Franchise Update Magazine - Issue III, 2013 by Franchise Update Media

Now includes

FranchiseLAW

Franchise update|Q3 2013

BUSINESS INTELLIGENCE FOR GROWING FRANCHISORS

page 67

Lead! What are your brand’s values?

Market! Consumer Marketing Conference sets new attendance records

Grow! Overseas brands

are coming to America

WHAT’S YOUR

DEVELOPMENT CONNECTION?

page 47

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Franchise update|Q3 BUSINESS

INTELLIGENCE FOR GROWING FRANCHISORS

4 From the Editor’s Desk Own Your Audience!

Lead 5.

8 President Profile: Meg Roberts transitions from marketing to leadership 10 CEO Profile: Paul Brown takes the helm during Arby’s revitalization 14 Feature: Anatomy of a Brand At f2o, fast casual + fine dining = “fast fine” 16 Leadership Guru: Aaron’s Greg Tanner says your values are your foundation 18 NEW BRAND: Pat Sajak spins out a new hyper-local deals brand 14

20 Human Resources Tactical or strategic—how does your HR person think?

Market 23.

24 Feature: Franchise Consumer Marketing Conference Marketing mania in Atlanta 28 CMO Roundtable “In your development efforts, how does your marketing team balance automation

with a personal touch?”

30 CMO Q&A BrightStar Care’s Jayson Pearl: growing and protecting the brand 34 Managing Millennials Making sense of the “participation economy” 36 Connecting with Customers How Hungry Howie’s stays current at 40 38 Consumer Data Boost revenue with mobile loyalty programs 24

Grow 41.

42 Feature: Development Connection Griswold Home Care keeps it personal

47.

46 Challenge the Pros “In an era of increasing automation, how do you maintain a personal, one-to-one touch with prospects?” 60 International Overseas franchises are coming to America 62 Sales Smarts Finding the ideal candidates for your system 63 Market Trends Making the connection between franchise fees and unit success 60

64 It’s Closing Time Are you wasting your most powerful development tool?

Franchiseupdate Is s u e III, 2 0 1 3

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From the editor’s desk

Franchise update|Q3 CHAIRMAN Gary Gardner

BY Kerry Pipes

CEO Therese Thilgen President Steve Olson

Own Your Audience!

fter returning from our 3rd annual Franchise Consumer Marketing Conference in Atlanta, I thought about how great it was to spend two days with so many leading franchise marketing executives. They are energetic, passionate about their brands, and they love the challenges and constant change in what they do. That positive energy rubs off on everyone at the event, and continues long after the conference is over. This year’s theme was “Own Your Audience,” and 320 attendees headed for home eager to put that energy into practice (see page 24). I can’t wait to see how much more this conference grows next year! Marketing plays a significant and expanding role in franchise development. It can help get a new brand off the ground, establish and increase brand awareness, rebuild or reposition a brand, and recruit new franchisees and support existing ones. In this issue, we profile Molly Maid’s Meg Roberts, who began her career in advertising and marketing and is now applying those skills as president of the brand; and Paul Brown, who took over as CEO at Arby’s this past May. Both spoke about the synergy and importance of marketing as it relates to brand development strategy. Roberts and her crew have their minds on brand expansion; Brown and his team have been working on revitalizing the brand, which turns 50 next year. Starting a new brand is always difficult and fraught with peril. Fresh To

Franchiseupdate Iss u e III, 2 0 1 3

Order (f2o) founder Pierre Panos—a successful upscale restaurateur and one of the country’s largest Papa John’s franchisees—discusses how he researched, created, and is now expanding this unique “fast-fine” dining concept. In part 1, he lays the groundwork for the brand’s emergence; next time he will discuss the nuts and bolts of making it work. Technology continues to be an important and evolving topic in franchising—especially as it relates to marketing. I witnessed this trend at the conference, and it’s represented here in our CMO Roundtable. Two marketing directors— Heather Anderson at Little Gym and Gillian Maffeo at Jake’s Wayback Burgers—discuss how they balance the benefits of marketing technology and automation with maintaining a personal touch. As we’ve heard many times in these pages, nothing replaces the importance of one-to-one interaction and relationships. Our cover story is a case study featuring a revitalized, 31-years-young Griswold Home Care on the value of transparency, clarity, and openness—along with lots of face time—at every step of the franchise sales process, from qualification through discovery day and signing. Also in this issue: Pat Sajak discussing his new franchise brand; Millennials and the “participation economy”; international development; FranchiseLawNews; and much more. Whether you’re in franchise leadership, development, operations, or marketing, you will discover something in these pages that will help you own your audience! n

Vice President Operations Sue Logan Vice President Business Development Barbara Yelmene Business Development Executives Jeff Katis Judy Reichman Executive Editor Kerry Pipes Managing Editor Eddy Goldberg ART DIRECTOR Franchise Update media group Samantha Calden DESIGN & PRODUCTION FRANCHISE UPDATE MAGAZINE www.petertucker.com Internet Content Manager Benjamin Foley Sales and Subscription Department, Office Manager Sharon Wilkinson Project Manager, Media and Business Development Christa Pulling Contributing Editors William Edwards Tom Epstein Darrell Johnson Jeff Fromm Marc Kiekenapp Jack Mackey Steve Olson Bill Wagner CONTRIBUTING WRITERS Debbie Selinsky Helen Bond Advertising and Editorial Offices Franchise Update Media Group 634 N. Santa Cruz Ave., Suite 200 Los Gatos, CA 95030 Tel: 800-289-4232 Fax: 408-402-5738 Send manuscripts and queries about story assignments to: editorial@fumgmail.com franchising.com franchiseupdatemedia.com franchiseupdate.com mufranchisee.com Franchise UPDATE magazine is published four times annually. Annual subscription rate is $39.95 (U.S.) For subscriptions email sharonw@franchiseupdatemedia.com or call (408) 997-7795 For reprint information contact Foster Printing at 800-382-0808 www.fosterprinting.com

Lead

Franchise leadership and management 8

8 President Profile: Meg Roberts

Meg Roberts transitions from marketing to leadership

10 CEO Profile: Paul Brown

Paul Brown takes the helm during Arby’s revitalization

14 Feature: Anatomy of a Brand

At f2o, fast casual + fine dining = “fast fine”

16 Leadership Guru:

Aaron’s Greg Tanner says your values are your foundation

18 Feature: New Brand

Pat Sajak spins out a new hyper-local deals brand

20 Human Resources

Tactical or strategic—how does your HR person think?

Franchiseupdate I ss u e I I I , 2013

By Dallas Kerley, Chief Development Officer

Successful Funding Strategies: How to get the equity injection you need to obtain a SBA Loan. Benetrends has been helping people achieve the American dream of business ownership for more than 30 years. With so many options for funding a new business, entrepreneurs come to us to help them navigate the many options and design the best funding program for their individual needs. One common concern we are often asked to address is “where can I get the money I need for an SBA Loan”? Several requirements need to be met in order to obtain an SBA loan. One of the most important is demonstrating that you have sufficient “Skin in the Game”. Usually this means that in addition to having sufficient collateral, lending institutions want you to provide a 20% to 30% capital injection to qualify for a loan. Entrepreneurs often find they don’t have sufficient savings to meet this equity injection requirement and therefore need to look at alternative sources for the funds. In light of this, two of the more popular ways to acquire these funds, has been using either 401(k)/IRA Rollover funding or a Securities Backed Loan. 401(k)/IRA Funding In recent years, over 10% of franchisees have used 401(k)/IRA Rollover funding as part of their funding strategy. It’s easy to see why Retirement Plan Rollover funding has become so popular. Due to the significant tax advantages, many entrepreneurs have the majority of their savings locked away in retirement plans such as IRA’s and 401(k)’s, which carry severe penalties and tax consequences for early withdrawal. For example, if you have $200k in an IRA or 401(k) and take an early withdrawal, you may be required to pay a 10% penalty and as much as 30% in ordinary income taxes, leaving you with only $120k of your original $200k. However, by employing a popular program known as a 401(k) ROBS (rollover for business startup), those funds can be used to provide the required capital injection for your SBA loan, both tax deferred and penalty free. While this program when used in conjunction with an SBA loan has proven to be a successful combination for funding a new franchise, many entrepreneurs utilize the retirement plan rollover as

the sole method of funding their new franchise, thereby avoiding the need for any type of loan. Securities Backed Loan Another popular strategy to acquire the needed capital for a loan, involves using a Securities Backed loan. This type of loan is similar in concept to a home equity loan, except the loan is backed by securities held in an investment portfolio, rather than the equity in your home. In many cases, this program makes more sense than selling your stock to raise the needed capital for your equity injection, because the cash needs are satisfied without disrupting investment strategies, asset allocations or creating unexpected tax consequences. Securities backed loans have both favorable interest rates and easy terms. Your credit score is not a factor in qualifying for a loan, the interest rate is usually lower than a home equity or SBA loan, you typically receive an approval within 48 hours and the funds within ten business days. There are other advantages to consider as well: the investments in your portfolio remain in your name and don’t need to be sold; therefore, you avoid paying capital gains on your low cost basis stock. You also can trade within your portfolio and you keep all the appreciation and dividends from your portfolio as it grows. Maximum loan amounts ordinarily are 70% loan to value, so for example if you have a $200K investment portfolio, you would qualify for a $140K loan. With these advantages, instead of selling their investments when they need funds for their businesses, more and more entrepreneurs are holding on to their investments, allowing them to grow and using this program to fund their business needs. This article addresses only two of the many different strategies available to get you the funding you need for your new business. Benetrends has proven and innovative funding strategies that make the most of opportunity, while minimizing risk and a legacy of success that goes back decades. When you work with Benetrends, you have the peace of mind, knowing you are working with the best possible partner for taking your business growth to the next level.

