Trying to transform your company? Three retailers test methods
|All kinds of light bulbs now share shelf space in Batteries Plus stores.|
When Batteries Plus set out to stretch the ‘Plus’ in their name, the challenge was bringing franchisees along for the ride. Rapid Refill and Fleet Feet Sports, too, are working to get buy-in as they change their brands.
Here are the rules according to Russ Reynolds, CEO of Batteries Plus in Hartland, Wisconsin, when trying to convince franchisees to commit to massive change:
No. 1, avoid mandates. Franchisees like a choice, he said, and they need to know why change is needed. “Growth is not an entitlement,” Reynolds said to his franchisees when persuading them to add a new line of products, light bulbs, to their stores.
No. 2, give economic incentives to act now rather than later. Owners who said yes to the change also received a five-year extension on their franchise agreement. “That was a pretty good hook,” Reynolds said.
No. 3, share data, and lots of it, to support the change—and make sure that data is all about the franchisee’s return on investment. “If you’re putting in $25,000 to $35,000 in inventory and fixtures, here’s when you’ll get your return cash on cash,” is the message Reynolds emphasized. In this case, it’s about two years.
Reynolds used those concepts while executing his company’s biggest change to date, which aggressively stretches the “Plus” in the company name. That required owners to add up to $30,000 worth of light bulb inventory to the hundreds of batteries in each store, jam multiple new SKU’s onto already “pencil-tight” shelves, and train staff on a complex set of specifications.
Reynolds calls it “a new expedition into a new industry,” and recognizes how daunting such a change can be for franchisees. But with less than a year of effort, 450 of 550 total stores have already converted to the new model, and a full 90 percent of franchisees are set to move forward. The company beefed up its strategy in September with a partnership that makes Batteries Plus the only retail licensee of the Duracell Procell brand.
It’s the type of buy-in any franchisor would envy. Two additional retailers, Rapid Refill and Fleet Feet Sports, are also executing big changes and working to bring their franchisees along for the ride.
From 3 to 7 in satisfaction
Rapid Refill had a problem. On a scale of 1 to 10, with 10 being the best, relationships with franchisees were about a 3, maybe a 3.5, said Jason Block, president of the Edina, Minnesota-based franchisor of stores that sell printer ink and toning cartridges and similar supplies. The company was a featured speaker at a Faegre Baker Daniels franchise conference this fall about improving relationships between franchisors and franchisees.
In an interview, Block said ownership changes were the main culprit. Rapid Refill was started in 2002 in Oregon. Hospitality giant Carlson was interested in expanding its portfolio of franchised businesses, and asked Jason’s father, a Carlson executive, to investigate a purchase.
When Carlson passed, Block’s father and an investment group bought Rapid Refill. A private placement of stock followed, then they became a public company based in Canada for a time. At last in 2012 Block and others took the company private again and can now operate it “as a family-owned business,” Block said.
“It’s a nice thing not to be a public company any more, especially of our size,” he said. Systemwide revenue is just north of $20 million—very small for a publicly held firm—with about 90 stores and a handful of commercial sales offices that take the retail store component out of the business model. Called the “rapid start” model, it allows an operator to come into the business at an affordable price range, $25,000 to $50,000, rather than the retail model that costs up to $150,000.
All those changes needed to be communicated, so Block set to work.
“Part of making sure you have a good culture and the relationships are improving is just to be very on purpose about it. It’s not something that happens overnight,” Block said. “It’s taking time to communicate everything that needs to be communicated.”
Block hired the Franchise Business Review, a consulting firm that surveys franchisees about their level of satisfaction and works with franchisors to improve the scores. The cost, based on number of units and about $5,000 for Rapid Refill, is worth it, Block said. “I will endorse it. It’s a good tool. In the past we’ve done more informal approaches. It’s great at soliciting feedback from franchisees that aren’t so vocal.”
Nick Roers is a Rapid Refill franchisee in a Minneapolis suburb who likes the direct approach. “Just be realistic with the numbers,” he said. “Just be honest.” He counsels franchisors to relay true expectations to their prospects. “Say, ‘Be prepared to not make money for 36 months’ or whatever it is.”
Rapid Refill does not have a formal mentoring program, something that Franchise Business Review’s President Eric Stites recommends. Roers decided to find his own. “At Rapid Refill I said, give me your top five performers, and I asked subtle questions that got me to my destination faster.”
And the level of franchisee satisfaction now? A follow-up survey from Franchise Business Review is still in the future, but Block cites improvement and Roers agrees. “It’s about a 7 or 8 now,” they said.
Block believes he will always have more work to do. “If you look at any franchise system change is required. The market changes, the demands of customers change. Whether you enter at its infancy or in a mature state, somewhere along there you will encounter change.”
Watch your body language
How does President Jeff Phillips get buy-in from franchisees for new ideas at Fleet Feet running specialty stores? Oftentimes, he implements the franchisees’ ideas. “It’s our job to recognize good ideas and help refine them and work toward implementing them across the system,” he said.
The best example is a training program for customers who want to run a 10K or a marathon, or who just want to get off the couch. It’s called No Boundaries, and the idea that started at one franchised location has been rolled out across the Raleigh, North Carolina-based company.
“It’s probably the most successful acquisition tool to come around in a long time,” he said. “We’re creating new runners and new active-lifestyle folks,” who would have never walked through the doors of a Fleet Feet store before. “It’s just been fantastic. We’ll put probably close to 30,000 people throughout 90 stores through the No Boundaries program this year.”
Like all retailers, Fleet Feet has plenty of new competition from Amazon, Zappos and other online merchandise sellers. “We’ve had to look for new places to find customers to grow the business,” Phillips said.
A second good idea came from the company’s franchise advisory council, another item that Stites of the Franchise Business Review recommends to all franchisors. Phillips and the company’s founder, Tom Raynor, five years ago had created a separate company that operated as a multi-store franchisee.
They created the company initially to provide an exit strategy for owners who had been around since the late 1970s and wanted to sell out. For the first two years that separate company bought about 10 Fleet Feet stores from retiring owners.
Then the advisory council got involved with an idea that Phillips calls “genius.” They asked management to also work on a strategy to get some of the superstar employees at the store level on a defined pathway to store ownership.
“And that’s what we did. We created the company, bought some Fleet Feet stores, put operating partners in place with a defined timeline and goals, and they could be in a position to buy the stores.” About 17 stores total have been set up for that purpose, allowing for store ownership for people notoriously short on cash.
The separate company has since been folded into the main corporation, and it’s taking on a greater role in acquisitions for Fleet Feet. Since this summer about six stores have been acquired.
Perhaps the biggest change of all for Fleet Feet reinforced for Phillips the importance of building trust. This spring the private equity firm Investors Management Corp. joined with Phillips and other executives to buy Fleet Feet from the founder.
That worried the franchisees. “People fear change, particularly with an organization like ours. Obviously the biggest concern is, is the management team going to disappear?”
Phillips said they could rely on the “deep personal relationships” built over time with franchisees. The transaction closed May 31, and their national franchise conference was in June, so they had an excellent platform to communicate the change.
The biggest hit at the conference was a series of owners’ forums, in which the executive team would answer any question at all. “Having no agenda—there were some risks in that, but the franchisees appreciated the opportunity.”
But the best feedback came from franchisees after the conference, who commented that even had management not answered their questions so well, they still would have known everything was going to work out OK. “They said, ‘We could see it in all of your eyes, and how you were approaching the conference.’ I thought that was telling, because they were saying we’re reading your body language.
“That was the ultimate compliment, having key franchisees, not just one but several, telling us that they could see it in our faces.”