The franchise industry has shown remarkable resilience and adaptability in the face of recent economic challenges. The 2023 Franchise Sales Index, compiled by FranConnect, offers an in-depth analysis of the industry’s performance based on anonymized data from participating FranConnect customers. This comprehensive report provides invaluable benchmarks and year-over-year comparisons across various verticals, making it the most extensive and authoritative data source on franchise sales.

Market Overview

Despite the lingering effects of the pandemic, the franchise industry has continued to grow. According to the International Franchise Association (IFA), the franchise industry reached $826.6 billion in economic output by the end of 2023, a 4.2% increase from 2022. The industry was also projected to add over 257,000 new jobs, bringing the total franchise employment to 8.5 million.

Key Findings

1. Leads Volume: Most franchise sectors experienced a significant increase in leads compared to the previous period. Commercial & Residential Services saw the highest growth at 60.77%, likely due to the increased demand for home-based services and the rise of remote work. The Automotive sector, however, saw a modest decline of 3.90%, possibly due to the ongoing chip shortage and supply chain disruptions affecting the industry.

2. Deals Volume: The Personal Services sector had the highest growth in closed deals at 54.09%, reflecting the strong consumer demand for health, wellness, and beauty services post-pandemic. Automotive and Retail Products and services experienced significant declines of 55.34% and 41.95%, respectively, possibly due to the challenges mentioned above and the shift in consumer spending habits.

3. Speed to Lead: Brands that contacted leads within 4 hours of inquiry had a higher close rate (74%) compared to the average (58%). This finding underscores the importance of prompt follow-up and efficient lead management in converting prospects into franchisees.

4. Lead Sources: Existing franchise leads, although lower in volume, had the highest conversion rate at 40.9%, indicating that current franchisees are the most valuable source of high-quality, convertible leads. Franchisors should focus on nurturing relationships with existing franchisees and leveraging their networks for referrals.

5. Units: Locations transferred increased by 92.7% to 2,058, while locations terminated rose by 8.3% to 6,823. This trend suggests a dynamic market with franchisees exiting underperforming units and new owners stepping in to revitalize them.

Vertical-Specific Insights

1. Quick Service Restaurants (QSR): The QSR sector continued to dominate unit openings (25.56%) and transfers (45.68%), reflecting the strong demand for convenient and affordable dining options. However, the sector also accounted for a significant portion of terminations (27.85%), possibly due to increased competition and the challenges of operating in a high-turnover industry.

2. Commercial & Residential Services: This sector saw the highest growth in leads (60.77%) and accounted for the largest share of unit openings (29.47%) and terminations (30.40%). The growth in leads and openings can be attributed to the increased demand for home-based services, while the high termination rate may reflect the challenges of managing a geographically dispersed workforce.

3. Personal Services: The Personal Services sector experienced the highest growth in closed deals (54.09%) and accounted for a significant portion of unit openings (22.35%) and transfers (23.32%). This trend reflects the strong consumer demand for health, wellness, and beauty services post-pandemic and the relatively lower capital requirements for starting a personal services franchise.

Conclusion

The 2023 Franchise Sales Index provides valuable insights into the state of the franchise industry and the factors driving its growth and challenges. By leveraging these insights, franchisors can optimize their sales strategies, improve lead conversion rates, and make data-driven decisions to thrive in an ever-evolving market. As the industry continues to adapt to new consumer preferences and economic realities, franchisors that prioritize innovation, efficiency, and customer-centricity will be best positioned for long-term success. 

For more information, including the full webinar recording of the report, visit our 2023 Sales Index Report here.  

In today’s fast-paced business world, technology is not just an option; it’s a necessity. For franchisors and franchisees, leveraging the right technology can mean the difference between mere survival and thriving success. Let’s explore how technology can engage and empower franchisees, driving franchise success to new heights.

Understanding the Franchise Ecosystem

Roles of Franchisors and Franchisees

In a franchise system, the franchisor owns the overarching brand and business model. They provide the framework, operational guidelines, and support to franchisees, who are independent business owners operating under the franchisor’s brand. Cohesive collaboration between franchisors and franchisees is crucial for a franchise system to be successful.

The Importance of Collaboration

Effective collaboration ensures that both parties work towards common goals. Franchisors must maintain brand consistency and uphold standards, while franchisees must focus on delivering excellent customer experiences. When both parties communicate and collaborate effectively, the entire franchise network benefits.

The Power of Engagement

Engaged franchisees are more likely to feel invested in the brand’s success. They are motivated to follow best practices, implement innovative ideas, and strive for excellence. Engagement fosters community and shared purpose, increasing satisfaction and retention rates.

Technological Challenges Faced by Franchises

Communication Gaps

One of the most significant challenges in a franchise system is maintaining clear and consistent communication. With multiple locations, often spread across different regions, ensuring everyone is on the same page can be daunting. Miscommunications can lead to operational inefficiencies and inconsistencies in customer experience.

