by Simon Lord
last updated 29/01/2020
TASTY - latest trends in food franchising
by Simon Lord
last updated 29/01/2020
Food and franchising go together like fish and chips, but the market’s changing faster than ever. Simon Lord looks at some of the latest trends that you should consider if you’re thinking of buying a franchise
Earlier this year, Hell put a plant-based topping on its newly-launched Burger Pizza without telling customers. It caused a massive stir – but not because people didn’t like it. In fact, very few people even noticed, with just one person querying what the product was from the 3,000 pizzas sold, but once news got out there were claims of misrepresentation and concerns that the company could have exposed unknowing customers to allergens such as legumes.
While many dismissed the controversy as a typical edgy stunt from Hell, the company itself claimed, ‘We care about the planet and want to start a conversation and raise awareness about sustainable food choices.’ It also pointed out that it had already sold over 35,000 vegan pizzas in the first half of this year. This one promotion highlighted a number of trends in the food and beverage sector that franchise buyers need to be aware of.
Where’s the beef?
This classic line from a 1980s Wendy’s advert is increasingly being answered with ‘Nowhere’. BurgerFuel is just one of several New Zealand franchises to have trialled alternative proteins, with the latest being Chook Free non-chicken burgers. Australian chain Grill’d took all meat products off its menu for a day earlier this year to draw attention to its meat-free offerings, while the all-vegetable Lord of the Fries chain has a relatively high profile if only a few outlets in New Zealand. With the number of vegetarians and vegans growing fast, it’s an area all food franchises need to be keeping an eye on.
‘The truth is that one vegan in a group makes the decision where that whole group eats,’ Sara Pantaleo, the CEO of La Porchetta, told the National Franchise Conference in Rotorua. ‘We introduced a vegan offer last December and while it’s under 1 percent of our food sales, the social media response has been immense.’
Looks are everything
Ah yes, social media. With home delivery having become more common across all food types now (see below), there’s increasing pressure on restaurants to make dining out a special occasion, not just ‘food as fuel’. This impacts upon everything from ambience and music to service and presentation, with the food having to be Instagrammable and the whole experience shareable on social media. It also requires a greater level of engagement with customers, making staff more important than ever. All these factors should work in favour of franchises, where having an owner/operator on the spot can make all the difference; however, as Donna Ferrall explains in her article on What to know about buying a food franchise, it does mean that franchisees need to be prepared to invest in good people and good training to make the most of their local opportunity. They also need to pay them properly and understand their obligations as employers.
Think global, act local
Being local is another important factor in franchise success – not just in terms of a franchisee’s connection with their local community, but in the closeness of the produce they use, too. Food miles – the distance food travels to reach consumers’ plates – are increasingly becoming an issue for consumers, which is one reason why McDonald’s has always emphasised the home-grown origins of many of its ingredients.
Many of the café franchises allow for local and seasonal specialities on top of their core menu products, and promote new menus on a regular basis with strong campaigns via social media and loyalty programmes. This keeps both product and customer appeal fresh.
This trend also opens up new opportunities for new franchises such as Kiwi Beverages, which are bringing together local soft drink producers via a dedicated and exclusive distribution network. Franchisees report considerable interest from retailers in stocking alternatives to the usual global brands.
Watch your waste line
In the last couple of years, awareness of packaging and product wastage has reached a tipping point, with consumers not only starting to question the use of, say, plastic straws, but also to accept and even demand action by retailers. Now that is attracting the interest of legislators – many types of single-use plastic bags have already been banned, and end-of-life regulation could see further restrictions on beverage packaging and single-use plastic packaging.
Rather than seeing this as a threat, some franchises will take this as an opportunity – as they have with plastic straws and re-useable cups. There’s an advantage to be gained from being seen as a leader, while social media will ensure brands which are slow to respond will be punished. It’s an area where the buying power of a franchise can have considerable value for early adopters.
Food waste is another topical issue. Most franchises have developed operating systems which already minimise food waste, and the availability of benchmarking between different outlets encourages franchisees to minimise waste for the benefit of both the environment and their bottom line. However, zero waste is almost impossible to achieve, so it’s important that franchises have developed responsible ways of dealing with it.
