QSR & Pizza Fueling Franchise Growth

Fast-Food-2Each year the International Franchise Association commissions a study from PwC (PricewaterhouseCoopers) on the economic impact of franchising in the U.S. Highlights from that study include the following:

  • Taking into account the indirect impact of franchised businesses, business format franchises support more than 13.2 million jobs, $1.6 trillion in economic output for the U.S. economy, and 5.8 percent of the country’s GDP.
  • Franchise businesses provided more jobs in 2016 than wholesale trade, transportation and warehousing, nondurable goods manufacturing, and information (including software and print publishing, motion pictures and videos, radio and television broadcasting, and telecommunications carriers and resellers).
  • Quick service restaurants (QSR) is the largest category, representing 25 percent of all franchise establishments and 45.5 percent of all franchise jobs.
  • Jobs supported because of franchise businesses were at least 10 percent of the private sector nonfarm workforce in 33 states, and at least 6 percent in every state.
  • The number of people employed by franchises is greatest in California, Texas, Florida, Illinois, and Ohio.
  • Franchisees own and operate 88 percent of all business format franchise establishments and franchisors own and operate 12 percent.

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Quick Serve Franchise Sector Continues to Blaze a Trail for Franchising

There is little doubt that the franchise industry is undergoing significant changes fueled in great part by the success of various PE firms that began in the QSR sector. As other franchise sectors are targeted by PE investors, the competitive environment in those sectors will become more challenging. In order to prepare for these challenges, small to medium sized franchises will need to become successful franchise systems that produces sustained system growth, successful franchisees and an efficient operating system.

Multi-unit franchisee ownership that originated in the QSR sector continues to increase as franchisors seek large multi-unit franchisees that can own and operate more franchise units.This ownership model provides organizational stability, ample financial resources, sustained growth and economies of scale to the franchisee operation.

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Who’s Winning the Pizza Wars?

Welcome to the pizza wars, where brands big and small, quick-service and fast-casual alike face two choices: pick up the pace and earn relevancy through definitive, clear marketplace differentiation or step aside.

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The Changing Franchise Relationship

PAC14_Brochure_cover_small_view“…the summer of 2014 saw two major judgments that underscored the changing times. While these two rulings address different parts of franchise operation, they both serve as actions seeking to level the balance of power between the franchisor and the franchisee.” – Franchise Direct

The quote above was from the beginning of a recent article on FranchiseDirect.com, The Changing Franchisor-Franchisee Relationship. It was for this article that I was asked to be interviewed. I’d like to thank the team at Franchise Direct for the opportunity to share insight and perspective about the upcoming International Franchise Association Public Affairs Conference in Washington DC. As well, I’d like to express my gratitude to IFA Staff for their assistance in preparing responses to interview questions. I believe it’s very important to deliver the correct message on all issues so their assistance and guidance was greatly appreciated. Their professionalism is second to none!

The complete article may be read HERE, but I’ll share my interview below…

Commentary from an Industry Expert

A noted franchise industry expert and speaker, Paul R. Segreto, CFE, was nice enough to answer some questions for Franchise Direct about the legal fight the franchising industry is enduring. Paul is a current member of the IFA Franchise Relations Committee. In addition, Paul is currently the CEO of Franchise Foundry, a franchise development company, as well as the host of Franchise Today on Blog Talk Radio. You can find out more about Paul here.

What will be the main points of discussion at the IFA Public Affairs Conference (September 15-18 in Washington, D.C.)?

The Public Affairs Conference is the best opportunity for IFA members to advocate for their business and communicate to lawmakers the challenges we are facing. In July, the National Labor Relations Board (NLRB) Division of Advice announced that a franchisor could be designated as a joint employer of its franchisees employees. The IFA is fighting this dangerous assertion because it is unlawful and will harm job growth, the economy and locally-owned franchise small businesses in every state. Franchisees have invested their capital in the business and stand to lose equity in their businesses if their franchisors are deemed joint employers. During the Conference, IFA members will take this message to Capitol Hill to fight for franchising and educate those on the success of the franchise business model and the growth that it continues to provide to our economy.

What is the risk to the industry from some of these judgments that have been handed down?

