By Michael Seid

Franchising, at its roots, is a social exercise. Minor issues in the relationship can often be ignored so long as everyone is otherwise happy. In business, that generally includes being profitable. When economic conditions are challenging, tensions tend to grow, issues appear larger and more complex than they might otherwise, and this is regardless of whether we are talking about our personal or our business relationships.

Covid changed a lot of how consumers shop today, including whether we eat at home or in a restaurant and the frequency of our visits. E-commerce continues to dominate the shopping landscape. Today we have the ability to research a store’s performance and understand its products and services even if we have never been there, and we also have the advantage of ordering products and services online for delivery (delivery drones are already here in some markets) or pickup. Amazon, where we routinely order things like garden tools and shampoo, is now a source for telemedicine and prescription drugs. Artificial intelligence (AI) is only going to accelerate this transition and business stress.

I recently attended an excellent conference put on by Akerman which stood out to me for some of the fresh voices and ideas that were on display. It is unfortunately becoming all too common at many other franchise events that speakers’ proposed solutions to problems are frequently well-worn, out of time and no longer sustainable or effective in today’s business reality.

Businesses today no longer compete on price and convenience alone, but instead on the emotional and sensory experience they offer consumers. While adding and eliminating products and services, better marketing, improved supply chains, lowered labor costs, changes to pricing, and limiting regulatory incursions are all important to keep a business profitable, these are no longer sufficient solutions in today’s marketplace to make a business competitive and sustainable.

Success today and into the future is about storytelling and how well you craft and deliver on Retail Theater. Retail Theater is creating an experiential environment – an approach that transforms staff into performers on a stage, and bricks and mortar shopping into a form of entertainment.

Franchising, with its historic focus on delivering products and services consistently and to brand standards, needs to consider how to adopt its approaches to differentiate from the competition, foster deeper customer connections, drive increased foot traffic, leverage competing technologies, and create a magnetic environment that draws people into the retail experience in order to be sustainable, let alone profitable. Old solutions are just insufficient for the challenges, and not only brick-and-mortar offerings will be vulnerable unless they adapt to the new marketplace.

Understanding Retail Theater

Retail theater in many ways is built on an old-fashioned approach to mom and pop retailing that leverages live interaction in creating an engaging and memorable in-store experience. In the past shop owners knew their customer’s names, the schools their kids went to, and the sports they played. They adapted their approaches to how each customer was served because they knew how they wanted to be served. They were a place where friends shopped with friends.

While we are still locally owned and operated in franchising, even before we became a multi-unit ownership dominated method, we substantially lost the ability to be as locally driven as generations of shop keepers before us. After all, we were taught that franchising requires consistency from location to location – and it does – except, we are now faced with a radically different marketplace, consumer, and challenges that the old-school solutions to problems, often advanced as best practices, are really not going to solve any longer.

Today the solution to retail issues is going to be found in the use of visual merchandising, storytelling, sensory design, technology, and creating and delivering on a retail personality required to build traffic and create a compelling brand for consumer loyalty. Solutions going forward are going to be about making the shopping experience feel immersive and dramatic, transforming everyday transactions into an emotional journey. It is going to require a deeper understanding of the targeted consumer than simply what they like to eat, the price they are willing to pay, and the hours and location that are convenient to them.

The success of Retail Theater rests on how well you physically convey your brand’s story and the culture of your business. From the moment a customer steps through the door they need to be part of a curated performance, and every element from the location’s atmosphere (lights, smells, sounds, feel and texture), the staff’s language, look and behavior, packaging, and product/service presentation need to be orchestrated to create a cohesive, memorable environment that makes the shopping experience more compelling and able to overcome the alternatives.

Retail Theater is about differentiation and giving your consumer a compelling reason to leave their home, get out of their car, and step into your restaurant or store. When executed properly, Retail Theater delivers increased and repetitive traffic by:

• Enhancing the brand’s storytelling
• Encouraging longer dwell time
• Stimulating impulse purchases
• Fostering emotional engagement
• Driving social media shares and elevating passionate discussions about the brand, its products, services and experience

Franchising has always been an engine of innovation. There are examples of many brands that understand the power of experience in building customer loyalty across diverse geographies, and others still knee-deep in old habits. Let’s start by looking at two direct competitors, Jersey Mike’s and Subway, and understand the importance of telling a story to your customers.

