Dynamic Duos

Franchisers and franchisees establish shared goals to form productive relationships

By Allison Perlik, Senior Editor -- Restaurants & Institutions, 5/1/2003

Carvel Corp. franchisee Irene Macones thought she had a great strategy to boost sales and attract new customers to the venerable ice cream chain: add Italian ice to the menu.

Macones tried for years to sell the idea to the company’s then-owners, but to no avail. When Atlanta-based Roark Capital Group purchased Carvel in late 2001, she saw her opportunity. On the day in early 2002 when she met new President Steve Romaniello, Macones made her case for Italian ice.

“From that day on, he and I moved forward so we could implement Italian ice for the entire franchise community,” says Macones, who operates stores in West Paterson and Clifton, N.J.

Carvel’s quick response to the issue marked the beginning of the company’s renewed commitment to its 250 franchisees. The 400-unit ice cream chain spent the rest of the year building a dedicated franchise support team to revamp the system and prime itself for expansion.

Franchisee-franchiser relationships can work to the benefit of both parties despite inherent conflicts. While the idea may seem simpler in theory than it does in practice, franchisees and franchisers agree that with joint effort, each group can share a common success.

THE BIGGER PICTURE
A certain amount of friction is almost inevitable in dealings between strong-minded parties. In the franchiser-franchisee relationship, the natural conflict between franchisees’ individual business goals and corporate’s view of the bigger profit picture lies behind many such clashes.

“It’s hard to feel like a true entrepreneur when [the company] comes down with [a plan] and you disagree,” says McDonald’s Corp. franchisee Suzanne Conley, who operates six stores in Wheeling, Ill. “But if you really are a true entrepreneur, you do what you have to do and take what they require, fit it into your plan and make it work on both sides.”

Partnering with a large company, especially a multinational giant such as Oak Brook, Ill.-based McDonald’s, can magnify these conflicts. Conley compares the situation to dealing with a small government in which everything is run by committee and consensus.

“It makes it hard to make good decisions sometimes. People tend to agree with [management] versus giving their own opinions,” she says, noting that franchisees may be reluctant to contradict those with the power to help their businesses.

Still, Conley points out that franchisees who do their part and run top-shelf operations earn the ability to be more candid. Like any business arrangement, she says, franchising is a two-way street.

PLAY BY THE RULES
Understanding and respecting each side’s position comes into play in other areas as well.

Lee Sanders, senior vice president of development and franchising for Minneapolis-based Buffalo Wild Wings Grill & Bar, says franchisees don’t always realize that franchisers are regulated by state and federal governments, limiting their flexibility. He cites franchisees requesting exemptions from particular rules or contractual agreements as an example.

“I have to say no, and the reason is that legally we’d have to give that exemption to everybody in the category,” he explains. “Franchisees understand, but it doesn’t change the fact that they can’t get what they want.”

Trusting the benefits of the franchiser’s experience is another key to franchisee success, says Jan Gilbert, executive vice president of Reno, Nev.-based Port of Subs. Likewise, he says, it is the franchiser’s duty to match the system’s goals to those of franchisees.

“The closer you get to a match, the more effective you’re going to be,” he says.

GET IT IN WRITING
Not all problems arise from differences in perspective. Common franchisee complaints stem from such issues as remodel requirements, encroachment and new-development opportunities. The franchise agreement itself offers franchisers the first line of defense against such conflicts.

At Raleigh, N.C.-based Golden Corral Buffet & Grill, franchise agreements define a protected radius for each franchisee operation to avoid cannibalization of sales, says Peter Charland, vice president of franchise operations for the western United States. The agreements also schedule capital improvements so franchisees can plan spending requirements.

To promote fair distribution of new development opportunities, Charland advises companies to create market segmentation maps that project growth. Franchisers then can offer current franchisees in good standing right of first refusal on properties in their geographic areas.

TALK IT OUT
While each of the strategies represents an important building block in the franchiser-franchisee relationship, none can be effective without the one element that holds them together: communication.

“Franchisers must have vision and a strategy, and they’ve got to be able to communicate them effectively to the franchisees,” says Joe Langteau, president and CEO of Westchester, Ill.-based AmeriKing Inc., one of the country’s largest Burger King franchisees.

Advisory councils of franchisees elected by their peers are a common tool to facilitate this interaction. These groups, designed to ensure that every franchisee has a voice in the organization, provide essential forums for resolving problems as well as exchanging ideas.

Some companies establish additional franchisee councils to handle specific issues. At Buffalo Wild Wings, the popularly elected national franchisee association works mainly to address franchisees’ internal issues. A company-appointed, five-member franchise executive advisory council provides the company a sounding board for its own issues and agenda.

David Bear, a 10-unit McDonald’s franchisee based in South Elgin, Ill., says technology allows more channels than ever before for franchiser-franchisee communication.

“I receive at least one e-mail a day from McDonald’s leadership,” he says, adding that the company also maintains a franchisee intranet to provide up-to-the-minute information. “Before, there were times when we would [learn critical information] by reading the newspaper. Now we get the news before it hits the media.”

Bear warns that such methods are effective only if used consistently, with material updated on a regular basis. “If you’re going to use technology, be sure to have the resources to maintain it,” he says.

MAKING CONTACT
Field consultants and franchise executives often serve as franchisees’ main points of contact with a company.

The role of field consultants, typically the primary link between franchisees and franchisers, should be clearly defined from the start. “We train our field consultants to be coaches and mentors as opposed to policemen,” says Port of Subs’ Gilbert. “Obviously, we want to maintain system standards, but our approach is to work in partnership.”

At Carvel, the company recently boosted its field support team by 60% and shifted consultants’ focus to enhancing unit-level economics. The chain also took the idea one step further, tying consultant bonuses to achieving this objective as well as to results from annual franchisee satisfaction surveys.

While field consultants may work more closely with franchisees on an ongoing basis, franchise executives often are franchisees’ initial contacts when joining the company.

“Selling a franchise is very different than selling a car or a toaster,” says Tony Padulo, vice president of new business development and franchise services for Randolph, Mass.-based Allied Domecq Quick Service Restaurants (ADQSR). “It’s not a one-time deal, it’s a long-term commitment. It’s much more a relationship-building process.”

That’s part of the reason ADQSR requires all of its franchise executives to be certified by the Washington, D.C.-based International Franchise Association’s Institute for Certified Franchise Executives within three years of employment. (Padulo currently is pursuing certification along with 23 others at ADQSR; Port of Subs’ Gilbert, Buffalo Wild Wings’ Sanders and Golden Corral’s Charland are certified.)

The program requires 3,500 credit hours in topics such as human resources, franchise trends and site selection.