Establishing a Strong Corporate Culture to Provide Franchisee Support

September 15, 2011

By Bruce Bloom

One of the challenging responsibilities of a franchisor is how to develop and implement effective franchisee operational support programs. These programs have the added responsibility of meeting, and exceeding, the franchisees support needs in a cost-effective and efficient manner.

This challenge is compounded by the differing needs of franchisees based on the complexity of the concept, their experience and organizations. These circumstances are also impacted by the basic tenant that “one size does not fit all.” The systems composition (i.e. single unit, multi unit, master franchise, and so forth), industry focus, geographic dispersion, franchisee experience level, and more, will affect the specific nature of an effective franchisee support system.

The most effective and efficient franchisee support programs are formulated, executed and evolve based on two important factors: the franchisor’s corporate culture and the structure of the support program itself.

Corporate Culture

Effective franchisee operational support programs begin with a sense of ownership from all of the disciplines that affect the development and execution of these programs. Senior management must create an environment that establishes support programs as a priority for the organization. The corporate culture must support both a sense of responsibility and accountability in the execution of these support programs.

The organization needs to be focused on the impact of these support programs to the success of the franchisees, the system itself and the brand. How often has one experienced frustration on behalf of the franchisee community regarding the “new” field representative and his lack of knowledge and inexperience in working with a franchisee? The franchisor needs to be prepared to provide the resources and training to those individuals responsible for the day-to-day execution of support programs whether in the field, as part of a help desk organization or whatever method is being utilized.

An environment of open and inclusive dialogue with the franchisee community is imperative. How often do companies survey their customers on their products, marketing, delivery systems and so on? Franchisees are both a customer and partner in the delivery of your brand. Soliciting their input and participation into the type of support that would be most effective for them and their continuing feedback on the effectiveness is essential to creating the appropriate operational support programs. Your franchise advisory committee, key franchisees and others are important sources of information and input.

Support Program Structure

In today’s environment and with multiple industries involved in franchising, there are a number of methods for providing franchisee support. They may include, among others, traditional field support, help desks, intranet sites, regional meetings and mentoring programs. The challenge is to determine which one of these, or what combination, will provide the most effective and cost efficient franchisee operational support program.

As previously noted, “one size does not fit all;” however, the basic premise of any franchisee support program should be protecting and enhancing the brand and assisting the franchisee in being successful. A few of the key issues that should be addressed in setting up a support structure include:

How complex are the operations of your franchised concept? As an example, restaurants tend to be a relatively complex operation; frequent, on-site visits may be essential. What is the geographic dispersion of your franchised location? If they are not close, a combination of periodic visits and help desk access may be the most viable approach. What exactly are the field representatives’ responsibilities? Do they maintain an operational focus or do they have quality assurance or other responsibilities as well? Setting up clearly defined responsibilities, providing adequate training and support are essential to providing the tools for successful execution of their responsibilities. It is also essential to hold these individuals responsible for the performance of their franchisees.

How is the brand managing and supporting the organization? Has the brand clearly defined its responsibilities both internally and to franchisees? Has the company given them the appropriate discretion and authority to execute their positions? How is the franchise organization evaluating their performance; is it ensuring feedback from the franchisee community? Feedback and participation are important roles that franchisees should play in this area. The franchisor needs input into what is working or what isn’t. What best practices are utilized in the business, whether by an individual or multi-unit franchisee? Can the franchisee participate with the franchisor in testing new methods of support? As a customer and partner, franchisee input is essential to developing the best systems possible.

New Versus Established Franchisees

As franchisees evolve in the development of their business, there is a need to adapt the support to continue to add value to those franchisees. As previously discussed, the point at which this occurs will vary by system and the nature of the concept.

To ascertain when those changes need to occur, there are a number of key factors, in addition to those identified previously, including:

Know your business model inside and out.
What should your unit-level economics look like? How will they evolve as a franchisee becomes more proficient as an operator?
What are the key drivers of the business? Who are your customers?

Here are hypothetical examples of the evolution of a franchisee and the potential specific needs that may occur.

The franchisee has just completed the initial weeks of operation.

