The world has changed, again

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Over a couple of articles written in mid-2020 I made some predictions around the post-Covid 19 economic and social environment and its influence on franchising in New Zealand.

To start, my assumption that we were entering a period we could define as “post Covid”, was completely incorrect, and should have been post lock-down mark 1.

We’re going to be living with Covid for quite some time, and if international trends are any indication, we are going to be extremely lucky to escape further significant lock-downs.

Having addressed the elephant in the room, let’s look at the five trends that I called at the time.

1. Recession

Not a lot needs to be said here other than I was not alone on getting this wrong.
The implication for franchising is that franchising is generally counter-cyclical and it looked at the impact recession has on employment.

Employment had remained extremely high statistically, but bumpy, and this has fuelled a predicted increase in interest in franchising.

2. The best systems likely to be more successful

I predicted good systems would rise like the proverbial cream.

This is evolving and certainly in franchise recruitment circles two lines of questioning have developed over the past 9-12 months – how has the system/category faired over the past 12 months and how did the franchise system support it’s franchisees over that time?

Those systems that have done well in these two areas will do well moving forward, I have no doubt.

3. Diversification of models

By diversification I suggested that franchisors would expand vertically through integrating their offering, and revenue base or perhaps horizontally by acquiring or developing additional brands in different categories.

Whilst it is hard to see any significant trend in this direction there have been a number of acquisitions.

But I would suggest that impetuous for diversification has evaporated for many and they are back to focusing on business as usual.

4. New rental and property models

Undoubtedly the e-commerce stream has gone from strength to strength and every business must now include this in their thinking and offering. What we have not seen over the past year is any major re-calibration of commercial rentals or property models.

5. Rise in entrepreneurship

I predicted we would see a renewal in an entrepreneurial spirit, largely driven by a rise in unemployment.

I got the unemployment driver incorrect, but unquestionably there are a growing number of people wanting to be in business for themselves.

They may not have been made redundant, but have decided they don’t want to do what they have been doing and now is the time. This interest extends to franchising, which remains perceived as a safer option for first-time business owners.

In addition to what I did predict, there were a couple of significant trends that I did not anticipate and these are now having significant influence.

1. Labour shortages

With the prospect that we were facing a recession, labour shortages did not really factor.
However, a fuller than anticipated employment rate and perhaps more significantly, immigration policy, means that almost all business sectors and industries we speak to have labour issues or concerns.

Franchising is not exempt from this and I am aware it is hampering many businesses and systems, both on an operational day-to-day basis and from a growth perspective.

2. Inflation and supply shortages

Just this month we have seen the release of the highest inflation figures in over a decade, but there are few businesses that would have needed this to be aware that costs of literally everything have escalated over the past nine-12 months.

Added to this are international supply and supply chain issues.

Read: Should I purchase a greenfield or an existing franchise?

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Nathan Bonney
Nathan Bonney
Director of Iridium Partners. He can be reached at nathan@iridium.net.nz or 0275-393-022

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