Article sponsored by BENETRENDS

Untitled-1 1

5/28/2013 4:07:49 PM

Grow Market Lead

CEO profile: Positive Change Molly Maid’s Meg Roberts: from marketing to president By Kerry Pipes

eg Roberts says her entry into franchising occurred when her professional career path unexpectedly changed direction. The Michigan native always thought she would be in the advertising business: she studied it in school and went to work for one of the largest ad agencies, BBDO in Chicago, eventually working on major accounts such as Wrigley. The high stress and long hours were not conducive to a family and any life outside work, so Roberts moved back to Michigan… not far from Molly Maid’s headquarters. She knew someone who worked there, one thing led to another, and in 2007 she became director of marketing for the 30-year-old brand. “One of the things that I came to realize very early on was that franchise marketing is much more complex than consumer retail marketing,” she says. “You don’t only have a brand marketing strategy, you also have to work with and influence the franchisees so that everyone is on the same page and executing effectively.” At Molly Maid, Roberts didn’t waste any time putting her marketing acumen to work. She introduced a customer-building online marketing campaign, driving up leads by more than 150 percent in 2010, and she channeled resources into social media. Under her leadership, Molly Maid notched double-digit sales growth three consecutive years. In 2011, she was promoted to vice president of marketing for Molly Maid and Mr. Handyman (Service

Franchiseupdate Iss u e III, 2 0 1 3

Name: Meg Roberts Title: President Company: Molly Maid, Inc. Units: 256 Age: 40 Family: 2 sons, Luke 10, and Erik 7 Years in franchising: 5 Years in current position: 1

Brands International owns Molly Maid, Mr. Handyman, and ProTect Painters). She and her marketing team continued to fine-tune their online strategies and consistently increased website traffic and, most important, leads to franchisees significantly year over year, racking up quite a reputation in the process. Last year Roberts was named president

of Molly Maid. Roberts says her marketing background continues to influence her management style, but “I’ve discovered that I’m more of a motivator than a marketer,” she says, favoring a collaborative approach to leadership and working closely with her team at corporate. For example, she and her team dug into customer demographics and other data and discovered about 200 additional territories they think they can build out. They’re also turning to technology to ensure they’re ready to meet the emerging Millennial customers on their terms. “We’ve been refining our web presence, capitalizing on social media, and upgrading our technology to provide better service,” she says. Roberts hopes these ongoing initiatives will help the brand add at least a dozen new franchisees each year. In fact, she says, “I’d like to sell a couple of dozen this year.” Sometimes, changing lanes takes you exactly where you need to go. LEADERSHIP What is your role as president? To

lead a diverse staff and diverse franchisees with precise goals and strategies. The ultimate goal is system satisfaction! Describe your leadership style. Re-

spectful, clear with high expectations, and fun-spirited. What has inspired your leadership style? Being part of winning athletic

teams, which taught me teamwork, leadership, and the concept of togetherness. What is your biggest leadership challenge? I struggle at times with bal-

ancing the long-term strategic vision with “get it done now” priorities. How do you transmit your culture from your office to front-line employees?

Respect all team members as contributors, “clients,” and collaborators.

Exercise in the morning? Wine with lunch? Exercise always, wine rarely.

How has the economy changed your goals for the company? Our goals

Definitely on-the-job training. With the right mentors and team members, on-the-job training provides all kinds of exposure.

For me, there’s no better pair than cold beer and college football!

remain unchanged but our focus on franchisee profitability, technology to improve efficiency, and gold-standard service is even more precise.

Are tough decisions best taken by one person? How do you make tough decisions? Collaborative decisions

thing from exercise to travel.

Where can capital be found these days? Capital appears to be loos-

are great. Still, never take credit for the good yet always be willing to “own” the bad.

Last two books read: All Things at

Once by Mika Brzezinski, and In the Woods by Tana French.

ening, though it is still not what it was five years ago. Local bank loans, retirement funds, and savings are often combined to provide financing.

Do you socialize with your team after work/outside the office? Yes! Every-

Do you want to be liked or respected?

What technology do you take on the road? I never travel without my

How do you measure success?

Absolutely respected.

smartphone.

Obviously sales are the essential

How do you relax/balance life and work? The best work/life balance

includes quality time with the kids and daily exercise.

numerical metric of success, but system satisfaction, attitude, and positivity are key. You feel this more than measure it.

Favorite vacation destination: Sul-

What has been your greatest success?

livan’s Island, S.C.

Contributing to growth, whether in personnel development, franchise business success, or my former contributions to marketing. Helping someone or something grow is truly satisfying.

Grow Market Lead

Where is the best place to prepare for leadership: an MBA school or OTJ?

Advice to CEO wannabes: There are

no truer words than “No one cares how much you know until they know how much you care!” MANAGEMENT Describe your management style:

Laid back as a result of being highly organized and very clear about high expectations. What does your management team look like? The best “motley crew”!

We have leaders and champions of IT, marketing, operations, and franchise development. How does your management team help you lead? Required: account-

ability, respect, and collaboration. Not required: consensus. We challenge each other. Favorite management gurus/books:

Favorite occasions to send employees notes: Always!

John Maxwell, The 21 Irrefutable Laws of Leadership.

Favorite company product/service:

What makes you say, “Yes, now that’s why I do what I do!” When my team-

mates say they love their jobs and when our franchisees say owning their own business changed their lives! PERSONAL What time do you like to be at your desk? Before everyone else, typi-

cally 8:15 a.m.

You just can’t beat good Target shopping “therapy!” I also love Greek yogurt.

Any regrets? Sure, but if you learn

BOTTOM LINE

from regrets and mistakes then they are lessons. Always focus on the upside.

What are your long-term goals for the company? They include continued

What can we expect from your company in the next 12 to 18 months?

growth and satisfaction for existing franchisees, as well as reinvigorated sales of great territory to further the brand and service availability.

Increased energy, increased visibility and branding, and increased speed to franchisees with technology advancements. n

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead

CEO profile: New Kid in Town CEO Paul Brown on Arby’s spirit of revitalization By Kerry Pipes

ast May Paul Brown made a bold move. He left his hotel management career to move into the food service arena, taking over as CEO of Arby’s. It’s a move Brown was well prepared to make: he has extensive experience and a proven track record in leading global and franchise brands including Hilton Worldwide, Expedia, and InterContinental Hotels Group. “What I have learned throughout my career in franchising is that it is really a competition for capital,” says the 46-year-old. “If a brand provides a great return on investment for franchisees, they will continue to invest and build with that brand.” Brown says he loves the franchise business because it’s a “relatively straightforward virtuous cycle.” He sums it up like this: franchisees make a great return, franchisees invest and build more units, franchisor makes a great return, franchisor invests more in the brand, and begin again. He believes the value proposition at Arby’s is at the intersection of the QSR and sandwich spaces. He says this a great place to be at this time: Arby’s provides high-quality hot and cold sandName: Paul Brown Title: CEO Company: Arby’s Restaurant Group, Inc. Units: 3,400+ Age: 46 Family: Wife Lisa; daughter Kelsey, 18, attending college in the fall; son Alex 14, entering 9th grade Years in franchising: 8+ Years in current position: Since May 2013

Franchiseupdate Iss u e III, 2 0 1 3

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Grow Market Lead

wiches, shakes, and fries, freshly prepared, served fast, and at a great value, and also is the only national sandwich brand that offers drive-thru service. The ability to handle such a complex product offering consistently and efficiently across 3,400 units globally is a big competitive advantage, one that he says the brand intends to continue to build on going forward. There’s been an active revitalization going on at Arby’s (see Franchise Update, Issue IV 2012, p. 18; and Issue I 2013, p. 14). Arby’s has had 10 consecutive quarters of positive same-store sales. Since 2005, the brand has opened an average of 85 stores per year globally. And midway through 2013, the brand has future development commitments for 177 new units (109 U.S., 3 Canada, and 65 international); all are signed commitments and scheduled to open by 2022. “We seek out franchisees with high expectations who want to play to win, every day. We have such an exciting, iconic brand. It’s important that our franchisees share that enthusiasm,” says Brown, who is excited to join the team at Arby’s. Some of the brand’s franchisees have been with the brand more than four decades, demonstrating the kind of loyalty and passion that he sees as fundamental to sustaining growth.

At Arby’s, our team members live our culture every day. Our brand values shine through in our restaurants, and we plan to continue to build on this amazing culture.

your office to front-line employees?

me a breadth of experiences working with businesses with various needs. I would describe my leadership style as adaptive, thoughtful, decisive, and analytical. I believe it’s important to take time and get to know the business—its customers, employees, and all other major stakeholders. I feel it is important to be thoughtful and listen as a leader, as a “one-size-fits-all” approach does not work in business and leading others. I like to work hard to get to know the members of my team and understand how they would like to be led and understand their working style. Different groups have different needs and everyone doesn’t want to be managed the same way.

foundational skill set. However, nothing can substitute for on-the-job learning about leadership.

LEADERSHIP What is your role as CEO? My goal

is to lead Arby’s through its continued revitalization, building on our currently strong sales performance and momentum and helping the company and our franchisees realize the full potential of the Arby’s brand. My objective is to also work collaboratively with franchisees and Arby’s leadership to enhance the company’s culture, systems, and processes to further innovate Arby’s product offerings, improve the customer experience, and achieve strong financial results for all stakeholders. Describe your leadership style. I

have worked in a wide variety of global industries, including high-tech, consulting, and hospitality. These have given

Franchiseupdate Iss u e III, 2 0 1 3

What has inspired your leadership style? Trial and error has certainly been

a factor. It is the benefit of a relatively long and varied career. I think because I have worked for some great leaders in various cultures and situations, I am able to apply those lessons learned along the way as best practices in leadership—for example, my time leading Hilton’s efforts to build the strongest portfolio of brands in the hotel sector and helping Expedia maintain fast-paced marketing and branding efforts to stay ahead of the competition. Each of these experiences provided valuable lessons in leadership that will be applied to help Arby’s with our goal to win every day with our customers. How do you transmit your culture from

It all starts with talking about culture with front-line employees and making it a routine topic of discussion. Keeping the subject of culture top-of-mind and truly “living” your culture day in and day out keeps your culture strong and vital. At Arby’s, our team members live our culture every day by delivering our brand promise to the customers they serve. Our brand values shine through in our restaurants, and we plan to continue to build on this amazing culture. Where is the best place to prepare for leadership: MBA school or on the job? An MBA degree can help build a

Are tough decisions best taken by one person? How do you make tough decisions? One person has to be ac-

countable but decision-making should be a collaborative process, relying on input from subject matter experts around you. However, ultimately, someone has to make the call. Good leaders should strive to develop a culture of collaboration within the organization but always be willing to make the tough decisions. Do you want to be liked or respected?

I don’t believe there has to be a tradeoff. Ideally, you can be both. Regardless, you have to make tough decisions that not everyone will like all of the time. This is obviously part of being in a leadership role. Advice to CEO wannabes: Be patient.

