Franchise Update Magazine Issue IV, 2016 | Page 40

GROWTH

Amped

for Growth!

FRANdata President Edith Wiseman

process changes at our company last fall.
It didn’t go well, but I was able to turn to
industry allies I had met here to help get
things on track.”
Next up was FRANdata’s annual “State
of Franchising” economic report. In a
departure from tradition, Edith Wiseman, president of FRANdata, stood in
for Darrell Johnson, who was attending his daughter’s wedding. Wiseman
drew laughter and applause when she
reported that the Johnson family brand
was celebrating 20 percent growth with
its “new unit.”
• State of the economy. What remained basically the same in her presentation, was the news about the economy:
continued slow growth and greater uncertainty lie ahead. Looming recessionary concerns, she said, are based on four

Making friends at the STAR
Awards dinner

38

signals: falling profit margins, the Fed’s disruptive change, a brand’s values and
negative Labor Market Conditions Index, culture will sustain a company by providnegative Capex growth, and the specula- ing a core around which the company can
tive default rate (junk bonds) above 5.5 adapt to external change.
percent—a set of conditions that preceded
He cited a prediction from Cisco’s
previous U.S. recessions.
John Chambers that 40 percent of today’s
Business confidence is down, but con- large, profitable companies will “fail”
sumer confidence is stable. The U.S. GDP within 10 years. Failure in this context,
is recovering, but is the slowest recovery he said, means long-term decline in revsince 1948. And while economic “shock enue, profitability, market value, brand
absorbers” are at the end of their effec- value, and cultural relevancy. Karlgaard
tiveness, she said the good news is that then laid out three “coping mechanisms”
we understand the risk better than we for companies to not be among that 40
have in the past.
percent. To succeed, he said companies
• State of capital access. “Small busi- must be 1) strategy-driven, 2) technologyness lending is down among major banks, driven, and 3) data-driven.
but there are other sources of lending,” she
In his 2014 book The Soft Edge, he said
said, as the number and types of alternate these three drivers are the cost of entry
lenders continue to disrupt the traditional into the marketplace, the ante every comlenders through the use of innovative pany must come up with to play. But the
technologies and market segmentation; big game-changer and competitive edge
however, she added, the banks are closing for a company seeking sustainable growth
the gap. One change resulting
from greater accessibility to Mystery shoppers Art Coley
both personal and franchise and Maureen DiStefano
system data, she noted, is that
credit decisions have become
more data-driven, relying more
on algorithms than on personal
relationships. Franchisors who
act now to improve their performance data, she said, will
be “best equipped to remain
competitive in the changing
lending environment.”
• Implications to franchising. Uncertainty creates
opportunities for the prepared,
and the route to success here, she said, is is that it be culture-driven. The right core
for franchisor executives to place greater values, he said, are analogous to having a
emphasis on marketing and technology robust immune system in the face of exand on balancing their capital/labor ratio ternal threats to the entire system. (One
in response to changes in minimum wage brand exemplifying this is The Dwyer
and overtime rules. She also urged fran- Group, which operates every day based
chisors to work on enhancing their credit on its Code of Values.)
profile and fixing performance issues.
In the face of accelerating change, KarlTo win the market share battle in 2017, gaard said that a sustainable competitive
she said, franchisors should focus on slower, edge is dying for most companies, and the
more targeted growth; emphasize ROI in new world order is “transient advantage.”
their messaging; create a seamless sales
process; educate through transparency; 2017 AFDR and growth
address greater prospect uncertainty with Next up was the first reveal of the 2017
greater information; and help franchisees Annual Franchise Development Report
get financing.
(AFDR). This year’s results were based
on results from 167 franchise brands
Culture is the killer app
representing 60,989 total units. Data
Wiseman’s presentation was followed by was recorded and compared with previkeynote speaker Rich Karlgaard, publisher ous years in areas including recruitment
of Forbes magazine, columnist, and book budgets, marketing sources and budgets,
author. His theme was that in the face of digital recruiting strategies, closing ratios,

Franchiseupdate ISS U E IV, 2 0 1 6

fu4_grow_confwrap(36-40).indd 38

11/8/16 2:35 PM