Many franchisees work with local charity groups to ensure that surplus food products are put to good use at the end of each day, while apps like Foodprint enable businesses to sell excess food at a discount. Councils and community groups may also offer composting options, which may need to be handled at a local level by franchisees. Again, social responsibility and sustainability will increasingly be expected by customers.
While hospitality franchises need to demonstrate to potential franchisees that they have strategies for managing all the above issues, buyers must also be aware of other key trends in food franchising. These include:
When there’s safety in numbers
While fast food outlets traditionally fare well in high streets and the suburbs, casual and themed restaurants are increasingly grouping together in hospitality precincts, with restaurants, cafés and bars side-by-side on the basis that people will go there to eat, even if they haven’t yet decided what to eat.
It means that franchisees shouldn’t fear competitors opening up next door, but it does mean that they not only need the right brand; they need to be at the top of their game when it comes to product and service delivery to make the most of the extra trade.
The wolf at the door
One area of competition that is a game changer as far as all sorts of hospitality businesses are concerned is the emergence of food delivery apps such as Uber Eats. The advantage of such apps to operators is that they increase your customer base, allowing you to sell to more people and potentially maximise return from your investment in specialist staff and equipment. In some cases, restaurants are now doing over 30 percent of their turnover via such apps.
However, what they’re not doing is making 30 percent more money. In an article titled, ‘Why Uber Eats will eat you into bankruptcy’, Forbes magazine explains that Uber Eats charges a restaurant 30 percent of their listed prices for the privilege of delivering their food (rates within New Zealand seem to go up to 35 percent of the GST-inclusive price). Restaurants are not allowed to increase prices to cover Uber’s charge, so they have to pay the Uber fee from their existing margins. This can have a significant effect upon a restaurant’s profitability, and not all franchise models are suited to it.
Two is better than one
Several New Zealand franchisors are now using their knowledge, buying power and support structure to develop new brands. These include BurgerFuel Group with Winner Winner and Shake Out; Café Brands, which has added Mexico to the Columbus Coffee stable; and Bird on a Wire, owned by the team behind The Coffee Club in New Zealand.
Such combinations offer potential buyers a choice of new sites and on-trend concepts while enjoying the backing of an experienced franchise team. At the same time, there are new opportunities based on established brands such as Hachi Hachi, La Porchetta, old favourite Valentines, and many more.
Whichever brand you choose, you’ll need to evaluate it carefully from a financial point of view before making your decision – and want to be confident you have the skills to manage it and achieve your desired results.
An appetite for more
If franchisors can operate multiple businesses, so can franchisees. In the US, over 50 percent of franchised outlets are now owned by multi-unit franchisees and the trend is growing here, too, especially in the food & beverage sector. For franchisees, too, the opportunity can appeal – if they have the desire and ability to build a larger business with bigger returns, why not stick with the model they know and open more outlets rather than having to move into something entirely new?
Starting with a single outlet and then adding one at a time allows franchisees to grow at a comfortable pace without overstretching themselves financially. However, it’s important to be aware that not all franchises are set up for multi-unit ownership, and not all franchisees are capable of running more than a couple of units.
Chew it over
If you are looking at buying a hospitality franchise, then, there’s plenty to think about. Constantly-changing tastes, environmental concerns, employment issues and competition all present challenges, but they present opportunities, too – and by joining a franchise, you’re in a much better position to seize those opportunities than an independent operator.
You’ll have a brand, menus, training, support, marketing and buying power all working for you, while someone else will be doing the research and development necessary to keep you up to date. It’s not quite success on a plate, but will allow you to concentrate on growing the business and providing a compelling experience to customers to keep them coming back again and again.
It’s still hard work, which is why so many franchisors say that one of the qualities they look for first in potential franchisees is ‘passion’. But if you love food, love customer service, love building a team and can manage the big picture as well as the small details, it can be very rewarding indeed.
This article was first published in Franchise New Zealand magazine, Year 28 Issue 3 in September 2019
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