If you are visiting my blog, you'll see that I have this category called "Franchising And The Movies." The category exists because I love the movies — I see close to 200 films a year (close to 140 of those I see in the theater) — and many of the things my wife and I like to do center around movies (for example, attending film festivals, traveling to other cities to see movies that won't come to Las Vegas theaters, and collecting movie props). But, you may also notice that although I've been writing this blog for almost three years, there are precious few entries in the category. I'm going to try to change that, starting now.
One of the summer's biggest (and most anticipated) films was The Dark Knight Rises. If you've seen the movie or read anything at all about it, you'll know that the central villain is a character named Bane. Bane is a mysterious, hulking, masked figure who, as the movie begins, is wreaking havoc around Gotham City. Bane's reign of terror interrupts what we learn has been an eight-year period of relatively crime-free peace, enjoyed due to the efforts of Batman, Commissioner Gordon, and (to a lesser degree) Harvey Dent as depicted in the previous film, The Dark Knight.
Having ridden off into the darkness at the end of The Dark Knight, we see that Bruce Wayne has, during the eight years since the events in that movie, retired as Batman and is now living in seclusion in Wayne Manor. Thus, when Bane and his gang of thugs begin upsetting the status quo, there is nothing other than the city's police force to hold Bane in check. As expected, Bane's activities catch Bruce Wayne's attention. He dusts off the cape and the cowl and goes after the mysterious figure.
(Spoilers follow; if you haven't seen the movie, you might want to stop reading here. If you want to read on, click the link below).
As it turns out, Batman is outmatched. Bruce Wayne / Batman is out of shape and out of practice. Bane, who has an origin similar to Batman's, is stronger, faster, and brutal. As Batman confronts Bane, Bane is able to quickly get the better of Batman and deals him a critical injury. Batman is left beaten and broken while Bane and his thugs take over Gotham. It takes Bruce Wayne (months of?) rigorous physical training and exercise to get back into shape so that he can face Bane once again and save his beloved city. It's no easy task; he must work hard to reobtain the physical and technical superiority he once enjoyed when he was terrorizing Gotham's criminal underworld. He's able to pull it off, but in Director Christopher Nolan's dark vision, you could envision it going the other way, too.
The business world, and in particular the franchising industry, is rife with stories parallel to the one depicted in The Dark Knight Rises. Take, for example, the recent emergence of the "better burger" chains in the fast casual landscape. The past several years have seen the prolific expansion of chains like Smashburger, Five Guys, The Counter, Shake Shack, and others. All of the sudden, consumers have an array of choices for fast casual burgers that they would not have dreamed of ten years ago. And look at the fallout.
For the quick service burger giant McDonald's, this new competition appears to have taken a toll; its systemwide sales have dropped over the last year. The fallout isn't limited to McDonald's, either. The former fast casual burger leader, Fuddrucker's, filed for Chapter 11 bankruptcy protection, and as part of its plan closed 24 of its corporate stores. The new "fast casual" burger chains (like the ones mentioned above) appear to have taken a figurative bite out of the established brands by providing what is perceived by customers as a better-quality burger. Some chains, on the other hand, have responded by improving or evolving. Apparently recognizing the threat posed by the new burger restaurants, Wendy's responded by launching its own higher-end "Hot N Juicy" burger. Rather than try to add to or change its existing burgers, Burger King took a different approach and created an expanded menu featuring new product offerings. For both Wendy's and Burger King, the chains have seen same-store sales increase during the past year after making these moves.
The lesson here is that complacency is risky. For years, the burger market wasn't particularly crowded. Companies selling fast or fast-casual burgers were, on the whole, able to enjoy increased (or at least steady) sales year-over-year and consistent system growth over an extended period of time. But the entry of "better burger" chains has created pressure on those systems and required them to evolve in order to stay competitive and successful. Complacency and overconfidence are two of the biggest risks to a business in a constantly evolving market; to be successful, businesses need to evaluate and revaluate what they are doing wrong, what they are doing right, and what changes the future may bring. That is true in burger restaurants, in other types of franchises, and in the business world in general. Indeed, my own industry — the legal business – has been rocked by a paradigm shift over the last 10 years that has forced law firms to either evolve, or risk becoming irrelevant.
Bruce Wayne was caught unprepared by the threat that is Bane, and almost died from it. Similarly, some franchise chains that have enjoyed success at some point in their history have gone the way of the Dodo; only the ones that have been able to evolve to respond to new competitive threats and changing customer tastes have been able to survive over time. As a result, a modern franchisor is well-advised to stay abreast of competition and constantly re-invest in its own system to be sure that it is not falling into the trap of complacency. Similarly, a prospective franchisee should learn about the leadership of a franchise system before investing, by asking questions about how well-equipped the company is to adapt to competitive changes over time. When that competition does come, you want your franchise system to be ready for it.