Take the time to make sure you have the necessary experience so you’re adequately prepared for the job. MANAGEMENT What does your management team look like? Arby’s is fortunate to have

a fantastic leadership team with deeprooted experience, each of whom has tremendous loyalty to the brand. How does your management team help you lead? They are all experts in

in the morning before work.

professional level.

Do you socialize with your team after work/outside the office? Yes, I believe

Favorite company product/service:

Favorite management gurus/management books? I actually prefer Har-

interacting in a casual setting outside the office is valuable to help get to know your team on more of a personal level.

vard Business Review articles to business books. However, I did recently read and enjoy a book titled The Advantage by Patrick Lencioni. It’s all about the importance of overall organizational health. I do enjoy reading books by Thomas Friedman. His book The World is Flat is a must-read in my opinion. I also just finished reading Grinding It Out by Ray Kroc. PERSONAL What time do you like to be at your desk? 6:45 to 7:00 a.m.

What technology do you take on the road? Apple MacBook Air and iPhone.

Arby’s Reuben sandwich is my favorite at the moment and nothing can beat our Curly Fries. However, we have several others in the product pipeline that may soon become my new favorites. Be on the lookout for them soon! BOTTOM LINE

How do you relax/balance life and work? I enjoy spending time with fam-

ily. We love to travel together. I also enjoy taking long walks with my dogs early in the morning on the weekends. Favorite vacation destinations: South-

east Asia and Vietnam are amazing. I also love Italy, Egypt, and the south of France.

Exercise in the morning? Ideally, I

Favorite occasions to send employees notes: When something ex-

like to work out three times per week

traordinary happens on a personal or

Grow Market Lead

their respective fields and bring a wealth of knowledge, experience, and stellar advice to help make sound decisions that are in the best interest of Arby’s.

How has the economy changed your goals for your company? Arby’s is per-

forming very well right now, so we’re planning to use this as an opportunity to grow market share and be positioned to make investments in the business to help position us for the future. How do you measure success? Our success and growth as a brand depends on the growth of our franchise system. For that to happen, we must grow sales, transactions, and margins. n

ISSUE 4 OF 2013 ADVERTISING

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OctOber 4th, 2013 Call (800) 289-4232 ext. 202 - or email sales@franchiseupdatemedia.com to reserve your ad space!

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead

FineFood Anatomy of a Brand By Pierre Panos

Served Fast

Building a genre-bending concept from original ingredients

t Fresh To Order (f2o), guests experience a unique offering—flavors and service inspired by fine dining served at a fast casual pace—and at fast casual prices. We created both the concept and the category niche, which we call “fast-fine.” Our eight locations across Georgia and Tennessee serve flavorful, fresh, and affordable favorites in 10 minutes for around $10 per person. Diners have embraced the new offering, and our restaurants have experienced doubledigit same store sales growth for the past Pierre Panos three years—although, in 2000, when I began contemplating a restaurant concept that fused the speed and inherent benefits of fast casual with the flavors, ingredient quality, and service level of fine dining, f2o seemed like a “crazy idea.” At the time, fast casual concepts were not yet the mainstay of dining that they are today. Most meals under $10 and served under 10 minutes were either a burger and fries or chicken with biscuits. While Wikipedia now lists 65 restaurant concepts in its fast casual category, back in 2000 breakthrough brands such as Chipotle or Panera Bread were just beginning their growth trajectory. Nonetheless, I remained committed to the concept and embarked on

Franchiseupdate Iss u e III, 2 0 1 3

an educational journey that would ultimately lead me to become one of the largest franchisees of Papa John’s pizza chain, owner and operator of a fine casual restaurant called Brookwood Grill, and founder and franchisor of my “crazy idea”—Fresh To Order. We are currently staged to double the number of f2o units by 2014 and are planning our expansion throughout the Southeastern, MidAtlantic, and Midwestern states. My educational journey didn’t end with a Ph.D., MBA, or baccalaureate degree. Rather, I learned three valuable lessons, which I’m happy to share with the many emerging franchisees interested in making their mark on the restaurant industry. I. Learn from the best

Back in 2000, as I chewed on the concept of fine dining served fast, I recognized gaps in my own experience. Though I’d been in the restaurant business my whole life (I began helping in my family’s restaurant when I was seven), I had worked primarily in fine dining. Furthermore, my operational experience was

limited to independent restaurants. To bring a completely new concept to market, I knew I’d need to first understand my product, so I set about researching the quick service and fast casual industries. Second, I’d need to understand how to attract and build passionate franchisees who could help me expand my revolutionary concept throughout the country. So I set out to learn, and I wanted to learn from the best. I studied every restaurant franchise available in the quick service category—their financials, franchisee satisfaction ratings, and staying power. Why? Because I knew my concept had to promise strong financials and an infrastructure that attracted and retained franchisees; serve a product that would build a loyal, national customer base; and deliver a sound return on investment. In 2001, I found my “franchising university” in Papa John’s, the world’s third-largest pizza company. At the time, and still today, the brand was ranked top among franchisors based on its financial strength and stability, growth rate, and overall franchisee satisfaction. I formed a holding company with an investor, called QS America, and then set to work. Looking back at my early years as a franchisee, I can say

the key elements of my education included the following: 1) Understanding the customer. The quick serve customer has different wants and needs than a fine dining customer. The one thing they do have in common? They are always right. The best advice I ever received was, “If you win an argument with a customer, you still lose.” 2) Delivering quality food fast. At Fresh To Order we deliver dishes with the taste profiles and quality of fine dining to our customer’s table within 10 minutes for about $10. My experience as a franchisee taught me how to

marry cost, efficiency, and quality to the benefit of the guest. 3) Supporting franchisees. Papa John’s created a powerfully effective infrastructure that supports the development, operations, marketing, and financing of its franchised units. Being a franchisee and having that exposure for so many years has enabled me to see the business from both sides and to understand clearly that franchisees are partners in our business. We need them to succeed and vice versa—that way, we all thrive. 4) Managing growth. Many franchise concepts have failed because of excessively rapid growth. At Fresh To Order, we set growth projections and open new markets at a rate that is appropriate for our brand. Growing at the just right rate will allow our franchisees to succeed. I had learned from others, joined the franchising world, and formed a holding company. Now it was time to

go to work. Next time I will share the nuts and bolts of how we have made Fresh To Order work. n Pierre Panos, a South African native of Greek decent, has founded three restaurant concepts in his nearly 30-year career in the industry, including a fast food mobile vending concept in South Africa at the age of 24, and Stoney River Legendary Steaks. Today he owns Brookwood Grill and is one of the largest Papa John’s franchisees in the U.S. He founded Fresh To Order in 2006, positioned to grow to 50 corporate and franchised locations by 2015. He lives in Atlanta with his wife and three children.

Top Lead-Generation Sources for Achieving Growth in 2013 Franchise Update’s 2013 Annual Franchise Development Report is the only franchise sales and lead generation benchmark report available in franchising. Order nOw contact Sharon wilkinson: (800) 289-4232 ext. 202, sales@franchiseupdatemedia.com

Right Market. Greater Results.

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Leadershipguru: Greg Tanner

What Are Your Values?

wonder if franchise leaders understand how important values are to attracting the best-fit candidates to their business and to ensuring the success of their franchisees. We hear franchise prospects asking, “How does the business work?” and “How will I make money?” but I can’t remember in my 40 years in this business more than a handful of would-be owners asking, “What are your values?” And just because they don’t blurt out the question doesn’t mean it’s not a high priority. I would put values near the top of candidates’ lists of criteria when investigating a franchise business. It should be obvious, but why are values important to prospects? Well, they’re not buying a tube of toothpaste. They’re investing their life savings, their retirement accounts, possibly a second mortgage in your business. It’s one thing if they fail; it’s another if you fail them. They can’t afford your scandal, impropriety, deceit, secrecy, and indifference. Values are the foundation for your business. They provide the structural integrity for your business model, training, systems, support, and, most important, your corporate culture. Without

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values, you have no basis on which to recognize problems, surface solutions, and make decisions. You may be selling a brick-and-mortar franchise, but it’s the shared values of your people and the soft touch of the relationships that hold it all together. I’m not much interested in the adage, “Leaders are born; not made.” My starting point is what are leaders doing today and where do they plan to take their organizations tomorrow? Given that, if the person at the top hasn’t articulated and consistently communicated a set of values throughout the franchise system, well, they don’t qualify as a leader. In a franchise system, motivating a “herd of cats” is a delicate and essential skill. You may have the title, but how you motivate others to reach common goals is greatly influenced by the values you demonstrate in your deeds. Another adage that doesn’t work in our business is “Do as I say, not as I do.” A franchise leader has to set the example. My adage is that “Franchisees follow what they see, not what they hear.” I recently wrote a book of “Tannerisms”—a collection of thoughts and observations I’ve experienced as a franchisor, franchisee, and franchise development executive. My purpose was to help anyone interested in owning their own business make the right decision. Aligning with the values of a franchise system is an important step in the decision-making process. I’m not going to tell you what your values should be—your values are your values. What I will share is a set of values that I’ve heard from thousands of franchisees across hundreds of franchise businesses: • Integrity. Franchisees want to follow someone (and people) they trust and depend on. With trust comes accountability and transparency. • Moral code. Set and maintain high standards for conduct within the organization, in interactions with vendors, and throughout the communities you serve. • Inspiration. Cause others to take

action because they can envision the desired results and benefits of their efforts. • Gratitude. Create a positive workplace where good work is appreciated, acknowledged, and rewarded. “Thank you” is a powerful expression. • Relationships. A franchise is like a family: We may be independent thinkers, but it’s how we work together and our collective brainpower that fuels our mutual success. • Respect. Everyone can and wants to contribute. A pillar of our strength depends on the free exchange of ideas and working harmoniously. • Winning. It’s an attitude, a reason for owning a franchise business and working hard, and a reward for being dedicated to succeeding. You have your values. You’re living them every day. Your corporate team and franchise owners follow your lead. But when I said to communicate your values throughout the system, implicit in that reach must be your front-line personnel: your receptionists, cashiers, customer service representatives, and phone qualifiers. They represent you and are the first to interact with people who want to give you money. And, it’s more than people. It includes your logo, website, advertising, public relations, cars, vans, trucks, product and service quality, warranties, guarantees, on-hold message, and everything you do, because how you show up to your franchise owners and their customers says what you’re about. Being the leader of a franchise is a big job and comes with much responsibility. Whatever your strengths are—marketing, engineering, technology, accounting, law, or sales—put yourself on solid footing and your team on the right path with a set of values that reaches all corners of your organization. n Greg Tanner, Aaron’s national directorfranchising, has been in franchising for 40 years. He is an Atlanta native, Vietnam-era veteran, and dedicated IFA VetFran committee member.

