How Does Digital Tech Transform Franchise Models in 2024

Vishal Sharma

Digital technology is transforming franchise models, revolutionizing the way businesses operate and interact with customers. Advancements in automation, artificial intelligence, and data analytics enable franchise owners to streamline operations, personalize customer experiences, and increase overall efficiency. From online ordering platforms to virtual reality training programs, digital innovations are enhancing franchise performance and driving growth. By embracing digital transformation, franchise businesses can remain competitive and adapt to changing consumer preferences in the digital age.

franchise isometric illustration with location and finance illustration

Introduction

 

Franchising, a cornerstone of modern business, provides entrepreneurs with a proven business model and established brand recognition. Traditionally, franchise models have thrived on standardised operations and brand consistency across locations. However, the emergence of digital technology has revolutionised this landscape. 

 

franchise isometric illustration with location and finance illustration

 

Digital innovations have not only disrupted traditional business operations but also transformed the very essence of franchising itself. In this exploration, we delve into the profound impact of digital technology on franchise models, analysing how it reshapes the dynamics between franchisors and franchisees, redefines customer experiences, and navigates the evolving consumer landscape.

The Traditional Franchise Model

 

Franchising operates on a model where a franchisor grants the rights to use its business model, brand, and operational systems to independent business owners, known as franchisees. 

 

This model enables franchisees to leverage the established brand reputation and operational support of the franchisor while maintaining a degree of autonomy in day-to-day operations. Typically, the franchisor provides initial training, ongoing support, marketing materials, and access to suppliers.

 

Characteristics of Traditional Franchising Include

 

Standardized operating procedures

Uniform branding

Centralized control over major business decisions by the franchisor

 

Successful Examples of Franchises Operating Under this Model Include

 

Fast-food chains like McDonald’s

Hotel brands like Marriott

Retail giants like Subway

 

These franchises have thrived by ensuring consistency in product quality, customer service, and brand image across their vast network of franchise locations.

 

The traditional franchise model has contributed significantly to the global economy

 

According to LinkedIn, franchise businesses globally employ more than 18 million people, representing about 1.5% of the world’s total employed population of 3 billion.

 

The top 12 franchising markets employ 20 million people, with the US employing 8.1 million and Canada employing 1.5 million.

 

With the global franchise market size reaching USD 100797.4 million in 2021 and projected to touch USD 279916.51 million by 2032 at a CAGR of 9.73%, franchising continues to play a pivotal role in job creation and economic growth worldwide

Digital Transformation in Franchise Operations

 

As technology continues to evolve, franchise operations are undergoing a significant digital transformation to stay competitive and meet changing consumer expectations. This transformation encompasses several key areas:

 

A. Shift Towards Online Ordering and Delivery Systems

 

Franchise businesses are increasingly adopting online ordering and delivery systems to cater to the growing demand for convenience among customers. By leveraging mobile apps and web platforms, franchises can streamline the ordering process, offer personalized experiences, and expand their reach beyond traditional brick-and-mortar locations.

 

The most mature delivery markets worldwide—including Australia, Canada, the United Kingdom, and the United States—grew twofold (in the United States) to as much as fourfold (in Australia) in 2018 and 2019

Source: Ordering in: The rapid evolution of food delivery | McKinsey 

 

 

B. Implementation of Digital Marketing Strategies

 

Digital marketing has become indispensable for franchises seeking to enhance brand visibility and engage with customers online. From social media advertising to search engine optimization (SEO), franchises are leveraging various digital channels to target their audience effectively and drive sales.

 

C. Integration of Customer Relationship Management (CRM) Systems

 

CRM systems play a crucial role in helping franchises manage customer interactions, track sales leads, and analyze customer data. By implementing CRM software, franchises can better understand customer preferences, personalize marketing campaigns, and improve overall customer satisfaction.

 

CRM Statistics

Source: 15 CRM Statistics You Need to Know in 2024 

 

D. Use of Data Analytics for Decision-making

 

Data analytics tools enable franchises to gather actionable insights from large volumes of data, helping them make informed business decisions. From analyzing sales trends to forecasting demand, data analytics empowers franchises to optimize operations, improve efficiency, and drive growth.

 

As franchises embrace digital transformation, they position themselves to thrive in an increasingly digital marketplace while delivering enhanced experiences to their customers.

Future Trends and Opportunities in Digital Franchising


As digital franchising evolves, several trends and opportunities are poised to shape its trajectory in the coming years.


A. Growth of Virtual and Remote Work Opportunities


The rise of virtual franchising aligns with the growing trend towards remote work. Franchise models that offer flexibility in location and operation cater to a workforce increasingly seeking work-from-home options. This trend opens up new avenues for franchisors to attract talent and expand their reach beyond traditional boundaries.


B. Integration of Artificial Intelligence and Automation


Artificial intelligence (AI) and automation are revolutionizing various industries, and franchising is no exception. Incorporating AI-driven technologies and automated processes streamlines operations, enhances efficiency, and improves customer experiences. From chatbots handling customer inquiries to predictive analytics optimizing inventory management, AI and automation are reshaping the franchise landscape.


C. Expansion Into Emerging Markets Through Digital Platforms


Digital platforms provide a gateway for franchises to penetrate emerging markets with relative ease. By leveraging online channels, franchisors can reach consumers in regions previously inaccessible. Additionally, digital platforms facilitate market research, allowing franchises to tailor offerings to local preferences and demographics.


Embracing these future trends and opportunities positions digital franchises for sustained growth and relevance in an increasingly digital-centric world.

Conclusion

 

In summary, the digital revolution is fundamentally reshaping franchise models, driving innovation, and expanding opportunities. With the global franchise market booming and millions employed worldwide, the adoption of digital technologies like online ordering, digital marketing, CRM systems, and data analytics is paramount for success.

 

Virtual franchising presents exciting prospects, allowing for low-risk ventures with global reach. Looking ahead, integrating AI, automation, and leveraging digital platforms will be crucial for sustained growth and relevance. By embracing these digital trends, franchises can position themselves at the forefront of the evolving digital landscape, ensuring continued success in the dynamic world of franchising.

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