an ability to integrate an expansive range of information--as well as a steady head and a strong stomach. This combination often means that seeking outside help makes the most sense. But how do you go about finding an investment manager that's the right "fit" for you?
Before interviewing your first prospective manager, make a list of questions that are important to your specific situation. You will quickly discover that you can listen to a multitude of well-honed and entirely different pitches--each of which sounds plausible. However, the long-run success of your financial relationship will be how perceptive your manager is at determining what inspires, scares, and motivates you...

Franchising has flourished over the past two decades, adding tens of thousands of units and rising on a compound basis faster than most of the industries it operates in. Much of this growth was achieved by franchisee operators who began when they were in their thirties and forties. Today many of them are in their fifties and sixties and looking toward retirement.

An unprecedented number of franchisees find themselves in this situation, and they are not alone in this desire to cash in and retire. There are more than 25 million U.S. business owners, many of them Baby Boomers, and the coming years will see a growing pool of businesses on the market. It's simply demographics at work. Where will the buyers come from?

As with many trends only beginning to reveal themselves, definitive answers are hard to come by...

Subway stalwart sees three trends changing the multi-unit franchising landscape

Just like any business, the franchising business is one that I have seen evolve tremendously over the past 30 years. While many of the cornerstones and crucial elements - product, simplicity, control, and support - remain the same, so much is changing.

Today there are at least three key areas that are altering the face of franchising. First, business is moving at lightning speed with the emergence of social media outlets, texting, and mobile Internet access. Second, the economy, while challenging, is providing a number of different opportunities for many. And third, an enhanced concern for our health and environment has created a niche and need for "green" and organic products...

Board Members from All Sectors Determine Topics, Speakers and Workshops

SAN JOSE, Calif., Aug. 4, 2010 - Franchise Update Media Group (FUMG) the leading industry resource for franchise development, today announced the Multi-Unit Franchisee Conference Advisory Board will meet August 5-6 in Atlanta to plan the 2011 conference agenda. The 2010 event attracted multi-unit operators from food, retail, and service businesses that represented $2 billion in annual revenues.

The board determines the topics, speakers, schedules, sessions, workshops, and other conference activities to ensure that the issues relevant to today's multi-unit franchisees are being addressed. Charles Smithgall III, chairman and CEO of SEI/Aaron's Inc...

Aziz Hashim turned his back on what would have been a lucrative career in electrical engineering following college, to return to his passion for the franchise business - where he first worked during his high school years. He loved the social interactions he experienced in the food business and was drawn back to it. His very first franchise location was a KFC he opened in downtown Atlanta in 1996.

"Through bootstrapping and borrowing money and credit cards and doing all the things entrepreneurs do, I was able to grow the business steadily," he says of his initial financing strategy. "The first store was successful. We built two in '97 and three in '98. It was very rapid growth after that. Financing was made available because of the advent of commercial loan securitization and we took full advantage of it...

Ken Leese, a New Jersey-born accountant who played on the tennis team at Old Dominion University, sees his career as a multi-unit franchisee and area developer in terms of sports analogies.

"When I was doing due diligence before buying my first Jackson Hewitt unit, I liked the similarities with playing college tennis," he says. "In both cases, you're playing on a team and you have to win the match for the sake of a bigger cause--the team--but ultimately, you're on your own out on the court. The franchise brand provides support, but ultimately I would be an independent business owner making my own mistakes and successes. I liked that."

Out of college, he went to work as an accountant at a small firm, and quickly learned that the majority of his business was preparing income tax returns...

In April 2010, McDonald's helped cement the realization that if franchises want to continue succeeding in this consumer-driven world, they must get involved in social media.

According to Advertising Age, the hamburger giant ramped up its efforts by naming a director of social media, its first. The new director is tasked with using social media to build the business, manage customer problems, and beef up outreach to their target groups. This is exactly what every franchisee can--and should--be using social media to do.
Today your customers are online. They are connecting with their friends on Facebook, chatting up brands on Twitter, and spending quality time with companies through videos on YouTube. They are writing and reading blogs, listening to and participating in podcasts, and connecting on LinkedIn...

Readers of Multi-Unit Franchisee magazine have resoundingly told us how they look forward to our annual rankings lists. So once again, working with research ally FRANdata, we've gathered the data, crunched the numbers, and formulated our annual "MU50" lists.

First up in our MU50 rankings this year is "Top 50 Brands by Number of Multi-Unit Franchisees." This list highlights the franchise brands with the highest total number of multi-unit operators. McDonald's and Subway, the brands with the largest number of total units, ride atop this list. Subway has nearly twice as many multi-unit owners (3,874) as McDonald's does (2,074). Yet, when it comes to percentages, the numbers are reversed: 84 percent of McDonald's franchisees own more than one unit, while just 44 percent of Subway's franchisees do...