Data Management

Franchises generate vast amounts of data, from sales figures to customer feedback. However, managing and analyzing this data to derive actionable insights can be challenging. Without proper data management systems, valuable information can get lost, and opportunities for improvement may be missed.

Operational Inefficiencies

Operational inefficiencies can arise from outdated processes, lack of automation, and fragmented systems. These inefficiencies can lead to increased costs, reduced productivity, and lower profitability. Addressing these issues requires a strategic approach to technology adoption.

The Role of Technology in Empowering Franchisees

Leveraging AI and Machine Learning

Artificial intelligence (AI) and machine learning (ML) are transforming franchise operations. These technologies analyze large datasets to identify patterns, predict trends, and provide actionable insights. For example, AI-powered chatbots can enhance customer service by providing instant responses to common queries, freeing staff to focus on more complex tasks.

Streamlining Operations with Cloud Solutions

Cloud-based solutions offer flexibility and scalability, making them ideal for franchise systems. These platforms enable real-time data sharing, streamline communication, and facilitate remote training and support. By centralizing operations on a cloud platform, franchises can ensure consistency and efficiency across all locations.

Accelerating Growth with CRM Systems

Customer relationship management (CRM) systems are essential for managing new franchise leads and improving lead response time. These systems help franchises nurture the right candidates, close deals faster, and reduce cost per lead. A robust CRM system can enhance conversion rates and drive more revenue.

Case Studies Successful Technology Integration in Franchise Systems

FastSigns

FastSigns, a leading signage and graphics franchise, successfully integrated a comprehensive technology platform to streamline operations and improve communication. The platform provided real-time data access, centralized communication channels, and automated workflows. This integration led to increased efficiency, higher customer satisfaction, and improved franchisee engagement.

My Salon Suite

My Salon Suite, a salon suite rental franchise, leveraged AI-powered analytics to optimize its marketing strategies and improve customer targeting. By analyzing customer data, they identified trends and preferences, enabling them to tailor their marketing campaigns more effectively. This approach resulted in higher customer acquisition rates and increased revenue.

Camp Bow Wow

Camp Bow Wow, a doggy daycare and boarding franchise, implemented a cloud-based management system to enhance operational efficiency. The system streamlined booking processes, automated billing, and provided real-time updates on pet activities. This technology adoption improved customer experience, increased operational efficiency, and boosted franchisee satisfaction.

Best Practices for Franchise Technology Integration

Selecting the Right Technology

Choosing the right technology is crucial for successful integration. Franchisors should conduct thorough research, evaluate options, and select solutions that align with their business goals. Involving franchisees in the decision-making process can also ensure that the chosen technology meets their needs.

Implementing Technology Effectively

Effective implementation requires careful planning and execution. Franchisors should create a detailed implementation plan, provide comprehensive training, and offer ongoing support. Regular communication and feedback loops can help address challenges and ensure a smooth transition.

Supporting Technology Adoption

Supporting franchisees in adopting new technology is essential for maximizing its benefits. Franchisors should offer continuous training, provide resources and documentation, and create a support system to address any issues. Encouraging franchisees to share their experiences and best practices can foster a collaborative learning environment.

Future Trends in Franchise Technology

The Rise of IoT

The Internet of Things (IoT) is set to revolutionize the franchise industry. IoT devices can collect and transmit data in real time, providing valuable insights into customer behavior, inventory management, and equipment maintenance. Franchises can leverage IoT to enhance operational efficiency, reduce costs, and improve customer experience.

Advanced-Data Analytics

Advanced data analytics will play a significant role in driving franchise success. Predictive analytics can help franchises forecast demand, optimize inventory, and identify growth opportunities. By harnessing the power of data, franchises can make informed decisions and stay ahead of the competition.

Virtual Reality and Augmented Reality

Virtual reality (VR) and augmented reality (AR) technologies are gaining traction in the franchise industry. VR can be used for immersive training experiences, while AR can enhance customer engagement by providing interactive and personalized experiences. These technologies can potentially transform how franchises operate and interact with customers.

Conclusion

In conclusion, technology is a powerful tool for engaging and empowering franchisees. By addressing common challenges, leveraging innovative solutions, and staying ahead of emerging trends, franchisors can drive success for their entire network. Whether improving communication, streamlining operations, or enhancing customer experience, the right technology can make all the difference.

Franchisors, now is the time to prioritize technology integration. Explore the latest innovations, involve your franchisees in the decision-making process, and invest in solutions that align with your business goals. By doing so, you’ll not only boost your franchise’s success but also create a thriving community of empowered and engaged franchisees.

Ready to take the next step? Watch our recorded webinar to learn how technology can transform your franchise. Together, let’s unlock the full potential of your franchise network.