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NEW Brand By Kerry Pipes & Steve Olson

Pat Sajak’s

Great American

Deal

TV game show host co-founds hyper-local deals franchise

at Sajak has been hosting TV’s “Wheel of Fortune” for the past three decades. Now he’s playing host to a new franchise concept. Great American Deals is a variation on the daily deal concept made popular by Groupon, but brand co-founder Sajak says it’s unique because it builds a community of connections between local business owners, consumers, and franchisees. The goal is ongoing customer loyalty and lasting relationships—all at the local level. Franchisees don’t need real estate or a lot of equipment with this home-based concept. Start-up costs range from $49,500 to $71,250, which includes a $35,000 franchise fee. The brand also donates $1 from every customer purchase to local

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schools and nonprofits. Sajak says Great American Deals comes down to building relationships with business owners throughout each community and becoming a true ambassador of the brand. It’s about reaching out, telling the story, establishing rapport, and becoming a go-to source for not only the best deals of the day, but also pertinent information about the community. We sat down with Sajak to find out more about the new brand and his involvement. Why get involved in this franchise? Our show, “Wheel of Fortune,” has been on for 30 years and it still continues to amaze even me. I would feel odd about sticking my name on a cereal box. I’ve never endorsed anything, because I always felt squeamish about it. However, my partner Michael looked at this new thing called Groupon when it came along, which intrigued me. What can we do that they are not doing? What’s the next step in the evolution of this business? How can we refine it? The attractive thing is, it parallels what we do on the TV show. Our marketing slogan is “We’re

America’s Game.” With the daily deals, I have never seen such a concept that has so many potential winners. We can make our mark in a special way about this. People can get into this business for a relatively low entry. The fact that their local businesses benefit is attractive to me. The fact that the local community benefits is attractive to me. It says a lot about this country, and the strength of our communities. I like the philosophy of it.

as possible. It’s a proven business, but we don’t know the upper end yet. The system works, and we are not inventing a new product. It’s about the sales savvy you have. Our franchise partners don’t have to think about the nation. They think about their community. The investment is relatively modest, without the traditional headaches of brick and mortar. You can be up and running overnight. It’s an excellent way to get involved in a proven field.

How is Great American Deals different? The big guys try to localize. Just for fun, I googled Groupon. In my community there were no deals, yet there were several that were 30 miles away. We’re not just joining the cluttered space, it’s cutting out our own niche. We can do things the big guys can’t do.

Any unexpected surprises? We’re pleasantly surprised at the level of sophistication of those who have come to us and grasp what we are doing. I was gratified by the enthusiasm for their communities and the giveback aspect of it. Our franchisees are motivated.

Where do you want to take this? What’s your vision? We want a nationwide network of successful franchisees. On “Wheel of Fortune” we run a segment about changing lives. We see people helping other families and starting charitable foundations. We share these stories. We can change lives with Great American Deals, as we also give back proceeds to the local communities from our daily deals. What is your smartest mistake? Getting involved in Great American Deals. My friends questioned me since there are two giants in the industry. Conejo, California, has been a great test market for us. It’s not just the franchisees who are selling deals, it’s the merchants spreading the word to other businesses because they are having success with it. Why franchising? It’s the only way you can do something national on a local level. Every community is unique. Franchising makes a great deal of sense. We are hyper-local. The best way to accomplish what we want is through franchising. What is your current progress for launching your program? We have been building community

Steve Olson and Pat Sajak

databases in our first markets and 11 franchisees have now signed with us. Describe your giveback program. It’s not tangential to what we are doing, it’s central to what we do. One dollar from every daily deal sold is donated to a local community organization. We had a school principal who wanted to tell people how they benefited from this. It’s great to see this enthusiasm. Everybody is suffering from setbacks. They don’t succeed if their community doesn’t succeed. Schools are so appreciative about our giveback program. If a school is benefiting and the students are benefiting, they become your customers. And they know every time they buy something they are helping their own school. All that goes around comes around. What’s your role in Great American Deals? It’s still evolving. This is not a passive investment, as I will have an active role and am anxious to do it. My mug is known for better or worse, and can help us get noticed. I’ve started with interviews on business radio stations to start building the brand for Great American Deals. I’m like the “Dave Thomas of Daily Deals.” We want potential franchisees to know who we are. Describe your franchise program. It’s a turnkey program as much

Any concerns you may have? I want people to succeed. One of the reasons we have gone so slowly is we don’t need to take checks from people. I would feel dreadful if we get people aboard and they don’t know how to paddle. Their failure would be my failure. With a reasonable amount of diligence by the franchisee it can work for them. I value the trust that people have in me, and their perception that I’m a “good guy.” It really needed to be demonstrated to me that our concept was viable, and that the chances of success were better than average. And I’m very comfortable with that. I’m very confident you can succeed with this. In the past I have avoided making recommendations. As an example, I don’t make political endorsements—if you are going to choose a presidential candidate based on what a game show host says, you probably shouldn’t vote anyway! Now I’ve found something I truly believe in, an opportunity that can make a difference in people’s lives. I know, as hokey as it sounds, that it’s not just the success of the franchisees, it’s the success of the businesses they’re serving and it’s the success of the schools and the organizations that will benefit from this. Anything else you’d like to add? No, except would you like to become a franchisee? n

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead

Human resources

By Bill Wagner

Tactical or Strategic? How does your HR person think?

ow many strategic initiatives has HR brought to the “C level” in the past 12 months? Your answer to this question tells us if you have a tactical or a strategic thinking HR person. Perhaps the more important question is, what type of HR person does the position require? A strategist can think and handle tactical applications, whereas a tactician really struggles with strategic thinking. If your company has one HR person, it is better for that person to think big picture. That person also should report directly to the CEO and, in my opinion, be part of the executive team. Given the expense associated with people, the impact this position has on your clients, and the need for continuous improvement, HR should not be the responsibility of a person lower on the food chain. When it comes to human capital, the following items are a few that fall within the purview of HR and are both tactical and strategic. The following lists delineate the responsibilities and actionable items for each.

most critical aspect of one’s personality. 2) Selection (job-fit analysis) for all positions. Simply stated, this is the comparison of the individual’s personality compared against the requirements of the position. In essence, we measure what each seat on the bus requires and compare that against the behavioral attributes of the incumbent or the applicant. Are they the right person for that seat?

5 tactical applications

3) In-depth training for all positions. People learn differently based on their personality. We just hired two new sales people for slightly different roles. Because of the nuances of their personalities, we’ve crafted a different training program for each. 4) Bench strength assessment. It is essential to survey the personality of every employee to identify potential future leaders and possibly fast-track them.

1) Position benchmarking. Do we understand the skills, education, experience, and personality required for all positions? We have a job description, but we also need to know the requirements of the position. A brief example is franchisee selection. We look at an applicant’s finances, but not necessarily at their results orientation based on their personality. This is perhaps the

Franchiseupdate Iss u e III, 2 0 1 3

If we train our people, the worst thing that will happen is they will leave. If we don’t train them, the worst thing that will happen is they will stay.

If we don’t, they will still become leaders, they will just do it somewhere else. 5) Training and development for all employees. If we train our people, the worst thing that will happen is they will leave. If we don’t train them, the worst thing that will happen is they will stay. 5 strategic applications

1) Succession planning. Part of any business plan is an exit strategy. Whether your exit strategy is an ESOP or outright sale, ask yourself the following questions: How many direct reports do you have? How many think and behave strategically? If your direct reports submitted their resignations tomorrow, based only on their performance would you accept or fight to keep them? If you were going to start an identical company 5 miles away and could take as many of your direct reports with you, how many would you take? When you go home, how many days a week are you emotionally tired? Your answers to these questions tell you the state of your executive team and your own health. When we don’t have the right people in the right seats on the bus, the onus of responsibility falls back onto our shoulders; and we worry about or are handling the things our team stinks at. That is why we are so tired every day. We always know who we have issues with; we rarely understand why the issues exist, what to do about them, or how to fix them. 2) Leadership development though 360° feedback. We spend our lives attempting to master the gaps that exist between who we are and the requirements of our position. The benefit of a 360° review process is that it is focused on the gap or differences between your perception of your performance and the perception of your manager, peers, and direct reports. (To see what your own gaps are, email kim@accordmanagementsystems.com with the word “GAP” in the subject line and we will send you a survey.) 3) Self-development action planning and accountability. For every behavioral strength there is a corresponding and diametrically opposed

It’s impossible to have a great company with mediocre people. But with your adoption of the right systems, concepts, ideas, techniques, and technologies you can grow your company to greatness.

position, the personalities of each employee, their 360° results, and an employee engagement survey. This clearly and objectively defines our A, B, and C players and provides an action plan on how to take the company from the proverbial good to great. It’s impossible to have a great company with mediocre people. But with your adoption of the right systems, concepts, ideas, techniques, and technologies you can grow your company to greatness. Oh yeah—the entire concept of a strategic HR person. If they don’t drive these strategic initiatives, who will? n

Grow Market Lead

challenge. The more and better we understand each, the easier it is for us to mitigate our edge, improve our attention to detail, etc. 4) Employee engagement surveys. Whatever you measure you can better manage. Employee engagement surveys allow us to measure our level of employee engagement or organizational dysfunction. Engaged employees represent our brand phenomenally well, whereas disengaged employees cost us clients and create aggravation and challenges throughout the organization. 5) Organizational development feedback and analysis. This is where it all comes together. This is the granddaddy of planning. Imagine taking graphs that represent each position and incumbent in your organization, placing them on the wall like an org chart, and looking for areas of strength or dysfunction. It is the blending of the behavioral requirements of each

Bill Wagner is CEO and co-founder of Accord Management Systems in Westlake Village, Calif. The firm works with franchisors and other franchising professionals to get the people side of the business right through behavioral assessments. Contact him at 805-230-2100 or info@accordsyst.com.

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Franchiseupdate I s s u e I I I , 2013

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Market

Consumer marketing initiatives

24 Feature: Franchise Consumer Marketing Conference

Marketing mania in Atlanta

28 CMO Roundtable

“In your development efforts, how does your marketing team balance automation with a personal touch?”

