Sponsored by FranConnect
According to a recent survey from KPMG, global CEOs are anticipating a recession in the next 12 months. The professional services firm reported that 86% of the 1,300 CEOs surveyed expect a recession, with 71% predicting it will impact company earnings by up to 10%.
Talks of a recession looming have been ongoing for months. Whether it happens this year or next, or not at all, a recession always manages to rear its ugly head time and time again — so it’s best to be prepared.
While there isn’t a way to recession-proof a business, it is possible to implement specific business practices to help make it recession-resistant.
Double down on brand compliance
Did you know that a loss of one star in a Google review can result in revenue declining by as much as 10%? According to an inflation survey from the International Franchise Association and FRANdata, 90% of franchisees are experiencing a moderate to substantial inflation impact, with quick-service restaurants being one of the most impacted sectors (83%). Eighty-nine percent of franchised units were forced to raise their prices and 64% reported lower earnings due to rising prices. So, while a loss of a single Google star may not seem like a significant issue in normal times, it’s not worth risking in this unpredictable economic environment when restaurants’ earnings are already down.
One solution is to double down on brand compliance. Franchise systems have spent years — even decades, in some instances — building their brand standards to ensure a consistent experience across their system. With price increases, customers are paying more and expecting more, so restaurant brands need to ensure their units are delivering exceptional customer experiences — and keeping those coveted Google stars. Through FranConnect’s brand consistency solution, brands have a dashboard-based view into franchise unit performance to quickly spot trends, challenges, and areas for improvement through programs that address non-compliance.
“If you have to enforce brand standards or collect money from non-compliant franchisees through legal proceedings, you can easily spend $100,000 or more,” says franchise attorney Brian Schnell, of Faegre Drinker. “Typically, franchisees don’t wake up one day and say, ‘I’m not going to pay or comply with brand standards starting today.’ For example, franchisors often allow franchisees to go unchecked on key brand standards for an extended period of time. FranConnect can equip you with technology that can provide you with solutions to detect early warning signs so that little issues don’t become big issues that result in lawyers getting involved.”
Schnell also emphasizes that zero violations do not equal compliance.
“In reality, there may be significant issues that haven't been detected yet. If left unaddressed, those issues could cost the franchisor way more in enforcement costs than it would have spent on solutions to prevent them,” he explains. “With the cost of noncompliance nearly three times the average cost of complying with industry regulations, there shouldn't be any question about the value of having a robust internal brand compliance program."
Brand compliance is one of the most critical tools for ensuring that customers come back spending more money, more often, helping to make restaurants recession-resistant.
Automate royalty collections and reporting to protect cashflow
Any decline in sales translates into fewer royalty collections for franchised restaurant brands. Many senior executives would agree that time spent chasing units for accurate and timely payment of royalties could be better spent in helping locations improve their revenue. FranConnect’s royalty management platform increases transparency and accuracy in royalty calculations while automating the invoicing and collection process to reduce time spent on critical administrative procedures.
Take Capriotti’s Sandwich Shop, for example. As the leadership team has been pursuing a growth target of 500 locations nationwide by 2025 while also expanding its subsidiary, Wing Zone, from approximately 60 franchises to 250, the brand automated its royalty collections and reporting to ease employees’ workloads so they could focus on strategic, growth-oriented activities. By replacing manual, ad-hoc systems with a robust software solution with point-of-sale integration, Capriotti’s drove efficiency and decreased the possibility of errors.
As a trusted advisor and supplier to have 1,500 franchise and multi-location brands and 350,000 locations worldwide, FranConnect offers franchise management solutions that can help restaurants become recession-resistant during challenging economic times to ensure success.