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Unlocking Franchise Growth for Private Equity

Finance Meeting

Unlocking Franchise Growth for Private Equity

The partnership between private equity firms and franchises has long been in the making. Franchising as a business model comes with an inherent ability to scale and grow exponentially in a short time, making the flow of PE funds into the franchising world seem, in retrospect, inevitable.

However, high valuations over the past few years have rendered the traditional PE formula of financial engineering, capital, and leverage less effective, leaving both PE and brands looking to organic growth vehicles such as marketing.

As private equity investments continue to flow into franchising, PE firms and brands hoping to drive growth and incremental value rapidly can no longer rely on a patchwork of marketing vendors, tools, and processes.

The vital keys to unlocking exponential growth will be in unified and scalable marketing platforms that give operators real-time data transparency, the ability to make marketing adjustments across multiple channels, and the power to effortlessly scale marketing and technology as new locations are brought online.

The Problem of a Digital-First World

For a decade now, the lion’s share of consumers have taken a digital-first approach when discovering and vetting businesses to hire and buy from. As more and more digital media outlets emerge and compete for consumer attention, companies have seen an overwhelming number of opportunities to get in front of their target audiences.

But the digital landscape has evolved and will continue to evolve rapidly, making it difficult for both corporate teams and franchise owners to stay up to date, especially when they’re busy managing day-to-day operations. As more and more forms of digital media pop up, the web of channels needed to stay relevant with consumers gets more and more complex.

The Growing Web of Vendors and Tools

Hundreds of vendors and tools have emerged in recent years to address the business and marketing needs of franchises, but they often work in silos, pointing to a conglomerate of vendors and tools that franchise teams and owners have to work with and navigate on a daily basis.

This patchwork of disjointed marketing vendors and tools leads to disconnected sources of information and data blindness that is time-consuming and resource-intensive to overcome. According to Yes Lifecycle Marketing, more than half of 250 companies surveyed used at least six vendors to connect with customers and collect data while 21% used more than 10. Another 21% of marketers spent an average of 15 hours just coordinating with vendors every week.

Both franchisors and franchise owners are often left to gather and interpret reports from independent marketing channels which makes it difficult to ascertain what is truly moving the revenue needle. Not to mention these same reports are often stale, month-end snapshots that make strategic decision-making nearly impossible.

The task is tough for franchise marketers but even worse for franchisees who are primarily concerned with operations and the day-to-day management of their locations. Understanding modern marketing is a full-time job and arming franchise owners with a simple basket of marketing playbooks, best practices, and creative assets often lead to less-than-optimal buy-in. This is especially true when franchise corporate teams are stretched thin and can no longer provide one-on-one marketing support and guidance to a growing number of franchisees. In turn, locations leave potential customers and revenue on the table and lose out to competitors in their local markets.

What Unified Data Looks Like for Franchises

A small cadre of solutions has been looking to assist franchises with connecting the dots in their marketing data. By bringing all essential marketing efforts together in one platform, silos between information sources are broken down, allowing users to see true performance from multi-channel campaigns. Platforms integrated with both brand websites and marketing channels help give franchises a clearer picture of customer attribution and marketing ROI while also providing real-time data that allows users to make adjustments as frequently as needed.

Applying artificial intelligence (AI) to consolidated marketing data further lightens the load on franchisors and franchisees by letting automation do the fine-tuning with marketing budgets. Manual campaign adjustment is limited to human working hours and can be error-prone, but automated systems never have to sleep and can make thousands of tweaks in real time, allowing franchises to maximize the efficiency and effectiveness of their advertising dollars.

Setting the Standards for M&A

As PE firms help facilitate mergers and acquisitions of franchise brands, growing from dozens to hundreds of locations as quickly as possible makes reducing the friction and manual elements of onboarding new franchise owners more and more crucial.

A look back at past bottom-up approaches with franchise marketing has revealed that leaving franchise owners to their own devices with minimal support can be disastrous. Rogue franchisees with inconsistent branding, incohesive messaging, and disjointed campaigns end up being a net negative to a franchise’s brand capital.

Rapid growth calls for a top-down approach where a brand has the technology and infrastructure in place to provide franchisees with a turnkey marketing system, creative assets, and a website from day one. Standards and processes should be established that provide cohesive branding, website architecture that fully utilizes the power of the brand’s domain in local markets, and consistent, long-haul partners who support both corporate and franchisees.

In this paradigm, franchises are able to provide the same streamlined operating experience for franchise owners while ensuring a consistent experience for new and returning customers alike. Such a strategy also increases the value of a brand to potential candidates who recognize the complexity of modern marketing and want more brand and technological support.