Three Operators Display Power of the 'Zee at RFDC Panel
Anyone who doubts large, multi-unit operators can wield more power than their franchisors wasn’t at the “success breakfast” featuring three entrepreneurs on the last day of the Restaurant Finance & Development Conference.
Franchisors who want to attract such owners—and who doesn’t?—should note the mindset of such entrepreneurs.
Dennis Monroe of Monroe Moxness Berg law firm, which sponsored the session, teed up his panelists this way. “All three of you are a little bit of a renegade when it came to your franchisor,” Monroe said. “What was your overall experience as a franchisee?”
Mike Scanlon, a former Applebee’s franchisee, was known for doing his own marketing, “which was brilliant, but drove the franchisor crazy,” Monroe said.
Scanlon said he opened store No. 41, and there are about 2,000 of them now. “Applebee’s was a little tiny organization and didn’t have a lot of support, so we did it ourselves. And it took them a few years to catch up and eventually I hate to say this: they got as good as we were,” Scanlon said.
“One thing franchisors don’t understand is one size didn’t fit all,” Scanlon said. “The renegade thing is really about: This is my business. I pay the bills, not you. I’m the customer—I write checks to you,” Scanlon said. “A few didn’t understand that, and those who didn’t, I took them off my phone list.”
Anand Gala grew up in the Jack in the Box system, where his mother was an operator. He became an Applebee’s franchisee at 25 years old. “I learned more there than in any other brand,” he said.
“The experiences that you have going through different brands—at Jack in the Box we had E. coli and 40 percent of sales dropped the next day and stayed there for a year,” he recalled about the infamous outbreak in 1993. “There were lessons learned on how franchisor and franchisee relations should be handled and should not be handled. There were many mistakes made, and many lessons learned.
“What hasn’t changed sufficiently are the attitudes of the franchisors. You can have a rotating” roster of “executives going through the door, who truly believe if they hold a title of vice president or COO,” they are in charge. “The days of command and control are over.”
Al Cabrera was one of the largest Burger King franchisees, and he recalls one era of management that wanted to make operators tow the line over installing a new point-of-sale system. “Then they made the unfortunate mistake of suing me,” he said. “They sued first and talked later. They wanted to make an example, and they made a mistake. They sued me, and I said 'thank you, I’m going to make a lot of money off this lawsuit.' At the end of the day, they paid me money.”
He praised current Burger King management, whose bonuses depend in part on the profitability of franchisees, a practice Cabrera applauds. He said franchisor/franchisee relations ebb and flow based on whether “good guys” or “bad guys” are in charge.
“You may get a good management team that comes in, then a new management team comes in and maybe they’re just bad guys. We’ve seen it all. It’s a wave. It’s an ocean that you’ve got to navigate.”
All three men have sold their operations in recent years, and are on to new ventures but still related to the restaurant business. Asked by Monroe why they stay in the industry despite its challenges, Scanlon summed it up: “I don’t want to give up what I know. It’s still a fun business. It’s still about delighting people.”