Jersey Mike’s and Subway – Two Brands on a Different Course

Jersey Mike’s is growing because its restaurants showcase its tradition, freshness, quality and staffing. The restaurants tend to be loud; customers can watch the meat being sliced, and the way the sandwiches are built showcases their freshness. The use of phrasing like “Would you like it Mike’s Way” leads a customer to watch what many call a ritual of building the Jersey Mike’s sandwich. Jersey Mike’s is high energy, fast, entertaining, exciting, and strives to be fun. For a comparable sandwich, its price points are higher than found at Subway.

Subway is growing internationally, but rapidly shrinking in the United States. I like the Subway sandwich and while I think it offers a product equal to Jersey Mike’s, Subway seems to go out of its way to deliver the most lackluster QSR experience possible.

Subway does nothing to tell any kind of brand story. On paper it has a “Sandwich Artist,” but no one who goes into a Subway has recently or ever heard the phrase or experienced what it means. The customer experience delivered by the local Subway staff is so far from what you get at Jersey Mike’s that you could almost believe Subway’s brand standard is to deliver a slow, tedious and boring performance, regardless of the location you visit. The menu is overly complicated and seems to grow every day, causing even experienced Subway customers delays in placing an order. While Subway has recently begun to upgrade the restaurants, it has failed to do much of anything to enhance the customer experience.

For a comparable sandwich, Jersey Mike’s is able to attract a higher price point, likely because the feel of a Subway is akin to ordering at an assembly line. Subway’s historic response to retail problems and competition has been consistent; they discount the price. While the $5.00 footlong might have worked in its day, the $6.99 footlong only reminds people that the price for the same product has gone up by $2.00 in a relatively short period of time. Not only is discounting not the right strategy, because in the public’s mind discounting does not equate to quality, it’s also not a sustainable solution as it hurts the brand and only ensures continuing tension with franchisees.

There are five words that are important in franchising: Consistent, Sustainable, Replication, Communication and Culture(SM). While Subway is consistent, it misses on the four other essential elements that make franchising work. Besides, what it is consistent in (its retail performance) is what will give management and the franchisees the most difficulty in turning the brand around.

Two Starbucks Examples – Getting it Right and Getting it Wrong in the Same Brand

The Starbucks Experience Most of Us Know: Starbucks has inspired many brands to adopt an experiential approach from the design of their locations, to how the customer experiences the brand, to how they feel about themselves because they shop at a Starbucks location. Yet while they led for many years in adopting Retail Theater, of late management seems to have gotten lost, and they are now needing to retool to regain their footing.

Starbucks is an experiential brand. While coffee may be their principal product, people don’t go into a Starbucks just for the coffee; they go because of the language used and the culture of the brand which makes them feel better about themselves. Starbucks lost sight of how the brand relates to its customer and how it conveys its story. Starbucks began to open drive-throughs, thinking that because drive-throughs benefits brands like Dunkin’, it would also benefit Starbucks. But doing so lessened the brand’s ties to its customers and disrupted the loyalty the brand counts on. Starbucks was attempting to compete on coffee and not personality, and that is an issue interrupting customer loyalty among other concerns.

Starbucks should not be trying to compete with Dunkin’ on style because even though they sell a competing retail product, each has a different brand promise for a different profile of customer. Starbucks is now returning to its roots and redesigning stores to attract customers not only to purchase coffee, but to lounge for a while and absorb again the Starbucks experience necessary to sustain customer loyalty.

Starbucks Reserve Roasteries: I first discovered the Starbucks Reserved Roasteries while visiting with clients in Shanghai. It’s a large footprint flagship with an open concept offering an immersive, sensory-rich feeling and design. Think of it as a coffee-inspired theme park. There are currently six Reserve Roasteries, located in Chicago, Milan, New York City, Seattle, Shanghai, and Tokyo.