30 CMO Q&A

BrightStar Care’s Jayson Pearl: growing and protecting the brand

34 Managing Millennials

Making sense of the “participation economy”

36 Connecting with Customers

How Hungry Howie’s stays current at 40

38 Consumer Data

Boost revenue with mobile loyalty programs

Franchiseupdate I ss u e I I I , 2013

Grow Market Lead

By Kerry Pipes and Eddy Goldberg

Own Your Audience!

Consumer Marketing Conference sets new records

ore than 300 franchise marketing executives and suppliers packed the RitzCarlton Buckhead in Atlanta on June 25–26 for the third annual Franchise Consumer Marketing Conference. The theme this year was “Own Your Audience,” and by all accounts the conference delivered the goods. Day One kicked off early with two simultaneous boot camps. One dug deep into marketing essentials in four onehour mini-sessions. Facilitated by last year’s Conference Chair Ed Waller, cofounder of CertaPro Painters, the four topics were 1) “Identify Your Audience,” 2) “Create the Experience,” 3) “Deliver the Experience,” and 4) “Measure the Experience.” This highly creative and entertaining session featured panelists discussing marketing challenges they’ve

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faced or are facing, followed by attendees working in teams, by table, to provide solutions and present them to the entire session, competing for prizes. Each segment featured new panelists. They included Tom Wood, CEO of Floor Coverings International; Ann Latendresse, brand marketing director at Great Clips; COO Clarissa Bradstock and CEO Joe Neely of Any Lab Test Now; Jayson Pearl, chief brand officer at BrightStar Care; Ruth Swanson, vice president of marketing at Fantastic Sams; and Gillian Maffeo, marketing director at Jake’s Wayback Burgers. The other morning session, led by branding and marketing expert John Moore, focused on “Sparking, Spreading, and Sustaining the Online Conversation.” Moore, COO of marketing firm Brains on Fire, is a word-of-mouth advocate who

has worked at brands including Starbucks and Whole Foods. His first book, “Tribal Knowledge,” chronicled his time at Starbucks. His next book, due this September, is called “The Passion Conversation,” and focuses on understanding the power of word-of-mouth, or as Moore called it, WOMology. Combining nuggets from academic research and marketing statistics (62 percent of marketers spend 6 hours a week on social media; 36 percent spend 11 hours) with real-world stories and practical suggestions (afternoon is the best time to Tweet, and most re-Tweets are on Fridays), Moore challenged attendees to examine their roles in new and expanded ways, asking questions such as “How does your business amaze or amuse customers?” and “If your business didn’t exist tomorrow, would you be missed?”

Grow Market Lead

2013 Conference Chair Wendy Odell Magus

After the two morning sessions, the Sponsor Networking Gallery opened for lunch—and exhibitors. Technology is driving the marketing strategies and efforts of most brands these days, and it showed in the number of technologyrelated suppliers on hand, offering everything from local marketing solutions and SEO to social media and a spectrum of digital marketing solutions. General session time

Steve Olson, president of Franchise Update Media Group, kicked off the afternoon with details from an in-house survey of attendees about their use of social media. Highlights included: local marketing was their number-one marketing issue; 63 percent didn’t measure ROI on social media; and 58 percent didn’t have a customer loyalty program. Olson also discussed how franchises were allocating their media budgets and using social media and mobile technology. Conference Chair Wendy Odell Magus, vice president of marketing at Kiddie Academy, then welcomed attendees and recognized Ed Waller, last year’s chair, with an award. Franchise economist and FRANdata

President Darrell Johnson then presented his latest report on the state of franchising, highlighting four trend lines that will affect franchising in the coming decade. 1) Disruptive technologies. “By 2015, 30 percent of U.S. web browsing and 40 percent of social media will be conducted by mobile device,” he said. 2) The coming new economic normal. “Recovery takes time,” he said, adding that “the trend line is positive—just a very choppy positive.” Despite the CBO’s prediction of 2–2.5 percent growth in the country’s GDP from 2010 to 2019, he urged marketers “not to be feeling bad about it, but to recognize the market you’re selling into.”

3) Dramatic demographic shifts. “America is growing older,” he said, with Boomers retiring and Gens X and Y stepping into a larger role. Women are gaining increasing economic power, and the country is becoming browner, with the ratio of minorities to whites shifting from 1 in 5 in 1980 to 1 in 3 today. 4) The changing state of franchising. Taking all of the above into account, he concluded, “Franchising is built for these dynamics” and “should do well in the next 5 to 10 years.” In this environment, he said, marketing will compete for dollars with development. The way to win the budget battle against all other departments, he said, is for marketing to

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead

Erik Qualman, keynote speaker

Kelly McDonald, keynote speaker

find ways to prove its ROI (marketers: think AUV!). Social media keynote nails it

Social media is one topic that continues to dominate franchise marketing discussions. And that’s right up Erik Qualman’s alley. Qualman, author of best-sellers Socialnomics, Digital Leader, and Crisis, regularly addresses groups on Gen Y motivation, digital leadership, digital media, and future trends. He spoke about the power of social media and used catch phrases like “word of mouth is now world of mouth” to make his points; and about how news travels fast online, so to be successful in this social era, companies must “react to their customers quickly by listening, interacting, reacting, and selling.” He presented some great ideas and entertaining video examples of how companies can use social media to address mistakes (he called it being “flawsome”) to “find the silver lining underneath.” Filled with big picture thoughts, social media statistics, and a long list of new online technologies and companies, attendees headed out to the first breakout sessions, with one last thought from Qualman dancing in their heads: “Disruption will happen, so you might as well be the disrupter.”

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Breakout sessions, Round 1

These rotating sessions, featuring different panelists each time, centered around four basic tracks: CRM; franchisee buy-in, delivery, and results; marketing execution strategy; and brand development and rejuvenation. Discussions and topics included tools and strategies to acquire and retain customers, empowering franchisees to enhance their marketing mix, harnessing and measuring word of mouth, and the CMO as transformational change agent. Next up was an unusual general session called “Brand Building from All Sides,” featuring five Jersey Mike’s executives (president, COO, CIO, CDO, and CMO), and one of their area developer franchisees. In a free-ranging discussion, they spoke about breaking down silos, the power of the brand name, and the importance of working together on building the system. “We all try to think with the end in mind—revenue growth and unit profitability for the stores,” said Hoyt Jones, company president. “That’s the foundation of everything we think about.” They also discussed how their home-grown POS system ties everything together, from measuring food and labor costs to the brand’s CRM system and loyalty program.

Day One was capped off by a welcome reception in the Sponsor Networking Gallery. Day Two: demographics rule

Picking up right where the previous day left off, attendees gathered for breakfast and more conversation in the Networking Gallery. Keynote speaker Kelly McDonald, a marketing and demographics expert, woke everyone up even more with a dynamic, energetic talk on… demographics. Acknowledging how often eyes glaze over at the mere mention of the word, she said, “If I were you and were developing relevant, targeted marketing plans, I’d want to know this stuff”—and proceeded to make that “stuff” interesting and relevant. She began by asserting that America is no longer a melting pot, but a “salad bowl,” where immigrants are not assimilating as they have in the past, but are working to be Americans and retain their cultural identities and customs. This, of course, presents a challenge for marketers and brands, especially older, whiter ones. She noted that across every major market in the country, the majority of the population is non-white, and that, nationwide, whites will be a minority by 2041. The

What began two summers ago as a small convergence of franchise marketing executives eager to gain an edge on the competition has tripled in size and scope and shows no signs of slowing. In just its third year, the Franchise Consumer Marketing Conference surpassed expectations once again, in both the number of franchisors attending and the vendor exhibitors on hand. In fact, the Sponsor Networking Gallery quickly sold out—necessitating a change of venue for next year. The 2014 conference will return to Atlanta, moving just down the road to the InterContinental Buckhead to accommodate the growing interest in—and growing importance of—consumer marketing and its role in franchise system growth.

challenge for the majority of businesses today is “marketing to people who aren’t like you,” she said. “Pay attention to the shifting demographics and values of the customers and communities you serve.” McDonald laid out 10 strategies for doing that: be relevant, build your infrastructure, know thy target, be respectful, tap into values, be true to your values, recognize different needs, use consumer insights, be fearless, and train for cultural sensitivity. However, she added, “Every market today is different from 10 years ago and will be different again in 10 years.” The remainder of the morning was dedicated to the four basic tracks and featured breakout sessions covering brand reputation, marketing automation, capturing customers through mobile, and rebranding strategies. Lunch was again in the networking gallery, followed by a roundtable session and additional breakout sessions in the afternoon. A closing dinner at nearby Maggiano’s Little Italy brought the proceedings to a celebratory, sometimes raucous, close. Plans are already under way for next year’s Franchise Consumer Marketing Conference. To learn more, visit franchiseconsumermarketing.com. n

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Conference by the Numbers

320 Record attendance 69% Growth of attendees 168 Franchisors attended 88% Growth of franchisor attendees

56% Growth in number of sponsor companies

Franchisors by Category

36% Service 34% Retail 30% Food

Franchisors by Title

35% CMO, CBO, VP Marketing 25% Marketing Director 14% Operations, Technology, PR, Development, and Legal Executives

13% Marketing Manager, Brand Manager, Regional and Field Marketing Manager

13% CEO, President

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead

CMO roundtable: “In your development efforts, how does your marketing team balance automation with a personal touch?” Heather Anderson Director of Marketing The Little Gym International

Our franchise development process is more high-touch than high-tech. While automation is an integral part of our marketing strategy, building personal relationships is our top priority. Since its inception in 1976, The Little Gym has been a family-oriented business. As the company has grown, we’ve remained true to our roots and have cultivated the same atmosphere in our corporate office and with our franchise owners. It’s important to us that we establish a personal relationship with prospective franchise owners from the very start. Every inquiry, whether it comes through phone, email, or our website, gets a phone call response. This initial call allows us to answer questions and determine if the candidate is a good fit. If we both agree that we’d like to continue discussions, a more detailed call is scheduled and the process remains extremely personal. Our automated process is designed to target lost franchise prospects and nurture them to re-engage with us. If we are unable to make contact by phone, the inquiry is placed into a drip email campaign prompting them to contact us again. A series of eight emails is sent over the course of a year. In addition to email, remarketing has proven to be a valuable way to stay in front of prospects who have visited our website but have not taken the next step to request more information. Looking to the future, we’re exploring

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opportunities to incorporate behaviorbased rules and triggers into our email marketing efforts. Automated tools play a key role in improving operational efficiencies, but we recognize that the messaging should still be personalized and segmented when possible. This is a project that’s currently under way on the consumer side and will next be applied to our franchise development efforts. Since many of our franchise owners started as members of our locations, we’re also planning to use social platforms as a personal way to introduce candidates to our franchise concept. For The Little Gym, automation does not replace a personal connection. It enhances it. Developing relationships from day one has proven to be effective for awarding new franchises, and more importantly, for ensuring their long-term growth and success.

