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3 Drivers for (& Challenges Facing) Membership-Based Franchises in 2019

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Convenience. Value. Personalization.

These are three things driving consumers’ buying decisions today.

They’re looking for not just any product of service, but the one that’s:

  • Easy to access.
  • Aligned with their lifestyle.
  • Able to deliver the biggest bang for their buck.

Which is why the membership-subscription business model has exploded in popularity in recent years...

...from American consumers’ addiction to subscription “boxes” and curated products (Birchbox, Loot Crate, StitchFix, etc.) to the rapid expansion of membership-model service franchises (Planet Fitness, Orangetheory, Massage Envy, and Merry Maids, etc.).

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The membership model provides benefits to both customers and franchises.

Customers gain the flexibility to use services how and when they need them (e.g. access to unlimited fitness classes that are easy to work into any schedule), as well as added value (e.g. access to and discounts for tertiary services like personal training, massages, and tanning)—and all at a flat-rate fee that keeps their budgets predictable.

Meanwhile, franchises gain the benefit of recurring revenue, as well as the ability to foster long-lasting customer relationships.

However, membership- and subscription-franchises aren’t challenge-free enterprises.

As consumers’ desires and expectations evolve, and more and more product and service providers shift to membership- and subscription-based offerings, competition will continue to increase.

Person on treadmill

Three Challenges Hindering Growth

Here are three common challenges membership - and subscription-based franchises should look out for in 2019...

Challenge #1: Demonstrating value to differentiate their brand

With more businesses jumping on the membership bandwagon across various industries, customers now have more options between membership-based product and service providers, and that means they’re paying closer attention than ever to value.

When businesses offer comparable services and price-points (fitness clubs built around similar concepts and charging roughly the same monthly fees), all that’s left to guide the consumer’s decision is experience.

Brands that want to succeed need to figure how they can differentiate that experience, and then make that differentiator evident through their marketing (e.g. marketing a fitness center as “parent-friendly” with free, on-site childcare).

Challenge #2: Acquiring enough members at the time of the grand opening

The grand opening is a critical period of time for any membership-based franchise.

If a franchise fails to acquire enough members during this crucial junction (in the weeks leading up to and following the grand opening), the location’s growth will be stunted, jeopardizing the future of the operation and its profitability.

As a result, membership-based franchises need strategic and timely marketing that raises awareness about their brand to the right audiences (those likely to become long-term members), and drives increased conversions (more membership sign-ups).

Woman with clipboard

Challenge #3: Avoiding churn and retaining members and subscribers

A high churn rate is a subscription-based franchise’s worst enemy.

A study on subscription-based e-commerce shows that 1/3rd of consumers who sign up for a subscription service cancel within three months, and more than 1/2 cancel within six months.

When members cancel, it not only affects the franchise’s financial standing (loss of monthly recurring revenue and investment into new customer attraction efforts), but it also hurts the brand’s reputation.

To combat member churn, subscription- and membership-based businesses need to invest in marketing that not only focuses on attracting new members but on retaining existing clients.

Industry Insights for 2019

To learn more about how membership- and subscription-based franchises are growing today, read our full Membership & Subscription Franchise Industry Report for 2019.

In this report, you’ll learn more about:

  • Why consumers are choosing product and service memberships over one-off transactions.
  • Franchise brands and industries that are experiencing unstoppable growth under the membership model.
  • Four steps membership-based franchises can take to overcome sustainability challenges and secure long-term success.

Read the full report!

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