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What’s love got to do with it? How to avoid trouble with franchisees


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Beth Ewen

“You have to love people. You have to care about them,” declared Dave Mortensen, co-founder of Anytime Fitness at a recent talk about the reasons behind the franchise’s stunning growth, now up to 3,500 units worldwide.

The words stuck out, maybe not least because his other comments were plenty potty-mouthed, and other speakers at the conference were hard-nosed and practical.  I wondered: What’s love got to do with it?

Chuck Runyon, co-founder, expanded on the theme, during their keynote address at the International Franchise Association’s annual convention in January. “What’s our mindset for how we attack the business? We think about employees first, and then we think about franchise owners and then we think about customers,” he said, acknowledging that some might put priorities the other way around.

But for Runyon it’s the correct order.  “How can we expect our customers to love us if our employees and franchisees don’t?” he asked.

I usually write about franchisee/franchisor conflicts in this column, and they can get extremely ugly and expensive, as everybody knows. I’m not complaining—they can also make for juicy stories and cautionary tales.

But what if franchisors could avoid those conflicts with a heavy dose of caring for their franchisees?  What if franchisees would quit blaming their franchisors when business goes bad, and instead step up themselves?

For today, let’s consider multiple voices exploring this lovely idea, which I collected in the past month at the convention and while preparing our first Zor Awards project.

Speaking up

Joe Stein is a Blaze Pizza franchisee in Southern California, and also a former executive at CKE Restaurants and El Pollo Loco. He told me he paid close attention to the management team at Blaze before signing on, particularly the quality and quantity of executives—after all, he wanted to be sure he was getting something for those weekly royalty payments.

But as time went on, he noticed something else that is typical: the franchisor had an initial design, but then started suggesting tweaks. “A lot of times franchisors will say, hey, let’s chance this. And rarely do costs go down, they go up,” he says. “Two years in I noticed, it seems like our costs to build a restaurant are creeping up and I brought that to the team. I said I’m concerned about this. They came back and said, let’s have a developers’ meeting.”

So the franchisees got together with construction vendors, architects and corporate execs and hashed it out until they reached their goal: “Let’s see how we can improve the look yet keep the cost down,” Stein says, and he’s pleased with the ongoing dialogue—and the tighter lock on opening expenses.

Owning it

Amber Sutton Donohoo, a Dogtopia franchisee in Virginia, was shocked when the company changed hands in 2015 and the founder whom she had found so inspiring, Amy Nichols, left the firm. She applauds the changes new management is making, especially its efforts to bolster systems, even though she believes there’s a long way to go. “I think there’s still a lot of work to do for the maturity of our system,” she told me.

But to her, what the franchisor does or doesn’t do shouldn’t be the most important thing for franchisees. “I think that a system should be clear on what they’re offering. There are franchisees in the system that complain about not getting some type of support when they don’t realize that the franchisor is not responsible for your success,” she says. “It’s your business. I always owned it, even during the struggling times.”

Donohoo was an early franchisee in the system, so there wasn’t a lot of data for her to scrutinize. So she called up every franchisee and every corporate store manager. “I was a bit pesky. I came up with a list of questions and asked everybody the same thing.”  

She also advises prospective owners to plan for a very long ramp-up time, even though, as she says, her franchisor is now working to reduce those times. She recommends building up savings for at least 18 months, during which time she didn’t take a penny in salary—and notes some prospects who started when she did couldn’t stick it out.

“Everybody has their own breaking point,” she says, but whatever yours is, she believes, is on you, not the franchisor.

The bottom line

Mike Rotondo is CEO of Tropical Smoothie, and he spoke at the conference on a panel about helping struggling franchisees. Many of the panelists talked about tough love from the point of view of the franchisor—how many believe, for example, that franchisees that are low-performing just aren’t following the system.

In other words, much of the talk was tough and not so loving, and especially noteworthy was the fact that no one was speaking from the franchisee’s point of view. I can easily imagine franchisees reacting negatively to the “help” the franchisors were purportedly giving, at least as these panelists described it.

But then Rotondo hit on the key difference between what motivates the two groups—top line versus bottom—and how that realization is the key to understanding. “What’s the metric the franchisee cares most about? Profits. So if we give our gross sales, they won’t like that,” he says.

But then Rotondo described what happened when corporate went on a road trip and told franchisees they would double their profits from 2013 to 2016. “The cellphones went down, the pads came out and they came to the conclusion that if I really want to drive the profitability I have to drive the top-line revenue,” he says. “But that was their conclusion. We were all aligned and we hit on a metric that franchisees cared about.“

There it is—something to care about, which may be the most lovable idea of all.

Beth Ewen is editor-in-chief of Franchise Times, and writes the Continental Franchise Review® column in each issue. Send interesting legal and public policy cases to bewen@franchisetimes.com.

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