Each location has a large roasting machine where customers can watch the coffee being roasted and the baristas telling their story and explaining what is going on with the different brewing methods available. Customers interact with the baristas in selecting the brew they want and can do a side-by-side tasting – learning in a theater-like environment. You can order coffee-infused cocktails and wine in their center feature bar, prepared by Starbucks’ mixologists. There is a bakery selling fresh pastries, pizza and deserts, an open baking station to watch the dough being rolled, and food is served for three dayparts – breakfast, lunch and dinner. Of course you can also buy coffee to take home, and merchandise including mugs, brewing equipment, books, and clothing with personalization. Not something you will find on every corner, but an example akin to how Apple retails in their branded stores and McDonald’s use of flagship locations.

Apple Stores: A Retailing Magnet

Apple stores function as high-concept retail theater with tight brand standards for products, displays, staffing and service. They have matched their high-tech products with a immersive educational retailing experience for consumers. The design of the locations is almost sterile, with long white tables to explore the products up front, and shorter tables in the back with seats so you can discuss things with their tech specialist. Customers are encouraged to touch and play with the toys, creating a palpable energy that is meant to be noisy, as it is the sounds and motion that draws others into the store to see what is going on.

Apple’s staff don’t merely sell you a box like Costco and Best Buy. Apple’s staff are performers, in look and in attitude. They consult openly with each other. There is a play area where children can entertain themselves while their parents are shopping. The staff is well trained and look the part of someone with the tech knowledge you can trust. They don’t talk down to customers or oversell what they personally like, but instead spend time asking questions. Apple’s staff is on salary and do not earn a commission on the products and services they sell. Their goal is to foster a customer-first experience where they can build a level of caring and trust. The customers know that the product they are recommending will match up with the way they need it to work.

You are greeted when you enter the store by staff members with hand-held devices to either check you in for your appointment, direct you to a person in the back to begin consulting with you on a new purchase, or direct you to someone who will simply close the sale on the item you came to buy. To cap everything off, they call their service representatives geniuses, refer to the area in which they work as the “genius bar,” and empower their staff to send you home with an add-on service contract and accessories you will actually use. Apple demonstrates how a theatrical approach to retailing can create a unified global identify that creates confidence not only in the product but in entire shopping experience.

Disney tested a similar approach in its overseas retail stores. You are greeted by staff who notify a second crew whether you are alone, with a baby pram, or with a toddler in tow. With that information the sales staff can greet you with a basket or sack, or follow you around and bring the products you select to the counter while you continue to shop. The floor has a pattern that leads in one direction to plush toys or to a children’s play area. Disney’s brings its Magic Kingdom approach to its branded retail stores overseas, similar to how Apple distinguishes how it markets from its own stores to that of the box sellers.

LEGO and Build-a-Bear Stores: Interactive Brand Playgrounds

LEGO and Build-a-Bear use Retail Theater to create an immersive, play-driven, retail experience for children and adults alike. Both stores have displays of products that let children scan, animate, build and both include play zones for on-site creativity. The stores are part retail and part theme park.

Both brands allow the customer to become the maker of their own product with a well-trained, upbeat staff acting as facilitators and guides on what the child can create. Staff takes the child from choosing what it wants to make to bringing the character or object to life. Retail Theater increases the time customers stay in the store, increases sales per visit, and increases customer satisfaction. Sales associates at both brands are salaried and not commissioned.

Goldfish Swim Schools – Retail Theater in a Service Business

Like Lego and Build-a-Bear, Goldfish Swim Schools blend performance with storytelling while building an immersive, fun, and confidence-building experience for children. Including the lobby and changing areas, the locations’ décor is themed to make you feel like you are at the beach with bright colors, murals, mini-palm trees, bubble machines, beach balls, etc.

The staff are trained to be upbeat, animated, and encouraging to the children with scripted narratives to give the student praise and boost their confidence, and lower the natural anxiety of the parents. There are graduation ceremonies with ribbons, photographs and songs. Parents get to watch their children learn a new and exciting skill, and the staff builds overall confidence in the children. Goldfish staff are generally salaried but can earn bonuses for retention rates and the sale of birthday parties and merchandise.

Lush Cosmetics – Like Lego, Build-a-Bear and Goldfish, a Sensory-Driven Retail Experience

Lush soaps are not made by the customer, yet Lush has created an immersive, hands-on experience where customers participate in finishing the product, giving them the sense of participation in the creation of the soap. Lush soap is made in their kitchens and there is a sticker showing the name of the person who made the soap. Customers are allowed to touch and test the product, custom-cut the soap into bars, mix their own versions of bath products, and watch live demonstrations.

