Secrets to a happy franchise marriage
Published: January 9, 2012
Relations between franchisee and franchisor have always been a make-or-break dynamic for restaurant chains. But the prescription for a mutually lucrative partnership has been scrambled a bit by the Great Recession. Ditto for the list of taboos that can spur either party to speed-dial their attorney.
We asked franchising vets from both the franchisor and the franchisee side to share their tips for maintaining a happy and satisfying marriage. Here’s their turn at playing Dr. Phil:
Marry rich, with eyes wide open. Bad matchmaking is the eternal bliss-killer of franchising. Good pairing is particularly important in a bruising economy because there can be less room for forgiveness. Against that backdrop, each side might want to redefine what prospect merits a 10.
With credit still tight (franchisee funding fell 20 percent short of the need in 2011, according to the International Franchise Association), signing a funded franchisee is the franchisor equivalent of marrying into a family that has live-in servants. Ka-ching. That means courting prospects with the credentials, connections and experience to access money and keep expanding.
Even more of a heartthrob: “A great day-to-day operator with management skills that are above the day-to-day operational level,” so the growth can be managed, says Bill Johnson of United Capital Business Lending.
On franchisees’ part, “make sure you understand what makes the business tick and how you’ll make money at it today,” says Roz Mallet of PhaseNext Hospitality, a Smashburger, Buffalo Wild Wings and Corner Bakery franchisee. “Don’t go into it with the mindset that you can change that brand and make it something it’s not.”
At the same time, look for a hard heart and iron-fisted consistency. If the franchisor isn’t willing to boot franchisees who fail to measure up, good operators have their investment tarnished. “When franchisees aren’t held accountable, the whole brand suffers,” says Paul D’amico, the president of Moe’s Southwest Grill.
That also means saying “no” to locations that won’t work, for the brand or the franchisee, says Auntie Anne’s president Bill Dunn.
Be transparent... “Everyone involved with the brand should know what it stands for and understand its goals,” says D’amico. That means communicating clearly and often, and not just from the franchisor down. Franchisees should be able to “effectively live the brand and present it consistently across the world,” D’amico adds.
…Particularly about strategy. Franchisors should take the lead on setting out a long-range strategic plan that “protects and strengthens the brand and the franchise partners,” says Schlotzkys president Kelly Roddy. The whole system has to be aware of it. McDonald’s Plan to Win is posted on the wall outside the office of CEO Jim Skinner.
Don’t get rules-bound: “Brand guidelines are important, but franchisees need to be free to engage with their local communities,” says D’amico. “The franchisor should help the entrepreneurial spirit of its franchisees thrive.”
Avoid the unilateral: Neither party should disregard the other in taking a course of action. On the franchisor’s part, “refreshing a brand is one thing, but changing directions can be frustrating and costly to a franchisee,” notes Moe’s D’amico. The franchisor has to consider the operator’s ROI.
“If something doesn’t work for a franchisee, then it doesn’t work for the system,” adds Schlotzky’s Roddy.
On the franchisee side, “we’re not trying to reinvent the wheel,” says Mallet, whose company is opening its stores in nontraditional locations. PhaseNext worked with the franchisors to adapt the concepts to those captive settings instead of bolting ahead because it knew what would or wouldn’t work in those peculiar sites.
If you’re a franchisor, provide the means for success, including centralized support services. “It’s not a franchisee’s job to worry about marketing creative, training materials or developing recipes,” says D’amico.
Those resources have to be adequate to meet the need. Auntie Anne’s, a sister concept to Schlotzky’s and Moe’s, maintains a ratio of roughly one corporate support employee for every three franchisees. It’s why the home office exists, says Dunn.
But the support shouldn’t be limited to functions like training, ad buying or cranking out LTO’s. Headquarters also has to focus like a laser on unit economics and improving the fundamental business model of the chain. “If your franchise partners aren’t successful, the brand won’t be, either,” says Schlotzky’s Roddy.
At the other extreme, he asserts, the corporation has to tend to macro-issues “they might overlook,” like legislative and regulatory issues, healthcare reform, and purchasing contracts.