Gillian Maffeo Director of Marketing Jake’s Franchising

Our marketing department is involved with assisting the sales team in creating material for prospects. We assist in developmental efforts and in identifying and recruiting new franchisees through several mediums. When we rebranded in March, we made sure that all of the sales and developmental materials matched our entire branding. We partnered with Greenbaum Marketing to help with the developmental and sales marketing plans. Our first plan of attack on the development side was fixing all of the

drip email campaigns. We tailor every email drip campaign to be customized for each prospect. We also created a new look and feel to the campaign to keep it fresh and up to date with our marketing materials. We also changed all of our sales and development brochures. We attend a lot of conferences (like the MultiUnit Franchising Conference) and we needed marketing material that was eye-catching, something to make future prospects stop and want to learn more about our brand and why they should invest in a Wayback Burgers. We also made additions to our brochures, for example, items that pertain to certain regions across the country, franchisee testimonials, menu variety, etc. We changed our trade show booths as well and created a recruitment e-sales brochure similar to the brochure for trade shows. This year for recruiting at the IFE, we will be advertising our Triple Triple Burger and promoting that Wayback is a “Big Opportunity.” Our ad campaign for the IFE is a little “risky,” but we are hoping it succeeds in attracting not only males, but females as well. The marketing department also created “prospect questioner forms,” which gather information about a potential candidate after they apply. We also have a form for after discovery day for a prospect to fill out, which gives us even more insight into that individual, their goals, and their thoughts on the brand. We also help recruit new prospects in a couple of other ways. We see a lot of leads come in when there are stories in the press (usually when we are featured in mainstream media). We also use portals, trade shows, and customers who visit Wayback. We have seen many prospects inquire about our concept simply because they stopped in for a burger and a shake. Through all of these ways our marketing department supports any methods of recruitment and marketing toward prospects. n

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Grow Market Lead

By Kerry Pipes

Chief Brand Officer Mission: to grow and protect the brand

ayson Pearl has more than 25 years of franchising experience on his resume. For the past year, he has led BrightStar Care as its chief brand officer. His role sees him leading cross-functional teams responsible for marketing, clinical operations, training, and national account management for more than 260 BrightStar Care locations in 38 states and Canada. Pearl has been with BrightStar since 2009 when he became vice president of marketing and franchisee onboarding. In that role, he led the implementation of a system-wide rebranding effort, the development of the BrightStart franchisee launch program, and the pilot program leading to Joint Commission accreditation of all U.S. BrightStar Care locations. He also served as senior vice president of the brand development group before assuming his current role. He’s also familiar with franchise marketing and product development. He’s had stints at San Jamar/Chef Revival, and he spent 15 years leading marketing and field operations for several large Burger King franchise groups and regional pizza franchisor Rocky Rococo. Describe your role. As

chief brand officer, I lead our corporate teams responsible for marketing, clinical operations, and national accounts. Formed as the brand development group, we’re accountable for driving the leading met-

rics that result in incremental sales and profits. Our mission is to both grow and protect the BrightStar brand. What’s the most challenging part of your job today? Creating a balance

between investing to differentiate while ensuring franchisee buy-in and adoption of key initiatives. With a fast-growing brand in a rapidly changing industry, we are constantly calibrating our passion to lead with the proper velocity of change for our owners. What are the 3 most important keys to being an effective brand leader today? I often tell my team

members that to be a great marketer, you don’t have to have all the answers—but you better have the best questions—so we: 1) Listen to the voice of the families. We’ve been tracking our consumer experience of the seniors and children we serve since 2007 through client surveys that measure satisfaction on attributes that drive our Net Promoter Score. Correlating certain attributes that create promoters to revenue impact creates a feedback loop for prioritizing initiatives, new clinical programs, and sharpening our marketing story. 2) Listen to the voice of our franchisees. Great ideas and programs are

only as great as their ability to be understood and easily executed with ROI achieved by our owners. We perform an independent franchisee survey every six months. Communication with our owners early and often on new programs and services is critical. 3) Listen to the voice of our CEO and senior leadership team. Ensure that marketing initiatives and investments are aligned with our strategic plan and resources, while remaining agile to respond to new opportunities. How do you measure marketing results and effectiveness?

In three ways: 1) performance metrics (including media direct response, lead generation, and conversion ratios, PR value with correlation of programs and campaigns to revenue increases); 2) franchisee feedback loop (independent and internal surveys on the value our team and investments are driving for their businesses); and 3) consumer sentiment (client and family feedback on our messaging, referral relationships, clinical expertise, and service touches through surveys and social listening). Describe your marketing team and the role each plays. Our inter-

nal team members act as both producers and leaders of advertising, social media, PR, creative production, local marketing toolkits, and service innovation. Their most important role is helping feed our high-performance culture with deep knowledge and accountability of their areas while being of service to our franchisees. They’re also accountable to judge what can be done most efficiently with their own efforts versus sourcing work and additional expertise with our marketing vendor partners. Discuss the importance of marketing having a “personal touch” in helping the brand connect with prospects. Consumers today have so

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many resources to learn about a brand before they click or call. In a business of serving seniors, children, and families at their time of need, the promises we make in our marketing have to reflect the truth of our service experience. Connecting to the emotional benefits sought by consumers helps us sharpen both our brand messaging and operational execution. How does this help with franchise development? Entrepreneurs looking

to BrightStar as a business opportunity are expecting the same level of truth and transparency that our families desire when looking for quality home care. In working with our franchise development team, we provide great information for independent review. We also have a thorough process delivered by our development team to provide candidates with the knowledge to ensure this business is right for them, while we assess that the candidate is the right fit for us. What ways or tools do you rely on to do this? We rely on industry

and competitive benchmarks, franchisee testimonials, and publishing our performance data, all to show the value of our franchise offering. We have one of the most comprehensive FPRs (Item 19) in the industry. What do today’s prospects expect from the franchise marketing department? They want to know that

they’re getting a strong ROI by joining an established brand and contributing to a general marketing fund. We show them how we help them build their business by delivering a combination of the local marketing toolkits, national advertising investments, and a growing online footprint. How is technology changing the way franchise marketing is done?

In two key ways. Social technology is allowing us to have conversations with our clients, their families, and the nurses and caregivers looking for a career with our franchisees in new and exciting ways. Also, the core technology that powers our franchisees’ business is a proprietary platform that allows us to capture the

data that matters to our business—everything from clinical outcomes to demographics to referral source and marketing performance. Are you using cloud technology? How? One of the most exciting ways

we’re using cloud technology is through an online platform we developed for family caregivers called CareTogether. It’s a free, private, secure online toolkit that gives consumers tools for asking for and coordinating family and community support for their loved one. We give them scheduling, journaling, photos, communication, and condition-specific educational materials. Families don’t need to be a BrightStar client, but if they are the CareTogether system connects with our business system to provide a consolidated calendar for the family. How are you assisting your existing franchisees with more contact and transparency? What are their needs? We provide a wide variety of

opportunities for our franchisees and their management teams to learn and share with the corporate team—and each other. We host two annual conferences (one for owners, one for their managers), quarterly Town Hall calls, biannual regional summits, monthly best practice calls, weekly e-newsletters, and more. The most important thing we do with all of this is capture the tools, updates, and learning and post them on our intranet so they become part of training and ongoing resources for our system. We provide a high level of transparency for our franchisees of our marketing efforts and investments through our marketing committee, made up of seven owners reporting into our 12-member franchise advisory council. We publish an annual report of the owner ROI from the general marketing fund to our franchisees that includes the expenses and balance sheet summary. How do you work with other internal departments? Does technology help? I believe that marketing work is

group work. Our brand-building initiatives and projects have to be informed by financial, technology, operational,

and regulatory considerations. It starts with creating a “project charter” that articulates the expected financial impact for our franchisees, the roadmap to make it happen and—most important—the measures of success to ensure accountability to our internal partners and franchisees. We create online work spaces for collaboration and documentation on our intranet, which allows us to manage access to resources between internal teams and franchisees involved in our task force initiatives. How do you manage costs and budgets? We begin the budget process

for our general marketing fund as part of our annual strategic plan, calibrated against our 3- and 5-year goals for the brand. We are consistently looking at the most efficient use of dollars versus results—for example, balancing the deep knowledge and high service of our internal marketing team but pivoting to outside agencies when scale, external insight, or unique resources warrant. Last year, I developed a tool to provide visibility to the rest of our senior team on the key metrics these investments are driving. Our brand development dashboard is a way to look at impact and trends versus our goals. We review spending versus budget on a monthly basis and link expenses to performance. Do you see vendors as business partners? Absolutely. We expect our

vendor partners to be as passionate about building the BrightStar brand—and our franchisees’ businesses—as we are. We set high expectations for the investments they make in their own organizations to serve our growing number of franchisees and national footprint. We count on them to provide us with industry and competitive insight to make sure we’re consistently benchmarking our success and costs. In turn, we provide our approved vendor partners access to our franchisees to drive their opportunity through participation in our weekly newsletters, conference roundtables and sponsorships, and strategic planning sessions with senior leadership. How have marketing strategies/

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead 32

tools changed over the past decade? How have you adapted? The

most profound change I’ve seen in the past 10 years is the brand message being delivered by consumers along with marketers. If customers are writing reviews about your brand that are in conflict with your marketing claims, there’s a problem. We see this as an opportunity to understand and engage with our clients, families, referral sources, and nurses and caregivers about what is most highly valued in our type of service. Then we’re empowered to help the promoters for our brand, well, promote—and make improvements through marketing, training, or operations to any concerns we hear from brand detractors. As marketers, our ability to monitor and engage in customer conversations about our brands is a tremendous opportunity. The franchise concepts that are able to create a community of brand evangelists among their corporate team, franchisees, referral network, and front-line employees will win.

