How to meet the connectivity and cybersecurity challenges of franchisors and franchisees

Financial health and profitability, staying relevant to customers and upholding the brand are daily battles in the franchising industry. Franchisors and franchisees often face interconnected challenges that necessitate joint efforts to resolve, such as improving client experiences, preventing security breaches and growing profits in times of inflation and tight operating budgets. These must be dealt with while simultaneously endeavoring to grow revenues and deliver an optimal customer experience.  Additionally, agility in responding to market shifts is essential to remaining aligned to ever-evolving customer demands and preferences, ensuring the franchise model remains dynamic and competitive. 

The industry has adopted technologies such as cloud-delivered point of sale (POS) and mobile, contactless payment applications integrated with Internet of Things (IoT) technology such as in-store cameras and sensors to capture buyer insight data, leveraging AI to make it actionable, informing key decisions across sales, inventory, client experience decisions. These, as well as the general democratization of information, have accelerated the rapid expansion of digital touchpoints in the typical franchise workplace, which along with growth opportunity for operators greatly expands the attack surface for malicious actors.

Cybersecurity is a very real concern in franchising. Data breaches in franchised networks have increased in recent years. These affect not only a corporation’s bottom line but impact its operations and can create compliance issues. Connectivity failures and security breaches are more than inconveniences; they translate directly into financial losses and compromised customer trust. In today's technology-driven market, staying ahead of these challenges is not just beneficial, it's essential.

Franchise systems are a particularly prime target for cyber criminals. According to Law.com, this is because most franchise systems operate as a connected mass of franchisees. The diverse array of consumer and personal data that franchises collect, store and transmit the franchisor presents a compelling target.

The implications of a data breach on brand reputation cannot be overestimated. For single unit franchisors or those operating dozens of stores, maintaining a consistent and reputable brand image is crucial. Conveying this image not only serves to attract customers but also upholds the standards of the franchise, affecting both the individual operator and the associated brand. Financial well-being and profit margins are inextricably linked with the revenue success of the one feeding that of the whole.

Despite challenges, the franchising industry is projected to grow in 2024

In 2023, the franchising industry faced economic challenges such as inflation, labor shortages, and rising interest rates. Despite these challenges, some of which are ongoing, the US franchising industry is healthy and continuing to grow. The International Franchising Association (IFA) reports positive growth projections for the US franchising industry in 2024. They report that personal services and quick service restaurants will experience the strongest growth of any industry. Personal services, including health and wellness, child-related, beauty-related, and pet services sectors, are expected to grow by 3.0% in 2024. 

Growth in the Southeast and Southwest will outpace the rest of the U.S. franchise market in 2024, according to the IFA. California and Washington are forecast to be the slowest-growing states for franchising at - 4.2% and -2.3%, respectively.

• In the 2024 Franchising Economic Outlook, FRANdata projects: Total franchised establishments increased by 1.9% to 821,589 units.
• Franchise employment grew by 2.6%, adding more than 221,000 jobs and reaching a total of 8.9 million employees.
• Franchising output to increase by 4.1% to $893.9 billion.

Challenges for the US franchising industry in 2024

The hiring of both skilled and unskilled labor will remain the major challenge franchisors and franchisees face in 2024. Based on IFA’s 2024 Annual Franchisor Survey, 79% of the franchisors report that their franchisees have job openings they cannot fill. 

“Cost of labor continues to rise, but after years of inflation, what customers are willing to pay has started to go flat or even decline, squeezing the margins of our franchisees,” said one CEO respondent to the survey. 

Top technology challenges facing franchises

Slow networks can cause inefficiencies, long lines, and poor customer experiences. These pain points can turn into obstacles for franchisees striving to get their operations up and running, or for established franchisees to maintain or grow market share. Fast-growing brands may experience many of these network challenges: 

• Given the rosy projections for franchising growth contained in the reports referenced above, it seems a given that successful franchises will outgrow their current connectivity capabilities, prompting a search for a new technology partner with more comprehensive solutions.
• For nationwide operations, management issues can arise when various locations rely on different technology partners. With franchises that have hundreds of locations across the country, this is an invitation to service disparities and invoicing nightmares.
• Cybersecurity threats to franchises will continue to present a considerable risk, and they will need to update or upgrade cyber defenses. To meet the skilled labor shortage challenge, franchisors should consider managed security solutions.
• Many franchises may be challenged by the need to integrate multiple systems while scaling networks quickly, in response to business needs and objectives. To remain operationally efficient and competitive in the face of planned growth within a volatile economy, many franchisors will seek one platform for secure connectivity, communications, and equipment.
• In times of high interest rates, franchises may face economic headwinds related to the way they currently purchase technology. They may seek to eliminate upfront capital costs and reduce operating expense by combining network hardware, maintenance and repairs for into one predictable monthly cost, thereby moving technology investment from CapEx to OpEX.

Spectrum Enterprise can help 

Providing consistent excellent customer experiences requires the latest connectivity technology. Franchisors need uninterrupted internet connection at every store for every application including POS, TV, voice, and more devices so they can make sales and offer the best customer experience.   But budget constraints, limited IT resources and lack of technical support are a significant hurdles. The franchising industry requires solutions that are not only reliable, secure, and adaptable but also value engineered to keep their business running smoothly.

With services and products that are flexible, smart, and ready to evolve with needs, our managed solution is a perfect balance of quality and affordability. It offers access to enterprise-level networking with the sophistication required to meet current and future challenges without overburdening your resources.

Our Managed Workplace Package for franchises simplifies technology standardization across all locations, ensuring reliable, secure services. Our single solution comes with our standard service level agreements (SLAs) that guarantee 100% uptime, end-to-end performance nationwide and unrivaled remedies.

Learn more about Managed Workplace Package for franchises.