If franchisors are joint employers with their franchisees, these thousands of small business owners would lose control of the operations and equity they worked so hard to build. The jobs of millions of workers would be placed in jeopardy and the value of the businesses that employ them would be deflated.

This recommendation is a drastic and overreaching solution. Ample federal, state and local remedies are available – and are regularly used to enforce current law, including more limited NLRB action, state attorneys, general action and private rights of action – to deal with labor violations of various kinds. Destroying the fundamental tenets of the franchise model would eviscerate the most successful business model in existence.

Why do you believe so many cities and states are reviewing their franchising policies?

The Service Employees International Union (SEIU) is leading organized attacks against franchising and these jobs they create. The labor unions multi-pronged attack at the local, state and national levels, including having the federal government declare entire franchise systems as a single unit rather than the collection of separate, small business owners they actually are. The SEIU wants to undermine the franchise business model so they can more easily unionize entire franchise systems, as it is much more difficult for unions to organize thousands of independent small businesses under the current regulatory system.

What specific actions are the IFA taking, or considering, to protect the rights of both franchisors and franchisees?

With our continued fight to defend the franchise business model, the IFA is ensuring that franchise small business owners are well informed of policies that could alter the way they do business so they are armed with the tools necessary to educate lawmakers. The IFA’s Franchise Action Network is a new strategic initiative that mobilizes franchisors, franchisees and suppliers at the grassroots level. A coalition of the franchise owners, all promoting a single mission, is the best way to protect our industry from an increasingly hostile legislative and regulatory environment at the federal, state and municipal levels.

How does Aziz Hashim’s ascension to chairman underscore the changing relationship climate between franchisors and franchisees?

Aziz Hashim is going to elevate the role of franchisees in everything IFA does. The nature of the game has changed. There has been no more important time for franchisees to be engaged with the IFA on public policy issues. Legislators need to hear the concerns these business owners have about policies that impact their relationship with their franchisor.

Franchises Excluded from Small Business Saturday – AMEX Responds!

Well, I am happy to say that I have been in touch with AMEX as one of their VPs contacted me directly and apologized for their exclusion of franchising. They just missed the boat on franchising being an integral part of small business. They never even considered franchisees as Moms and Pops investing their money in a small business of their own. All their thoughts were focused on the giants of franchising and not the smaller franchises. Although, I did communicate that even the McDonalds franchisees are small business owners themselves. The long and the short is that AMEX knows they committed a huge blunder in excluding franchising.

Rosa Alfonso, the AMEX VP that contacted me directly, wants to set up a conference call next week with several other AMEX VPs to start down the road of getting franchising involved in next year’s Small Business Saturday. I am so excited they took notice and are willing to do something about it.

As much as I would love to be front and center on this, I recognize that it should not be without the IFA. This is about franchising being recognized as an essential component to America’s economic recovery, as IFA President, Steve Caldeira has promoted since leading the IFA. It’s about continuing to educate, not only the masses, but even the giants of business like American Express. I’m sure Steve and his staff could think of many ways this can further benefit franchising.

To that end, I have reached out to Steve Caldeira and will defer to him and the IFA staff in moving forward. Of course, I look forward to being involved as I am passionate about franchising!

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Franchise Growth or Future Problems?

After what many franchise professionals claim was a tough couple of years, franchising seems to be gaining momentum once again. This is very encouraging news! But, franchisors must be prepared, not only to handle the increase in inquiries, but in working effectively with today’s franchise candidates who many have indicated are more diligent and cautious than ever before. Many of today’s candidates are voluntarily or involuntarily unemployed, soon to be unemployed, or, may just want to control their own destiny, and are approaching business ownership with the attitude that failure is not an option. In dealing with these candidates, it is essential to exercise extreme diligence in presenting the franchise opportunity all the way through to executing the franchise agreement, and beyond.

I know, many franchise professionals are probably thinking they already do that. Besides, it’s the law to fully disclose the opportunity, right? They’ll go on to state they’ve always done things by the book, at all times. Blah, blah, blah! It really doesn’t matter what was done in the past, how it was done, or why it was done. What matters is that the opportunities that present themselves today and in the future receive timely, diligent attention, at a high level of professionalism, in order for a transitioning corporate executive / business professional to even consider a company’s franchise opportunity. And, if they ultimately do sign the franchise agreement, remit the franchise fee, and commit to investing a substantial sum of money, rest assured these new franchisees will expect and command a high level of accountability from the franchisor, and from the system itself. From themselves? Not likely as they will rarely blame themselves for any part of failure. But they will hold others accountable.