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The franchise concepts that are able to create a community of brand evangelists among their corporate team, franchisees, referral network, and front-line employees will win. How is your marketing/branding strategy developed, and how does it flow through the system? We’re

truly blessed with the active involvement of our co-founder and CEO, Shelly Sun. Shelly involves our senior team, corporate staff, and franchise community in the development of our strategic plan

based on the vision she and JD (her husband) had when they started BrightStar 10 years ago—and that informs our 5-year vision and 3-year strategic plan. Our marketing plan is informed by the 3-year targets and is built on the initiatives that are consistent with Shelly’s vision for market share, service offering, and brand portfolio for BrightStar over the next 5 to 10 years. Our sophistication for creating and sharing this plan within our system has become much sharper over the 4 years since I joined this amazing brand. In many ways, we’re making strides in communication flow that one wouldn’t expect from a system that’s grown 3 times in size since 2009. Higher involvement with our franchisees at the front end of key projects, greater shared business intelligence data, and increased field experience from key personnel are just some of the ways we’re making better decisions as a brand and providing toolkits and marketing to our franchisees that drive results. n

Grow Market Lead

Millennials By Jeff Fromm

Welcome to the Participation Economy Work with Millennials just as you would market to them

ranchisees are looking hard at how to recruit and retain Millennial employees. The oldest Millennials are in their mid-30s (born in 1977 and 1978) and have been a part of the workforce for more than a decade. The youngest, though, are still a few years away from working age. The group in the middle (late teens to mid-20s) is the one that many franchise companies have working on their front lines. So what’s the best way to work with this group, which is becoming increasingly more powerful in the workforce? The same way you should market to them: embrace the Millennial-inspired “participation economy.” What is the participation economy?

The participation economy developed because Millennials want to be active participants, not passive consumers. The same goes for how they want to work at franchise companies. To win with this cohort, companies should incorporate participative benefits into their models. The chart below shows how marketers should market to Millennials. The language on the left shows the old model of marketing. It used to work, but it’s outdated now. The new marketing model has replaced it. The new marketing model involves engagement,

interaction, engaged participants, personal gestures, and active co-creators. Keeping these five concepts in mind will help franchisors win with Millennial workers. First, let’s continue to dissect the participation economy, which breaks down to include “participation” and “shareworthiness.” What is participation?

Driven by advancements in digital and mobile technology, when it comes to marketing Millennials are practically demanding to be a part of the process. They want to be a part of the process when it comes to their work, too. Franchisors should capitalize on opportunities to include Millennial workers in decision-making. When Millennials are being marketed to, their participation falls into three types. They want to co-create: 1) the products and services that you sell; 2) the customer journey or the customer experience; and 3) the marketing, which goes beyond social media. Franchisors can consider similar tactics for including their Millennial workers in the process. What is shareworthy?

Shareworthiness is rooted in Millennials’ strong desire for peer affirmation. According to research Barkley did in conjunction with the Boston Consulting Group and SMG, 70 percent of Millennials say they are more excited about decisions

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they’ve made when their friends agree with them. Common roads to shareworthiness include purpose and disruption. Is your franchise causing Millennial workers to pay attention and engage in your brand? Does your company help Millennials feel better about themselves at the end of the day? Franchises that are getting it right

Dairy Queen is an example of a franchise that is scoring well with encouraging Millennial workers. (Full disclosure: Dairy Queen is a Barkley client.) In March, DQ employee Marissa McGee tweeted that she wasn’t looking forward to working on “Free Cone Day.” Instead of seeing Marissa as a disgruntled employee, DQ capitalized on this chance to make her have a more enjoyable time at work that day. The @DairyQueen account sent Marissa funny pictures, GIFs, and words of encouragement every hour that she was working. Dairy Queen showed that it was paying attention to its employees and supporting them at the same time. This example involved the main corporate Twitter account, but it could be applied perhaps even more effectively by franchisors that maintain social media accounts at the store or group level. By interacting with employees through social media, not only can a franchisor demonstrate interest in engaging with employees, it can also help head off any negative posts or comments by workers. A solid social media policy is a great start, but frequent direct interaction can enhance relationships and keep the lines of communication open. n Jeff Fromm is executive vice president at Barkley, a “fiercely independent advertising agency.” He is co-author of Marketing to Millennials, lead editor of the blog MillennialMarketing.com, and founder of Share. Like.Buy, a conference about marketing to Millennials. Contact him at jfromm@barkleyus.com or 816-423-6195.

The Wall Street Journal is #1 in delivering the affluent with personal income $200,000+, and liquid assets averaging nearly $1 million. Showcase your franchise every Thursday in Marketplace and online every day at WSJ.com/Franchising. For more information contact Andy Johnson at 214.640.7820 or andy.johnson@wsj.com.

Source: 2012 MMR Affluent Survey, HHI $100K+ #1 in personal income $200K+ among all reported titles.

Grow Market Lead

Connecting with customers By Jack Mackey

Hungry Howie’s Moves Ahead “Flavored Crust Pizza” celebrates 40 years

arlier this year, there was an inspiring celebration of the American Dream—and a tinge of sadness, too—as Hungry Howie’s Pizza marked its 40th anniversary. The company was founded by Jim Hearn (aka Howie, but I’ll get to that at the end of this column) in 1973 in Taylor, Mich. Steve Jackson, who delivered pizza for that very first location, joined forces with Hearn to open the second location in 1976, and the pair began franchising Hungry Howie’s Pizza in 1982. Today, there are 575 units open in 22 states, and Jackson is president of the company. The business is focused on carry-out and delivery and is known as the home of “Flavored Crust Pizza.” Since Hungry Howie’s has 20-, 30-, and 40-year-old locations, it’s safe to say the product is a proven winner. But having a 40-year tradition brings special challenges, too. To grow, it is essential to constantly refresh the brand. To compete with the big national chains for a larger market share, Jackson and his team developed a wholistic growth strategy focused on getting and keeping more customers. The effort includes a new store prototype that has a fresh, contemporary look and feel. As new locations open and existing units convert to the new look, the company’s national ad fund is committed to aggressive marketing to increase positive awareness and ultimately drive more traffic, more trial, and more sales. The plan has to be customized by market because Hungry Howie’s has heavy concentration in Michigan

Franchiseupdate Iss u e III, 2 0 1 3

and Florida, where broadcast makes sense, but that mode of marketing is not feasible across all markets in 22 states. Where broadcast marketing makes sense, Hungry Howie’s aims to connect with the female consumer who is typically making the buying decisions for her family. They’ve developed TV ads with a funny, quirky “Howie’s Ad Agency” format (check them out on YouTube), and bought high-visibility TV programming during “The Voice,” “Modern Family,” and even the Super Bowl. In the emerging or less mature markets, the company is committed to “brutally defending” the mailbox with very targeted direct mail promotions that consistently build the brand and sell the goods. Couponing is a fact of life in the world of pizza, and the company goes head-to-head with the big chains. Howie’s competes by leveraging its differentiated product with distinctive creative materials, delivered when it matters. One of the strongest ways the brand connects with its target female customers is through a program that has been going on since 2009: Love, Hope, & Pizza. Back in those dismal days of the recession, competitors were cutting prices—and sometimes quality, too. Howie’s took a different approach: they printed 13 million pink pizza boxes in support of the National Breast Cancer Foundation. For the month of October, they donated $1 to the NBCF for every large pizza ordered and additional money when customers purchased pink breast cancer awareness ribbons at Hungry Howie’s locations. Hungry Howie’s

added 200,000 Facebook fans, and some video testimonials were shared by 2 million viewers. The financial results: Hungry Howie’s donated more than $200,000 to help women detect and prevent cancer. Also, the company has experienced 11 consecutive quarters of comp sales growth, with percentage increases far above the industry average. To keep the momentum going, the company is launching “Howie Doing?” This is a system-wide customer experience measurement program to convert more of their hard-won new customers into repeat customers, repeat customers into regulars, and regulars into brand advocates. With the near-universal adoption of smartphones, customers can not only take a survey on their mobile device about their most recent experience, the brand’s true advocates also can share their recommendations directly from the survey to social media and review sites. The vision is that marketing and operations are working hand-in-hand to build the business by providing a distinctive—and superior—customer experience at every stage of customer engagement. Now about the company’s name. Back in the 1970s, the busiest restaurant in Ypsilanti, Mich., was called Hungry Charlie’s. And when Jim Hearn was just in his thirties, his even younger managers were in awe of his success in business. They nicknamed him “Howie,” after the eccentric billionaire Howard Hughes. Thus the name. And the tinge of sadness I mentioned? Jim Hearn, whose remarkable career inspired so many others to reach for the American Dream, died just a month before the 40th anniversary celebration of Hungry Howie’s. As Steve Jackson said at the company’s 2013 convention, “He was a leader and a visionary and we will miss him, but his legacy will carry on.” n SMG Chief Evangelist Jack Mackey, CFE, helps clients transform the customer experience. For a complimentary copy of “The Millennial Consumer: Debunking Stereotypes,” go to www.smg.com/research.

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Consumer data By Tom Epstein

Loyalty on the Go Boost unit revenue with mobile programs

echnology in the mobile space is moving at blazing speed. Normally, franchise systems tend to run a bit behind the curve when it comes to new technology, but not so in the loyalty space. We are seeing some brands get extremely aggressive with new technology, but it does not always seem to deliver the results they are looking for. More often than not, franchisors may not even know what the results are, as there are challenges tracking the ROI on these campaigns. Most of the latest and coolest-looking technology in the space has not been integrated with existing technology, making tracking the results of a campaign difficult at best. I have seen many of these new, cool technology platforms come along, but at the end of the day they are engaging between only 1 and 5 percent of a brand’s total customer base and are not really driving any new ones in. With a strong loyalty program, it is not uncommon to see average ticket lifts of 17 percent and an increase of visits by as much as 50 percent. Another challenge is that there are so many new high-tech players in this field that haven’t been properly vetted or that don’t seem to have a good handle on the real needs of a franchise system. Many of those I have seen come along over the past couple of years have great technology, but their end game is to build a database of consumers that they can market not only your product and services to, but also those of your competitors. So instead of building a database of customers loyal to your brand, you are helping your vendor build a database of customers loyal to their platform! In those cases you end up with a Franchiseupdate Iss u e III, 2 0 1 3

With a strong loyalty program, it is not uncommon to see average ticket lifts of 17 percent and an increase of visits by as much as 50 percent. customer who comes to see you only when you have a compelling offer on your vendor’s platform. What you really want is a customer who is highly loyal to your brand and who will come to see you not only when you have a great offer or “reward,” but also at any other time they want or need your product or service. The best loyalty programs are designed to “reward” your customers for doing something they would not ordinarily do. For example, you should not give a reward to a customer for purchasing something on their first visit. A customer should be able to earn points for that first visit, but not be able to redeem them until they come in the next time. You are driving the customer to do something extra, to make that extra visit. To drive customers in, you can make an offer that is time-sensitive, such as a text campaign that targets your loyalty database when business is slow.

