FranchiseMarketUpdate BY DARRELL JOHNSON Where Are We? For retail, the future has already arrived “L ocation, location, location.” Those three words used to mean the same thing. I’m not sure that applies any more. In the new world of commerce, they may mean your location, my location, and some location where I will be. If you want to sell me your product or service, will you need to address all three? If so, there are huge implications for the contractual terms of the func- tions that franchisors are responsible for executing. This will span traditional contract topics such as exclusive terri- tories and delivery models to franchisor functional activities such as training and site selection. Let’s look at some of the recent devel- opments and trend prognostications that might influence future buying behavior. By future, I mean inside the typical real estate lease period for retail establishments. Each one of these points is disrupting one or more industries. • The largest taxi company in the world doesn’t own any taxis (Uber). • The largest hotel company in the world doesn’t own any hotels (Airbnb). • IBM’s Watson can deliver basic legal advice within seconds with 90 percent ac- curacy (compared with 70 percent accu- racy from humans); and cancer is being diagnosed with four times more accuracy than by humans alone. • Facebook pattern recognition software recognizes faces better than humans do. • The first self-driving cars, trucks, and even ships will be in commercial use soon. • Working while you commute will move residential markets further out and change traffic patterns. • Few of our children will bother to get driver’s licenses. • With a dramatic decline in car ac- cidents, the auto insurance business will drop dramatically. • Within a few years medical devices will work with your phone to measure more than 50 biomarkers that will iden- tify nearly any disease, giving world-class medical access to nearly every person on the planet. 88 MULTI-UNIT FRANCHISEE IS S UE III, 2017 • The first smartphones with 3D scan- ning capabilities will be out by the end of the year, allowing you to scan your feet at home and send the file to shoe compa- nies that are now building equipment to custom manufacture your perfect shoes. • The cheapest smartphones now cost less than $10. Within the next few years 70 percent of all humans will own one, What does “location” mean in a world that is being changed in a dramatic and rapid fashion? giving nearly everyone access to world- class education offered by organizations ranging from Khan Academy to Stanford University. • Finally (not that it is relevant to this column), by about 2020 we will have apps that can tell by your facial expressions if you are lying. Imagine what that might do to televised political debates. Real-world consequences Some of these developments and forecasts will take longer than predicted to imple- ment. Some will morph into something else. However, most are already happen- ing and have near-term consequences for retail businesses. Do I need a shoe store if I can essentially send my foot to a shoe company, pick the style I want, and get a custom-built shoe back, all in a matter of a few days or even hours? Do I need to go to the doctor’s office for a checkup when I can send all my biomarker infor- mation to her? If the auto and insurance industries are in for revolutionary change, how does that change where people live, how they move around, and what they spend money on? If my child (or me, for that matter) can take a course from a world-renowned educator online, what does that mean for our educational system and all the ancil- lary education businesses? If software can recognize my face, change the menu board to my preferences, or instantly tell a salesperson about me, what kind of em- ployees will you want to hire? That brings me back to the initial point: Location. What does that mean in a world that is being changed in such a dramatic and rapid fashion? Perhaps the starting point in answering that question is to focus on what people want to spend their free time doing. While this applies to all generations, I’ll use Millennials as an example. My key observation is how protective they are of their personal time. If your focus is trying to make their ex- periences better, you may be missing the point. Some may want that “experience” in your retail establishment, enjoying the ambiance and good service your establish- ment strives to achieve. Yet one size doesn’t fit all (think shoes, as the 3D point above dramatically demonstrates). They may want your product or service delivered to them so they can save their personal time for other things more important to them. Some may want your product or service ready as their autonomous vehicle drives by, or still in your establishment but in a less formal, minimal service way. Being all things to all people is a pre- scription for failure. However, being stuck with a fixed retail design without consider- ation for the variations in what your core constituency wants isn’t any better. Un- derstanding how your key demographic spends their personal time is a good step. Of course, you need to first understand your key demographic. On that front, there is a tremendous amount of data to draw from. Our own experience accessing a data house with detailed records on 150 million households has been very help- ful with our clients for both franchisee recruitment and consumer marketing. What a fascinating and challenging world we are in today. Darrell Johnson is CEO of FRANdata, an indepen- dent research company sup- plying information and analysis for the franchising sector since 1989. He can be reached at 703-740- 4700 or djohnson@fran data.com.