Well, my fellow franchise professionals, it’s time to press those conservative suits, study your franchise documents, fine-tune your operations, and examine and perfect your franchise sales process as any shortcomings will surely raise their ugly heads in the future if today’s new franchisees become dismayed, discontented, and or fail in their businesses. They will not hold themselves accountable. Instead, they will blame the person who “sold” them their franchise, or the operations department that they perceive to have provided little or no support, or the franchise executive that they feel showed no compassion in “forcing” them into paying royalties and advertising fees.

So, why did I turn what started out to be a positive of increased franchise interest after a year of disappointing results, and turn it into a picture of potential problems complete with gloom and doom? To encourage and motivate every franchise professional to be on his or her A-game and to put their house in order. Not only to bring new franchisees and revenue into the system, but to continue to grow their system with franchisees that, when attaining a relative level of success, will refer new franchise candidates, validate the franchise system, and possibly look to purchase additional locations in the future. The alternative of course, is dedication of resources to dispute resolution, and possible litigation. Remember the old Fram oil filter commercial? You can pay now, or pay later!


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What is IFA Fran-Guard?

The International Franchise Association‘s new, greatly expanded franchise sales management and compliance program will help franchisors take proactive steps to reduce risks, manage growth, and build a stronger, healthier franchise system. IFA Fran-Guard covers both the legal and business aspects of compliance with a series of modules designed or CEOs and senior executives, franchise development professionals, in-house counsel and franchise attorneys, paralegals and compliance managers.

CEOs and Senior Executives

Not only does a system-wide compliance program protect your franchise it can make it more profitable. Modules cover the Business Case for Compliance, Franchise Sales Growth & Management, and Best Practices.

Franchise Development Professionals

There’s more to compliance than legal requirements. Learn how a sales management and compliance program can increase your effectiveness and help drive franchise sales.

In-house Counsel, Franchise Attorneys, Paralegals and Compliance Managers

It’s important to integrate all aspects of franchise sales management and compliance from disclosure to franchise sales, field support, and operations. IFA Fran-Guard modules cover practical steps to implement a system-wdie compliance program.

All CFEs and CFE Candidates

IFA Fran-Guard has been incorporated into ICFE’s professional development program. IFA members who successfully complete the IFA Fran-Guard program will receive an ICFE Fran-Guard Certificate. All modules are approved for CFE credits.

Where is IFA Fran-Guard Available

Programs will be offered throughout the year at various IFA meetings and conferences and in different formats to make participation more convenient. Courses will be presented online via IFA University and through a series of webinars. A schedule of upcoming sessions may be found on the IFA website.

Fran-Guard Discussed on Franchise Today

Recently on Franchise Today, Paul Segreto welcomed as his guest, David French, Vice President, Government Relations at the International Franchise Association. Paul and David discussed franchise compliance and the development of the IFA FranGuard Program previously introduced at the IFA Convention in San Antonio. Listen On-Demand

About the International Franchise Association

The International Franchise Association, the world’s oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of more than 1,100 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA Web site at www.franchise.org.

Source: International Franchise Association


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Discussion About IFA’s 50th Anniversary Exemplifies What Franchising is Really About!

Recently, on the International Franchise Association group on LinkedIn, I posted the following discussion, “The 50th Annual IFA Convention in San Antonio is less than three weeks away. Will you be attending? If so, what do you hope to bring back to your organization? If not, is there a specific reason?”

Many franchise professionals responded and explained why they would be attending the event. Most of the responses centered around sharing ideas and building relationships. Sure, some mentioned exploring new opportunities with potential and existing clients, but we are all in business to make money, right? But in addition to generating new business, almost all that responded were looking to interact with fellow franchise professionals. Hopefully, long-term relationships will be established over time and the franchise community will continue to evolve and strengthen.

