The closure of chocolate franchise Max Brenner this month comes as a warning to the traditional franchise model, an industry leader says.
The announcement of the Australian chocolate empire going into voluntary administration over “escalating costs and tighter retail trade” shouldn’t come as a surprise to retailers, Katja Forbes, international director of the Interaction Design Association Boards told Retailbiz.
The franchise model is quickly becoming redundant in the current retail market, she says, with many franchises struggling to give consumers the personalised experience they increasingly desire.
“In recent years it has become apparent that a great many franchised groups are sinking into administration,” she said.
Franchises are being “left behind” due to the “inflexibility” of most franchise models, Ms Forbes argues.
“Whilst their competitors are agile and can adapt quickly to market demand, franchises are much slower – many even answerable to a head office overseas.”
“If you think about franchise model it’s almost a one size fits all type of model,” she said.
Innovation is also “not in the DNA” of franchises, she says.
“The other challenge for franchise model is it doesn’t allow for that innovation, the growth opportunities.”
Particularly as the rise of e-commerce and AI drives customer-centric, personalised retail experiences, the inflexibility of most franchise models is increasingly outdated.
“It’s that lack of nimbleness that really realty causes them to suffer in this market because organisations such as Amazon.”
Despite the shortfalls of less flexible franchise models, Ms Forbes doesn’t think the closure of Max Brenner and other franchises marks the end of the franchise model as we know it.
“It still has applications but I think the very niche franchises especially like Max Brenner trying to create chocolate culture – such a niche franchise that doesn’t allow flexibility of customising for individual experience and different context I think that’s the kind of model that’s going to suffer.”
Franchises need to re-evaluate their business models and ensure that they’re enabling customer-focused and personalised services at each of their outlets.
“What we have now is very much a culture of designing for immediate gratification and as people are engaging in the franchises that don’t prioritise their individual needs,” she said.
“The franchise model can work but not if they slavishly maintain the strict adherence to a product set or a particular iteration of the brand. It’s really important they find ways to be innovative within scaffolding of the franchise model and I think that’s where they’re getting it wrong.”