As a new franchisee, the reality of operating a business can become overwhelming. The support a franchisee has received is not as concentrated, many of the training issues learned are forgotten, and the franchisee begins to operate the business, not manage it. There is a lack of marketing; the franchisee believes a scenario similar to the “Field of Dreams,” if you build it they will come. Increasing the frequency of your contacts during this period is critical. Are franchisees producing operating statements? What type of feedback is the brand receiving from their customers, suppliers and so on? Now is the time to reinforce operating standards and provide that additional support. Having specific field personnel, and a game plan that work with franchisees at this initial stage can be an effective means to address these initial issues before they become long-term problems. The franchisee is looking to develop additional units.

Many franchisees are not prepared for the operation of another unit. Does the franchise organization have a system internally that ensures they are qualified to do so (i.e. good ULE, adequate capital, internal organization) before consenting to that additional development? How is the franchise business supporting franchisees to prepare for that next unit, organizationally and financially? Is the brand doing it early enough in the process to be beneficial?

The franchisee has reached a point in development he can no longer effectively manage the additional locations on his own. (That level of development will be determined by the type of system.) First, are they qualified to continue this development (i.e. good ULE.)? Has the franchise company assisted the franchisee with developing an organization that can absorb these additional units through both new management levels, staffing levels and so on? This is a good time to begin a train-the-trainer program for the franchisee to ensure he can maintain a solid operating team. On an ancillary issue, has the franchise business assisted the franchisee with potential site and construction support, funding and other resources? The franchisee is beginning to have financial or operational issues.

This is a key time to assess the performance of the existing locations to ensure they are being properly operated and do not begin to create financial issues for the franchisee through diminished performance and its potential impact on your future system growth.

The franchisor has required and obtained financial statements of its franchisees, which it is continually monitoring. Operational reviews are declining, suppliers have noted issues and the support organization is trained to focus on this information. The franchise begins to note a decline in performance.

A proactive approach with frank and open discussions with the franchisee should begin immediately. In conjunction with the franchisee, a game plan should be developed to address those areas of concern that are affecting the performance of the units. Additional training or support may be required; frequent follow up with specific objectives are critical. Mentoring programs can be an excellent resource in assisting the franchisee.

The franchisee is an established veteran and potentially reticent to accepting advice and support.

The level of support should not change. However, there are potentially new sources of support areas. Does the franchisee have a succession plan? If it potentially includes family members or associates, are they adequately prepared to assume those responsibilities? Can the franchise organization provide support to those individuals through additional operating and training support to ensure an effective transition? What does the franchisee’s estate planning look like? Can the brand leverage that experience as a mentor to keep the franchisee engaged in the program? The franchisee has become a large operator (more than 10 units).

The areas of opportunity for support will change. While it is still essential to monitor operating statements, balance sheets and their operating standards, a new set of opportunities will present themselves.

Potential support areas may include:

Organizational development; how do they continue to develop the organization required to maintain their current operations and support future growth? •
What does their management organization look like?
Have they developed sufficient capacity in human resources, finance, procurement, construction and real estate?
Is their internal training capacity sufficient? Do they have a strong train-the- trainer program?
What are their succession and estate plans?
Do they have new sources of capital; enhancements in their existing capital structure?
How else can the brand support their future growth? Are there acquisition opportunities? A master franchisee system has unique issues. In many systems they are responsible for this type of support. The efforts of the franchisor should be focused on providing the support and training that will allow the master franchisee to address these same issues in a similar manner.

These are a few examples of potential opportunities in creating value for your franchisees, at various stages in their development, in your operational support areas. The long-term success of these programs will be based on the franchisor’s focus on tracking, evaluating and evolving these programs. Many of these same principles will apply as the organization considers other areas of support including marketing, development and procurement.

The successful program will create value for franchisees ultimately through their success and commitment to the system, while protecting and enhancing your brand.

Bruce V. Bloom, CFE, has accumulated more than 40 years experience as an entrepreneur and a senior-level executive in a number of Fortune 500 franchise companies in the restaurant and hospitality industry. Bloom is the president of Bloom & Associates, LLC, which provides a variety of franchise and business consulting support to numerous organizations in the franchise industry. He can be reached at 615-472-1647 or [email protected].