One of the responses was from franchise veteran, Michael Seid. He stated that he had been going to IFA conventions for 25 years. I really admired the fact that he had attended these events for over a quarter of a century! Think about all that has changed in 25 years. Just think about the technological changes that have occurred during this period of time. I mean no one was walking around the IFA event in 1985 with a cell phone, right? How about a laptop? Could anyone have even imagined the internet and email? Heck, fax machines were barely around in 1985, albeit the ones that were used that ridiculous paper that always seemed to roll onto to the floor and under a desk… just out of reach.

Yes, times sure have changed, but the love and passion for franchising apparently has not. It’s just been passed onto people like Michael Seid. By virtue of his responses to my original discussion, and subsequent question, “I’m curious, what was the convention like back in, what, 1985?”, Michael takes us down memory lane and does so in such a dignified manner and with genuine sincerity, that he really seemed to pay it forward. For the benefit of all within the franchise community, I am honored to share his response below.

“1985 was in Miami if I recall and that was not my first so it may be longer than [25 years]. If I recall the attendance at my first convention was measured in the hundreds – not like we have now in the thousands. It was a much different association – we have come a long way with programming and content and member services. A lot of the founders were still around. I just got a great biography of Joe Francis from The Barbers who was very active years ago. If you did not know Joe you missed a great man – really a fine individual who went out of his way to give guidance to anyone who asked for his help. His son is still very active in the IFA. It’s a great quick read if you have not seen the book. Joe is gone 15 or more years.

The culture of the IFA has not changed. You can still corner an experienced member as a new comer and they seem always to be thrilled to mentor and give advice. I remember asking Fred DeLuca a question when I was new in the association and he spent two or more hours giving me his advice. That has not changed at all as most members today will do the same for a new comer.

Looking back at what has changed – No franchisees back then. That was a major difference Steve Lynn and Jim Bugg made that happen). No PAC to speak of (Sid Feltenstein changed that). No franchise appreciation day (Bernie Browning‘s idea). No Education Foundation only an education committee (I think Sid Feltenstein is also responsible for that). No thought of diversity or minorities in franchising (Ron Harrison). No VetFran (Don Dwyer‘s idea during the first gulf war). No Second Tuesdays (if it was not Lane Fisher and Scott Lehr then they were responsible for making it grow as it has). Who would have thought we would be looking at using franchising to provide products and services to the poor in the emerging markets and yet today we have the Social Sector Franchising task force. No CFE (John Reynolds). No one would have thought of a franchisee ever being chairman (Steve Siegel was the first and Doc Cohen the second). No franchisees or suppliers forum leadership on the board (Joyce Mazero if I recall was the first Counsel of Suppliers chair on the board and Jeff Kolton was the second – although we had no vote then. Supplier membership on the Executive Committee did not exist (I had that privilege when I was supplier chair to be the first because of Gary Charlwood).

I remember the IFA chair years ago saying that he would never let a mattress salesman (his word for suppliers) ever being on the board. Suppliers got a board vote when Gary Charlwood was chairman). No suppliers elected to the board in their own name for six years (I was privileged to be the first and Lane Fisher the second). No women as chairman (Joanne Shaw was the first and Dina Dwyer the second). No major investment in research (Mike Isakson). I think Jim Amos when he was chair actually creating the first IFA long range strategic plan. When Don DeBolt became president of the IFA we were near bankrupt and look at the great financial condition we are in now (Russ Frith as Treasurer did an amazing job). We did a lousy job in lobbying years ago and now we have a huge public affairs team. We dealt with Coble and LaFalce holding hearings on relationship laws in Congress and those days are gone.

Yes a lot has changed over the years. We owe a debt to a lot of some very smart folks who were in the leadership back then who kept adding great elements to make the association better. Along the way we had some who were less than stellar also but for the most part, we have been fortunate by those who chose to be in the leadership. Lets not forget the amazing job Debbie Moss has done in growing and professionalizing the convention supported by a really professional team of staff.

Still with all of the change, growth and the better financial condition of the association, the culture of the IFA has not really changed. I expect that many of the members/leaders from years ago who have not been active in the IFA will be at the 50th anniversary. Some of them will be surprised and pleased how far we have come.”


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