Cape Town - Successful franchising needs a solid relationship between franchisor and franchisee, McDonald's SA CEO Greg Solomon told Fin24 on Tuesday.
"This does not mean there will be no conflicts, but - like any relationship - it will go through conflicts," he explained. "You have to be brave and allow robust conversations."
Best practice in the franchise industry is about knowing each others' responsibilities and holding each to it, in his view. It is about freedom within the given framework from an industry as well as relationship perspective.
"A franchise model also needs to evolve. It is about innovation, transformation and keeping pace with the digital era. What worked ten years ago might not work today," cautioned Solomon.
"The fourth important buzzword for the industry is to be customer centric. Retailers who focus on these four areas can withstand the storm or even find the silver lining in the cloud that hangs over our heads at this time."
McDonald's currently has 238 restaurants in SA of which just under 50% are franchised. In SA it serves just under 8 million customers each month. It is growing by about 10 to 20 new restaurants per year.
"In tough economic times you have to have a long term plan. A franchisor and its franchisees must look 5 years ahead. We see strong potential in SA. At the end of the day we have to remain modern and progressive. In any business you have to continue to evolve your brand, business and relationships," explained Solomon.
At the same time he is of the opinion that the franchise industry is not yet contributing enough to the SA economy. He thinks there is still a huge opportunity for franchising to unlock in the country.
"Business entrepreneurs are not yet contributing to the full potential they can in SA compared to the rest of the world," he added.
As for SA's retail sector in general, Solomon said it has undergone tough times as consumer confidence hit an all-time low. Therefore, from a retail perspective the challenges for franchises remain the same as for any other business.
"SA has the right regulatory framework for franchises, but we can be more progressive to create the right balance to grow entrepreneur franchisees. They must take responsibility for their businesses within a clearly defined framework," emphasised Solomon.
A franchisee cannot just be a passive, hands-off investor, in his opinion. He or she must run a great business. Training and minimum specifications are very important - and this, in his view, cannot just be a quick 2-week exercise. McDonald's SA, for example, formally trains about 2 000 people each year in a programme which can take between six and nine months.
"It used to be about location, location, location. I would, however, like to add location, timing and customer experience. Customers are becoming so wise now in how to choose different brands that they are willing to travel slightly longer to have the right customer experience," said Solomon.
"If a franchisee cannot get those right, the idea of 'location, location, location' won't work."