Sales associates are trained to perform product demonstrations – essentially mini-plays that tell the story of each item. They cut the soap in front of the customer and explain the chemistry of the products. The store has retail parties where attendees participate in the Lush experience and can touch, smell, and mix ingredients for some of the products they can buy and take home. Sales associates are salaried, but there are performance-based bonuses at the store level for management and staff.

McDonald’s – Leading QSRs into the Future

Systematizing and brand standards have historically been a major focus for McDonald’s. Of course, McDonald’s has varied the products it sells in different markets and has innovated its products and methods of service offering over time. McDonald’s has allowed for variation in the types of locations it approves, their design, and even lets its logo change depending on the retail opportunity.

McDonald’s has created flagship locations including in New York City, Chicago, London, and Tokyo that use technology, entertainment, design features, and customer services differently, and whose locations don’t match up to the type of experiences you typically get at a McDonald’s. These locations act as a test for the future, and each of the flagship locations differs in many ways. Overall McDonald’s is using:

• Architectural features including glass walls, solar panels, and plants and vines inside the restaurants to improve air quality, rooftop gardens, and sleek minimalistic locations
• Open kitchens with visible food prep and cooking lines adding a performance element
• Self-ordering kiosks with touchscreens
• A more interactive customer experience while improving order efficiency with lower staffing ratios than found at traditional locations
• Local art installations
• Table and delivery service
• Regional music
• Digital entertainment including gamified interfaces for children

These stores are designed to be theatrical showcases of a modern, digital-first restaurant with varying international menus and ingredients. The McDonald’s location in Chicago has a Leed Certified Roof covered in plants; the New York location features a three story LED façade, with table service; and the London location has rotating international menu items and “Taste of the World” days. It’s both an investment in the brand and a look at how the brand will be showcased and competing into the future.

The Strategic Advantages of Retail Theater for Franchises

There are significant advantages for using Retail Theater in franchising as it addresses the root causes of many problems like traffic, frequency, and retention that don’t seem to be fixed by the old solutions often advanced as best practices (they might have been at one time) at many of the conferences we all attend. Retail Theater allows for:

• Brand differentiation
• Higher conversion rates – shoppers into buyers
• Creation or maintenance of customer loyalty for more than just the product or service by delivering on a memorable experience

Retail Theater requires a balance between flexibility and consistency and needs to be defined in a “shared theatrical brand toolkit” for it to be effective in a franchise system.

There are risks of implementing a Retail Theater approach. Before it is implemented it has to be tested to avoid some of the potential challenges including cost of implementation; finding the balance been consistency and creativity; the cost of training management and staff; measuring ROI for implementing the strategy; and determining the ability of the franchisor’s management to internalize and fully understand the change in direction. While there are already learnings to be found, the solutions and brand approach will not fit nicely into a best practices approach and will require management to get comfortable with thinking though “contextual practices” specific for its brand.

As we move forward in a digital world, implementing Retail Theater will not be an option and instead will be the imperative strategic response to shifts in consumer behavior. The solutions of the past are not going to work as we begin to see AI advance changes in e-commerce, methods of delivery, consumer expectations, labor availability and costs. Brand standards, consistency, and Retail Theater do not have to be mutually exclusive as we begin to turn franchised locations into stages where the staff become storytellers for the brand and customers become loyal fans. How we select, train, support and motivate our franchisees will also need to be adapted to this emerging retailing requirement.

The franchised brands that thrive in the future will be those that offer more than just great products and services. The future of bricks and mortar requires that the consumer obtain an emotional reason to shop that is worth remembering. Franchising has always adapted to change with many of the best (and sometimes the worst) ideas coming from franchisees and others that work at the local level. Moving into a Retail Theater mindset is just another advance that will strengthen the model.

MSA understands that the foundation for success in franchising is derived from five elements – Consistent, Sustainable, Replication, Communication and Culture^(SM). Whether it is in helping you understand and adapting Retail Theater to your brand or simply looking at ways to improve your performance and growth domestically and internationally, give us a call.