Friday 22 November 2013

Food franchising: a vector for growth

A multidimensional retail destination made up of food and drink coffee franchises continues to be an important revenue generator, especially those with sit-down restaurants, food to go and drive-thru outlets.

The franchise sector generates an estimated 660.5 billion dollars annually with typical US industry sales at about 1.8 billion dollars daily. By far the largest preferred franchise partner in fast food convenience is McDonald's, followed by KFC, Burger King, Subway, Pizza Hut and Starbucks but in terms of fastest growth, Subway leads the pack according to Entrepreneur 2013 Franchise 500.

Location, location, location
Launching a food franchise operation at a major transport node (airport, petrol station, railway etc.) offers a significant growth platform for innovators with the entrepreneurial drive to succeed. And the rewards are open to all, not just the big brands.

Food on wheels
The community element of roaming, mobile chains makes a powerful statement at a time when consumers are challenging the mainstream fast food sector. And with lower running costs, chefs of mobile food trucks can quickly and inexpensively trial new palate pleasing recipes and methods to entice consumers. Recent initiatives like Jamie Oliver’s van at airports and Morrisons’ Healthier Goods Vehicle point to brands exploring new ways to get closer to the customer at their point of need. Food-on-wheels is a common sight in the Far East too, and for the small independent trader, presents an attractive franchising opportunity.

In China, people flock to petrol stations where street traders sell local food from their rickshaw trucks and bicycle trailers.

Reviving regional favourites
Franchising is big business and it seems everyone wants a slice of the pie, no one more so than emerging entrepreneur David Beckham who was recently reported to have had the idea of opening a pie and mash chain called PM (Pie and Mash) with chef friend Gordon Ramsay.

Beckham sees a gap to revive a well-loved but forgotten staple for 'eastenders' (those native to east London including Beckham himself).

We think that Beckham's commercial vision matches his soccer skills, cleverly spotting that, despite the trend to explore exotic foreign cuisines, customers will always retain a nostalgia for "mama's home cooking". All that was required was to frame the offer as fashionable and cool.

Beckham (pictured) wants to create a global franchise of eateries selling his favourite grubIt helps to have a world famous brand ambassador to kick start a new foodie franchise but don't underestimate the power of brand design, the kind that is unafraid to stick its head Giraffe, a restaurant chain that is building a UK presence in the fast casual dining sector through its partnership with Tesco’s (locating its restaurants near to the supermarket) as well as at a growing number of international airport food-court environments. Incidentally, Giraffe has crafted a family friendly reputation and ‘global’ food offer that appeals to a broad international demographic.

Does local beat global?
From a Russian perspective...

As a model for many developing markets, Russia is an interesting model. According to a report published by Ekaterina Soyak, General director, E.M.T.G, there were more than 600 franchisors in 2011, representing a sixfold increase from 1999 with foreign franchisors representing a third of the total number.

Since the early 1990s, the big western brands including McDonalds, KFC, Burger King, Subway and Wild Bean Cafe on BP petrol stations have led the market but there are a number of local fast food brands that have also managed to establish themselves including Coffee House, Shokoladnitsa, Kroshka Kartoshka and Rostik's (until they merged with KFC). Euromonitor predicts a 200% growth in the Russia fast food segment by 2014 with 50% occupied by local brands.

Source: EMTG | Russian Market Report 2012 (PDF: 1.2 MB)

The latest to join the list is Mister Blin down in Sarartov South Russia, a brand that has been selling Russia’s favourite snack food pancakes to an eager public for the last 7 years or so. With the help of Minale Tattersfield to give the brand a makeover, Mister Blin is now planning an assault in other regions and primarily the 40+sq m food to go offer within petrol station convenience stores.

Russia’s favourite local food chain Elki Palki is also undergoing a redefining process, and again using design strategists Minale Tattersfield to enable the franchise company to compete with the multinationals and, who knows, take them on at their own game by going global.

For Merab Elashvili, President of the Board of Directors of RFA (Russian Franchise Association) the growth of franchising is important for resurrecting Russia's entrepreneurial spirit and spreading
prosperity out to the regions. Speaking about franchising in the magazine Business Flight, Elashvili describes it as ' engine of progress that can stimulate the non oil-and-gas sector of the economy and, particularly in the regions, become a platform for implementing innovations.'

While franchising is a vector for growth, stimulating job creation and prosperity, sustained economic progress is best achieved when franchisees tap into local needs and start their own brands. The opportunities to do this in Russia's roadside cuisine segment are there for certain individuals but if you are thinking of taking on a big chain, don't do it alone. Get a top international design and branding team on board and together construct a world class, enticing offer.

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