“The Founder” is a 2016 movie based on Ray Kroc and McDonald’s origin story, which won critical acclaim for Michael Keaton. In one important scene, Kroc (played by Keaton) visits a franchise location only to find that the operator has introduced fried chicken on the menu to compete with KFC. This flies directly in the face of the menu standardization he hoped to enforce across the McDonald’s system. If you haven’t seen it, I highly recommend that you do.

This scene is pivotal as it demonstrates the issues and challenges in achieving brand consistency. As a true visionary, Kroc wanted more than to sell burgers and fries. He aimed to deliver the same quality burgers and fries no matter where McDonald’s was located. And isn’t this the true goal of all franchises? To have uniform consistency from location to location? This was the key to what ultimately led to McDonald’s franchise dominance.

The crux of this article is that this uniformity becomes the cornerstone of all successful franchise brands, along with learning how to achieve it.

Inspect What You Expect

This mantra and approach go beyond establishing expectations and having a mechanism in place for verifying that expectations are being met across your entire system. So, how do you ensure that this principle is embedded in your operations?

Establish Clear-Cut Expectations

Do your franchisees clearly understand what you expect of them through regularly ongoing communications? These can best be conveyed through town hall meetings, newsletters, and updates to your franchise operations manual. However, based on FranConnect, franchisee visitations aren’t frequent enough to create sustainable changes.

Enter the Playbook

The playbook is a comprehensive document that outlines an organization’s key strategies, processes, and practices. It’s a “living, breathing document that serves as a roadmap for operating a business. It helps to ensure consistency and efficiency and to align with a brand’s goals and values. Your playbook can be used to ensure adherence to your vision and vision statements, core values, roles, and responsibilities. However, the most utilized facet of franchising tends to be around the business’s operational processes. It is a step-by-step guide to daily operations and routine activities critical to the business.

Systematic Audits

We have found that the trend has shifted to where more and more Franchisors are augmenting their franchise visitations by having their franchisees conduct their self-appraisals on the present state of their businesses. This translates into a regular cadence and approach that combines unexpected and announced visitations with franchisees “keeping score” with their utilization of franchise playbooks such as those deployed within FranConnect. Your audits should inspect strict adherence to your standards, customer service protocols, and operational requirements. You can readily conduct these assessments on your own accord, through your franchisees, and with solutions like RizePoint, a quality management system for multi-location businesses.

Utilize Checklists

Playbooks are critical to guiding your Franchise Business Consultants to assess each component of the operator’s execution and compliance with your standards. Well-defined checklists or playbooks deliver on your “inspect what you expect” program and can take average performers. With the help of your most accomplished Franchise Business Consultant, top Franchisees can be used to share their insights through your published playbooks. You’ll quickly see how this can transform your rank-and-file franchisees into exceptional operators.

Your Digital Tools of the Trade

Using technology tools and platforms that can aid you in monitoring your operational metrics, including your sales performance leading indicators, customer feedback through NPS, or other customer experience tools, can make good performers great performers. Your compliance checklists will provide you with the ability to provide on-time interventions when your standards aren’t being met.

The Power of Data-Driven Insights

Franchisors often find themselves with limited access to the systemic insights that exist within their organization based on data being kept in operational silos. This can gravely impact your franchise team’s effectiveness and the utility of playbooks. While playbooks are a standard operations framework, your data-driven insights allow your franchise operators to craft strategies that impact local market conditions. Imagine the power of sales data and customer feedback and how they could help franchisees adjust everything from your quality standards marketing to customer service and execution.

Performance benchmarking is one of the greatest benefits of aggregating data into a format that allows franchisors and franchisees to benchmark performance across different locations. By allowing your technology to analyze data on sales, product quality, customer satisfaction, and operational efficiency, you can make informed decisions that can greatly enhance system-wide performance.

Continuous Improvement

With the average span of control of one Franchise Business Consultant to every thirty Franchisees, our research and pulse surveys show that the frequency of visits to franchise locations is too infrequent to bring lasting change. In having a technology-enhanced solution such as FranConnect’s automated operational playbooks, some triggers go to the Franchisee, Franchise Business Consultant, and others within the organization to allow for follow-up and a drive for continuous improvement. This can also help you continually update the playbooks to convey the most effective strategies and processes for the location and system.

Conclusion

Franchise Business Consultants equipped with data-driven insights can provide the most effective advice to franchisees, who can use those insights to address the individual challenges at each location and optimize their operations based on objective evidence. Additionally, since the onset of the COVID-19 pandemic, we have seen an ever-increasing trend toward franchisees completing unscored self-appraisals using playbooks.

For those taking the best practices approach to leveraging the skill set of your top performers and expanding that knowledge through playbooks, you will have the advantage of taking average performers and turning them into your best performers.

And breaking down silos and taking a data-driven approach will help transform operations and strategic planning and allow you to evolve your system into a model of brand consistency.