Event Recap: IFA Convention Surfaces Key Challenges for Franchisors

The International Franchising Association’s (IFA) 2018 Convention in Phoenix, Arizona earlier this month provided a valuable opportunity for my colleagues and I to connect with both familiar and new faces, and hear from a variety of presenters about challenges and new developments affecting franchisors. While a number of important discussions took place, some of the key topics that bubbled to the top of our list include:
 

Build your brand

Rohan Oza—a SharkTank guest and marketing mastermind behind iconic consumer brands such as Vitaminwater and smartwater—discussed brand building. Rohan’s presentation emphasized several important branding concepts including: 
 

• Everything is niche, until it’s not
• Aim to defy the experts
• Influence the influencer
• Create a culture
• Live the brand

 
Who are your spokespeople? Know who the influencers are that will endorse your brand. Influencers could include the neighborhood PTO president, a local celebrity having just won an Olympic medal, or blogging parents making decisions for the household. There is a tendency to target branding and marketing efforts directly to the end customer, but investing time to identify individuals who can influence the decision of many patrons can help elevate the brand more quickly. But influencers and customers aren’t a company’s most important brand ambassadors. Leaders and employees are its greatest champions. Tone starts at the top.
 
The culture of the brand is also significant. Many lifestyle brands today seek to embody a specific value like healthy living or spiritual wellness. Defining what your company stands for can be a critical brand differentiator.
 

Get ready for revenue recognition

BDO’s Jay Duke moderated a panel that included my colleague Angela Newell, focused on critical points every franchisor must know about the new revenue recognition rules. Public companies should have adopted this new guidance starting in Q1 of 2018; the rules become effective for private companies in fiscal year 2019. This new standard will dramatically change the way franchisors recognize revenue and report on their finances. If you missed the session at IFA, check out our past blog or webinar on this topic.
 

New standards for reporting financial performance

Item 19 in the Franchise Disclosure Document (FDD) has always been a hot topic of conversation, especially with debate surrounding whether disclosures are necessary and to what extent. In the last few years, it has become the norm to include Item 19 disclosures so that prospective franchisees can better understand the performance of the brand. The new Item 19 standards create a number of pitfalls that companies will need to navigate. Legal counsel and the North American Securities Administrators Association are useful resources to consult about Item 19 standard changes.
 

Bright future ahead

Franchising continues to be a great way to build a business and a brand. The types of companies looking to franchise have expanded beyond the typical restaurant, household, and educational models. With projections pointing to another year of franchise establishment growth, and private equity’s interest in these investments, the potential economic benefits continue to draw healthy interest from franchisees.
 
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