Throughout the pandemic, cash levels on corporate balance sheets soared. The S&P 500 alone accounted for $2.2 trillion in cash throughout the pandemic. As recovery from the pandemic has continued, cash levels have begun to normalize, with many companies returning cash to shareholders through the traditional mechanisms of stock buybacks and dividends.
But what does this mean for franchised brands? How do we think about returning value to our franchisees?
Franchise brand investment tends to be cyclical. In some years, major investments from the franchisor are necessary to refresh branding, develop new product, or overhaul entire operating systems. However, in years when the business is stable, this level of investment will not yield the same returns, which brings us to the question: How do we create value for franchisees? Here are three ways stable brands can continue to return value to franchise owners.
1) Subsidizing and co-ops
Although administering subsidies or running a co-op program requires time and maintenance by the franchisor, it’s an effective way to return value to franchisees—while also advancing the brand overall. Subsidizing (partially or entirely) key brand initiatives ensures a faster adoption rate and compliance—while also keeping more cash with your franchisees. Likewise, a franchisor-funded co-op program that reimburses franchisees for specific expenses rewards those owners who are the most engaged and focused on improving their business. Co-op funding has the added benefit of amplifying national or global marketing initiatives at the local level.
2) Training and culture
Excellent, consistent service doesn’t happen without quality training. And high performance, whether at the frontline or the franchisee level, doesn’t happen without a strong, supportive culture. An investment in education and leadership skills yields returns for both franchisor and franchisee. From updating virtual training content, to hosting free in-person workshops or conferences, or even paying for third-party certifications or coaching, these opportunities solidify a franchisor’s commitment to ensuring that each location and each franchisee are truly set up for success.
3) Recognition and celebration
Everyone, franchisees included, wants to know they are part of something bigger. By creating memorable, once-in-a-lifetime experiences to celebrate franchisees, a franchisor deepens their relationship with franchisees and drives franchisee preference and loyalty. Whether it’s an incredible trip, dining experience, celebrity introduction, or something more customized and personal, harnessing the power of the brand creates moments and memories for franchisees they may not otherwise have had. Even though this investment is arguably the hardest to measure in terms of impact, it intuitively produces very real value for franchisees at all levels.
If your franchised brand is reaping the benefits of major investments throughout recent years and you’re pondering how to best support your franchisees in the current environment, consider employing one of these strategies to yield results.
Whitney Knight is a franchise brand builder with more than a decade of experience. She is Director, Brand Personality for Hilton Garden Inn, Homewood Suites by Hilton, and Home2 Suites by Hilton. Contact her at Whitney.Knight@Hilton.com.