Generation Z and Franchise Brands

11 May, 2020

According to  WhatIs, there are two billion people (updated in January 2020) classified as Gen Z. Generation Z is the demographic cohort following Generation Y — which is more popularly known as the Millennial Generation. The dates given for Generation Z range from the mid-1990s through the second decade of this century, although precise years vary according to the source.

Entry-level employees in many industries today belong to Gen Z. Like the Millennial generation, Generation Z is comfortable with new technologies because they have grown up in an Internet-connected learning environment not long after their birth. Not surprisingly, texting is the cohort’s preferred communication mode, followed by social media interaction.

Clearly, franchise brands need to be aware of these facts concerning Gen Z. Reports indicate that much of the trouble restaurants and retailers are experiencing has to do with keeping pace with the rate at which new social media habits are emerging and affecting how this generation eats and shops. Older Gen Z members are willing to give vendors personal information, but they expect transparency for how that information will be used.

I often urge my team members and our valuable clients to keep an eye out for what the Gen Z’ers want. For example, really hip luxury publisher in China, The Brief (Jing Daily) advises that China’s younger shoppers perceive jewellery more as a personal statement than a token of love and commitment, and this shifting demographic has led to booming e-commerce gains for China’s mid-end jewellery market.

Another publication, Fast Company, has this to say about them: This group makes up a quarter of the U.S. population and by 2020 will account for 40% of all consumers. Understanding them will be critical to companies wanting to succeed in the next decade and beyond. Gen Z have adapted to quickly sorting through and assessing enormous amounts of information.

Online, they rely heavily on trending pages within apps to collect the most popular recent content. They also turn to trusted curators to locate the most relevant information and entertainment. These tools help Gen Z shrink their potential option set down to a more manageable size. Gen Z have a carefully tuned radar for being sold to and a limited amount of time and energy to spend assessing whether something’s worth their time. Getting past these filters, and winning Gen Z’s attention, will mean providing them with engaging and immediately beneficial experiences.

Without empathy and understanding, brands risk being filtered into obscurity.

Successful brands must have a clear set of values to achieve long term success. Brands must offer consistent promises, so customers know what to expect time after time. Brands with longevity recognize the importance of creating an emotional connection with customers. This emotional connection comes from the experiences the brand creates for its consumers.  Maintain this emotional connection, and customers will return for the long term.

How to Attain Longevity

Many business owners want to grow the size of their business. That’s a great goal, but only as long as their existing location or locations are profitable. The often-repeated Chinese saying 剜肉补疮literally means cutting out a good part of your flesh to cover up a small pimple – getting oneself into bigger trouble when the current trouble isn’t as big… A good analogy is adding water to a leaking bathtub…

For a franchisor, this means providing your franchisees with the operational tools to give franchisees a greater chance of profitability. Simply stated, unit-level economics is one key to longevity. Every unsuccessful outlet is a drain on the franchisor’s reputation, a drain on other franchisees’ morale, and a drain to overall profit (as the envisaged economies-of-scale diminishes). Lesson: Focus on profitability.

Most business owners know that when you maximize efficiencies you maximize profitability, but it’s more complicated than just obtaining low costs from your suppliers. Your goal should instead be to obtain great products at a fair price. The continuity of suppliers (and try not to rely on just one) is important for brand longevity.

To achieve that continuity, you need to develop strong relationships with your key suppliers. Constantly arguing for a better price doesn’t create a partnership. Instead, you too become a commodity in your supplier’s eyes and the relationship becomes transactional and motivated by only money.

A great relationship means your suppliers will be more likely to go above and beyond what is necessary to help your business, which as we have seen during this COVID-19 period, can be crucial to long-term success. Your suppliers are also experts in their fields, and they can help you solve problems and identify opportunities if you have a great relationship. Lesson: Create strong partnerships with suppliers/vendors.

Being relevant in consumers’ minds is important for any brand, but that does not mean you should hop on every fad that arises. Make sure you can recognize the difference between pandering to a fad and adapting your system to a trend. For example, when the salted duck egg became popular, many restaurants adjusted their menus significantly. A year or two after, the enthusiasm for items with the salted duck egg has diminished, so those brands that have invested valuable time and money creating salted duck egg menu items realized that those items no longer were as relevant and didn’t sell well any more…The fad has passed.

Certain trends however, stay. And your brand needs to be able to adapt to them. In the fast-casual restaurant industry, for example, off-premises consumption has been on the rise for years, even before COVID-19. Ghost kitchens, dark kitchens, or cloud kitchens (and other names) are sprouting out in many nations because of the off-premises consumption. Successful brands have adapted their operations to accommodate this trend. The costs and benefits make sense…If you focus on your customers and what they want, you’ll recognize important trends. Lesson: Recognize fad versus trend.

When your brand is ready to grow, consider each location carefully. It’s much better to have 10 locations in one city than 10 locations in 10 different cities or countries. This allows you to play off the synergies of brand recognition. You’ll be more successful in the short and intermediate term with clustered growth, which allows you to plant deeper roots (e.g. central kitchen; training center, etc.) for long term growth. This clustering makes oversight easier, and it also allows for better logistics for key suppliers or distributors. These traits are important for brand longevity. Lesson: There’s strength in numbers (concentrated in one location).

When a brand starts to grow, consistency is one of the most important considerations. Operations should be followed to a T in all-new locations, and the customer experience should be seamless and consistent from the first location to the newest. To achieve this, make sure your brand is scalable (and protected – logos, etc., are registered) before attempting to grow. Have you chosen franchisees that have values aligned to yours? Do you have a well-thought-out, comprehensive operations manual for your franchisees to follow? Do you have robust training systems so that your franchisees and their employees run the business according to your plan? Do you have employees who can travel to new locations to check on compliance with standards and consistency in all material respects?

The brand’s values should be consistent. Brand values define your company, and if you allow them to be sacrificed in favor of growth, the overall brand will suffer. Through your company culture, focus on your most important asset, which is your employees. Pay close attention to legacy and new employees’ opinions (feedback) because they can tell you a lot about your brand and where it is going. And always follow up on every issue on a timely manner. There’s no point knowing something and not doing anything about it.  Lesson: Ensure that the brand is scalable and consistent.

When you start a business, you don’t set out to fail, so your ultimate goal should be brand longevity. Putting the brand first instead of chasing explosive growth before you are ready can help you reach milestones like 10, 20, or 35 years in business.

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