In the 15+ years that Franchise Business Review has conducted franchisee satisfaction research, the food segment has always been the toughest nut to crack. Restaurant concepts are arguably one of the most sought-after (and most well-known) franchise segments; however, they tend to have lower satisfaction among franchise owners than other franchise sectors.
This year I was invited to attend the Restaurant Franchise and Innovation Summit, happening in Atlanta in March 2020. The conference is focused on powering restaurant franchise growth through technology and leadership. So with that in mind, I decided to take a look at some of the data to see just how franchise owners in the food segment feel about their brands’ performance.
Every year, we survey thousands of food franchise owners in eight key areas, including technology, innovation, leadership, to gauge their satisfaction and identify the Top Food Franchises. What I found were some interesting highlights.
Trends in the Food Franchise Sector
1. The food sector, as a whole, scores lower in franchisee satisfaction than the rest of franchising.
The reality is that a food franchise business is very complex to run well, and food operators have to contend with a number of challenges: employee turnover, food spoilage, low margins, high competition, and constantly evolving consumer tastes. The investment costs are generally higher, therefore the risks are higher and the success rates of individual owners are lower. All of that adds up to lower satisfaction among owners.
2. Food scores have increased since 2016 in key areas while the rest of franchising has seen decreases.
Some of the stats that jumped out at me:
- Scores on System-wide Communications for food increased (13%) vs. non-food (-2%).
- On the question regarding Senior management involves franchisees in company decisions, food scores increased (11%) vs. non-food (-2%).
- Marketing and Promotional Programs saw an increase for food (9%) vs. non-food (-3%).
The biggest jump since 2016, however, was in Local Market Competitiveness, where the food sector increased more than double non-food brands (15% vs. 7%).
These increases are likely due to the good economy as a whole, which makes people more optimistic, but more importantly, food franchisors have getting more sophisticated over the last decade at helping their franchisees be better operators AND engaging them more in this process – for example, sharing financial benchmarks system-wide to help franchisees identify problems and improve their margins, setting up peer performance groups, and providing better field support training so field consultants are operating more as business coaches rather than “compliance police”.
3. Scores on Innovation & Creativity are up for the food sector but Technology is down.
It’s clear that Innovation & Technology are especially important to food franchise owners, given that as innovation scores among food operators increase, so do overall scores; however, the same cannot be said for non-food brands.
It’s also interesting that innovation is up, while technology effectiveness is down, as they are often very closely linked. The companies that are doing the best job innovating are coming up with product and marketing innovations that are successful, without making the business more complicated.
Chicken Salad Chick is a great example. They release new flavors of chicken salad to accommodate different tastes, but it really doesn’t complicate the operations much more. Similarly, Chipotle and Dominos are two classic examples of keeping operations simple. That said, as many food brands bring on innovative new products to expand their menu offerings or sell more items during different parts of the day, it can quickly complicate the business to the point where employees can’t execute well.
4. Scores on Effective Use of Technology have dropped significantly for food since 2010, but have started to rebound over the last 5 years, yet non-food has stayed relatively even.
On the technology front, there has been a huge investment by food brands and franchisees into many different technologies (e.g., apps) to help improve operational efficiencies and reduce costs (primarily reduce labor costs) and expand market reach, but many of these have not proven a return on investment yet.
Brands have also lost control of the total “brand experience” and are struggling with profitability due to the explosion of takeout/delivery services, i.e,. Uber Eats, Door Dash, etc., something non-food brands don’t have to contend with.
Those factors could explain the drop, and subsequent rebound as food brands are starting to adjust for changes in how consumers want to experience their purchases.
These stats offer some powerful insights into the state of the food franchise sector, including the impact of technology, innovation and leadership on franchisee satisfaction. After seeing the stats above, if you think satisfaction isn’t that important, consider the economic impact of franchisee satisfaction on your system:
- Reduced costs
- Increased operational effectiveness
- More successful performance
- Higher royalties
- More recommendations
- More franchisees
At the Restaurant Franchise and Innovation Summit, you’ll hear from leaders at top brands who are successfully navigating these and other trends in the food franchise sector. From how to make third party delivery your ally to using technology to acquire new customers, this year’s agenda addresses the challenges that the food sector is facing in helping franchisees be more successful, more profitable, and ultimately more satisfied.
If you haven’t registered yet, make sure you don’t miss this opportunity to dive into tactics and techniques for driving restaurant growth.
Will you be there? Drop me a line and let me know.