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Robert Stidham, founder and CEO of Summa Franchise Consulting and founder of Franchise Dynamics on the importance of reinvention.
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As we watch the franchise industry and pandemic evolve around the globe, it’s clear that we are not “going back to what was” but rather we are faced with the challenge of change, of trying to determine what the next normal is going to be.
In our consulting practice, a meaningful part of our work is done with franchise organizations that are struggling with this new paradigm. With franchisors of all types and sizes, it is clearer than ever that the biggest threat to their future organizational success is coming from an internal inability to adapt or change to a new business reality.
Change or be left behind
The business landscape is littered with companies that failed to evolve. This is particularly visible in the retail category where long-term, globally successful brands simply did not evolve to changes in consumer tastes, buying habits, and technology.
One of the reasons that so many retail stores are struggling or failing is that people aren’t shopping the way they used to do. Consumers are no longer spending the afternoon at the mall. Now, consumers often prefer to shop at home. Shopping isn’t a pastime like it used to be – it’s more transactional. This change is generational, economic, technological, and practical.
So how do organizations address this problem? Generally, a management team isn’t going to solely solve these challenges. Remember, the mindset of management is to maintain the status quo.
“No long-term franchise company is in exactly the same business it was when it first started”
Change is difficult. Managers are generally focused on tasks and creating stability within their organizations. They are not there to create change. Unfortunately, we often see management as an impediment in an environment of change.
Therefore, the key to successful change appears to be driven by a combination of vision, planning, and transformational leadership.
Innovation is more than a buzzword
Vision, in part, is defined as: the act or power of imagination, a mode of seeing or conceiving and unusual discernment or foresight. It is the ability to look forward in time to put aside biases, old beliefs, and preconceived notions to honestly look at the business you have, its strengths, weaknesses, and challenges, and to see where the organization will need to go into the future.
Transformational leadership demonstrates the ability to look beyond maintaining the stable conditions that exist within a company, and instead thoughtfully consider the broadest business landscape, new opportunities, and risks or threats to developing a new strategy. It’s important to recognize that change is difficult for people and that this opportunity also carries individual, team, and cultural risks to the enterprise.
No long-term franchise company is in exactly the same business it was when it first started – whether 10 years ago or 50 years ago.
Consider McDonald’s, for example. Today it is the world’s largest restaurant chain by revenue, serving over 69 million customers daily in over 100 countries across 37,855 outlets around the world.
Although McDonald’s is best known for its hamburgers, cheeseburgers and French fries, today they feature salads, chicken products, breakfast items, wraps, and desserts. Its McCafe brand introduced consumers to a competitive coffee concept to rival other well-known QSR chains who had long held pole position as purveyors of affordable, decent and accessible beverages and baked goods. In response to changing consumer tastes and perceived unhealthiness of its food, the company introduced salads, fish, smoothies, and even fruit to its menu.
Continuous innovation created new opportunities for the brand and kept it relevant. The company owned a majority stake in Chipotle Mexican Grill until October 2006, when McDonald’s fully divested from Chipotle. Until December 2003, it also owned Donatos Pizza along with a small share of Aroma Café from 1999 to 2001. In 2007, McDonald’s sold its position in Boston Market to Sun Capital Partners.
In the current pandemic, McDonald’s has once again reinvented its business, by shutting dining rooms in many locations and focusing on its drive-through capability and on-demand delivery concept. It has been able to develop an existing structure to sustain franchisee revenue and profits, through this difficult time.
An invaluable checklist
It’s important to recognize most franchise companies don’t have the resources of a McDonald’s. However, in our experience, most franchisors do have capable leadership who understand their business well. That team and your franchisees become your most valuable resource in reinventing your franchise offering and ultimately, your franchise business.
“Reinvention, by definition, is required periodically for every organization to continue to survive and grow”
While McDonald’s has certainly made mistakes in change strategy (does anyone else remember the ‘Hula Burger’?), it has built an organization that understands the power of reinvention.
From both our consulting work and our research, we’ve identified factors that transformational leadership needs to be very specifically focused upon, including:
• Consider your relevancy within your category. Is what you do meaningful and valuable to all of your franchisees and their customers?
• Reconsider what advantages you bring to your customers, including your franchisees. What could you be doing to increase value for all stakeholders?
• Are you offering the right services or products that your franchisees’ customers want to buy?
• Do you have the right people, including franchisees, within your company?
• How do you balance short-term change with long-term thinking?
• Have you provided an opportunity for leadership to reimagine the business?
• Are you prepared for the challenges that lie ahead?
• Can you build an effective plan for the future?
• What are your true measures for success?
Finally, all franchise businesses, even the most successful, can run out of opportunity to grow, if they don’t change.
Companies that fail to periodically reinvent themselves are not necessarily poor at fixing what’s broken. More often than not, they simply wait too long before addressing the issues within their company and franchise system. They don’t spend nearly enough energy creating a better foundation for the future and planning for the growth of their business. Unfortunately, as a result, they are less effective at implementing change and are caught struggling when their core business begins to deteriorate.
Reinvention, by definition, is required periodically for every organization to continue to survive and grow. This is a difficult task. It’s also what separates high-performing organizations from those who don’t survive. However, like any change, it can feel overwhelming to tackle the processes required to discover, develop, plan, and implement change, all while keeping the lights on and pivoting in this new normal.
Let us know how we can help.
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