Sending an offer that can be redeemed only if they come in in the next few hours is highly effective. When is the last time you received a text and did not read it right away? Also, take a look at the value of that “reward.” If the value is the exact amount of a typical purchase, you are just as good doing a 2-for-1 coupon. You want the value of the reward to be either a little less than a typical average ticket or a little more. If you are a pizza place and the typical average ticket is $20, your reward should be $15 or $25. If it is $15, the customer will have to pay a bit more on top of the reward to get their order. If your reward is $25, the customer will have to come in two times to get the full reward, with only $5 coming off their next ticket; or, more likely, they will purchase additional items, which will probably take them to a higher ticket amount than the reward was worth, which helps you make up for the cost of that discount. Let’s get back to what the numbers mean to your franchisee, using an average frozen yogurt shop as an example. If your store has an average ticket of $7 and does 4,000 total transactions per month ($28,000), you should be able to get around 25 percent (1,000) of your customers into your loyalty program. If those customers boost their check average by 17 percent, that adds $1,190 to sales (.17 x $7 = $1.19 x 1,000 = $1,190). And if those 1,000 loyal customers also increase repeat visits by 50 percent, that’s the equivalent of an additional 500 visits, or $4,095 in monthly sales (500 x $8.19). Add those gains together, and you just increased total sales that month by $5,285 or 18.9 percent! So what does this mean to a franchisor? If you have a royalty fee of 5 percent, you just boosted your royalty revenue by $264.25 per store per month. If you have 100 stores, you would be increasing your revenue by $317,100 per year ($264.25 x 12 x 100)! Not a bad ROI—and all trackable if done correctly by integrating all the pieces of your loyalty program into a single data host.

Involve everyone

When making decisions on a new loyalty program, you should have all the key players on your staff in the room to talk about how this new program may affect their part of the business. 1) Operations: Will it work on the current POS? 2) Marketing: Will it achieve the desired results? Can you validate them? 3) Sales: Will it enhance your brand image and thus make closing deals for new locations easier? How much easier would it be to close a deal on a

To drive customers in, you can make an offer that is time-sensitive, such as a text campaign when business is slow. When is the last time you received a text and did not read it right away?

location if you already knew you had 2,000 loyal customers in that market driving to another of your locations farther away? Even better, start identifying markets by using loyalty data to determine where you should be focusing your growth efforts. 4) Finance: Cost is important, but does the program have a measurable ROI? In summary, a loyalty program can do wonders for your business, but do your homework and think it all the way through to what your real goal is: ROI! n

Grow Market Lead

It is my belief that your email marketing, text marketing, online ordering, orders coming in from smartphone apps, and regular transactions at the POS should all be integrated in the same loyalty host. This way, when you do campaigns you can track the results of email versus text marketing, for example, and get a handle on what is actually driving your business.

Tom Epstein is CEO and founder of Franchise Payments Network, an electronic payments processing company dedicated to helping franchisors and their franchisees improve system performance, increase revenue, and reduce expenses. Contact him at tomepstein@franchisepayments.net or 866-4204613 x1103.

Franchiseupdate I s s u e I I I , 2013

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Franchise development intelligence

42 Feature: Development Connection

Griswold Home Care keeps it personal

46 Challenge the Pros

“In an era of increasing automation, how do you maintain

a personal, one-to-one touch with prospects?”

60 International

Overseas franchises are coming to America

62 Sales Smarts

Finding the ideal candidates for your system

63 Market Trends

Making the connection between franchise

fees and unit success

64 It’s Closing Time

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Franchiseupdate I ss u e I I I , 2013

Grow Market Lead

By Eddy Goldberg

WHAT’S YOUR

DEVELOPMENT CONNECTION? Transparency and openness rule at

Griswold Home Care

hen Jean Griswold company in the world, and 2) to be the opened her first non- best business opportunity for franchisees medical home care available anywhere,” says Mike Magid, facility in 1982, she vice president of franchise development. set the tone for how the company opFollowing the tradition laid down erates today. by Griswold, the brand is looking for Griswold, by all accounts, was an ex- something special in its applicants. traordinary woman: high school guidance “Every person we bring in wants more counselor, geriatric counselor, married to from life than just creating profits in a an ordained minister, wheelchair-bound business. We need to see that in them,” with multiple sclerosis, and inspired to he says. “We like to say our franchisees start a home care business after an el- are not just looking to feed their pockderly member of her husband’s church ets, but to feed their souls. That’s the passed away from malnutrition and culture we live.” dehydration after a period of neglect. Shortly after that, Griswold opened The process a small home care business. Operating The company’s franchise award process out of her own home, her mission was consists of six steps, carefully honed to help people in need by providing over the decades to preserve the valextraordinary care at affordable rates. ues of the founder. Applicants receive She aimed to keep her expenses as low a summary description of those steps as possible and pass on the when they request a franchise savings to clients—and attract kit from the company’s redethe best caregivers by offering signed franchise development higher wages and screening website, which went live in them carefully before matchearly June. ing them with clients. In fact, the first six months Two years later, in 1984, of 2012 were dedicated to an she began franchising, first as entire rebranding, not just the Special Care, then as Grismain website but the franchiwold Special Care, spreading Mike Magid sees’ microsites as well, with the brand outward from the new colors, a new logo, and Philadelphia area where she lived. Her a new company name, updating the husband joined the company, and later, brand from Griswold Special Care to so did her son. In 2009, when she retired Griswold Home Care. and sold the company to private invesWhat follows is a is a step-by-step tors, the brand had about 90 territories. walk-through of the company’s sales Today it has 141 franchisees who own process, a case study in best practices. 250 total territories in 32 states. The introductory paragraphs for each “Today, everything we do—our mis- step, in italics, are taken directly from sion—is 1) to be the best care services the franchise kit each candidate receives.

Franchiseupdate Iss u e III, 2 0 1 3

Step 1 Getting to Know You

During our first conversation, we will get better acquainted with each other to see if there is an initial match. We look forward to learning more about you and your aspirations for owning a business and you will learn about our history, mission, market, and vision. Magid says prospects must pass five tests to move to the next step: 1) be a good cultural fit for the model and the industry; 2) possess the leadership skills to run a business; 3) show the outbound relationship- and trust-building skills to grow the business; 4) have the financial wherewithal to build and sustain the business during ramp-up; and 5) commit to full-time and effort. The process begins with speed of response: any prospect who submits an inquiry must be contacted within 24 hours, preferably the same day. Once contact is made, there’s an initial phone call—with face-to-face video. In fact, face-to-face calls are the rule at every step. “We believe it humanizes the process. We get to know each other and can do that much better with video,” says Magid. “We strongly encourage the spouse to be on the initial call. No franchise sale will take place unless both husband and wife are on the same page.” It’s not mandatory at this point, but it is required eventually. Candidates are presented with a highlevel overview of the industry, the business model, and what Griswold looks for in an ideal candidate. The team probes to learn what triggered their search,

Step 2 Model Differentiators, Training, Systems, and Support

In this part of the process, you will learn about how to execute our unique model, our training program, and the various ways in which we support you in your efforts. In addition, this is where you learn about our cutting-edge marketing programs that will offer you a competitive edge. Our turnkey system for recruiting and retaining caregivers and our proprietary software application will make running your business easier than you ever expected. Where Step 1 is about fit, Step 2 is about what candidates are getting for their money, says Magid. “If you’ve done your job right in Step 1, you’ll know the key criteria and characteristics that are important to them (putting money aside). You have a better understanding of their drivers and can focus on how the model fits those drivers.” It’s time for a deeper dive into the model—its differentiators, value proposition, training, systems, and support. “We strive not only to help candidates understand our model, but also what it is they’re investing in,” he says. One key differentiator Griswold emphasizes is how the company recruits caregivers, how they get paid, and why they make top industry wages while allowing lower client pricing. “We’re the only franchise in non-medical home care that doesn’t use direct W-2 employees,” he says. Caregivers at Griswold are selfemployed professionals with their own

federal EIN. Clients pay the caregivers directly to provide care, and pay Griswold separately to oversee the process. Magid describes their model as a win for clients, caregivers, franchisees, and the franchisor. Benefits to franchisees include reduced overhead and back office infrastructure, lower working capital requirements, and quicker ramp-up to opening. This model also eliminates wage-related expenses for the caregivers (and 1099s), along with the need to manage and contribute to payroll taxes, unemployment insurance, and workers’ comp insurance and claims. Clients benefit too. “Our transparency starts before they even call us. We have one pricing model and post the rates on every franchisee’s micro site. Our hourly rate is for everything; we don’t price our service a la carte. The base rate is the rate,” he says. Also, “We transparently disclose to clients on the first intake who they’re paying, how much they pay each entity (caregiver and franchisee), and why the costs are lower. This builds enormous credibility with consumers,” he says. “It’s an open and honest delivery of our home care system. Those things are important.” This model, says Magid, also helps attract a higher-quality group of professional caregivers, motivated not only by higher wages, but by the fact that they control their assignments and hours. It’s not easy to become a caregiver either: fewer than 10 percent of applicants pass successfully through the company’s screening system. And, as with the brand’s franchisees, it takes a certain attitude to fit in at Griswold. Caregivers who make the grade “must meet our criteria of competence, compassion,

and integrity,” says Magid. “They’re in this as a profession, not a job, and their mission is to help others in need.” In summary, caregivers provide the non-medical care at higher wages, clients can afford better quality care that meets their budget, franchisees oversee the care for a weekly fee, and the franchisor supports the entire process. Neat. That’s the bulk of Step 2, he says, with the rest focused on training and support.

Grow Market Lead

how long they’ve been looking, other concepts they’re considering, why they haven’t purchased anything yet, their timeline for a decision, obstacles they might need to overcome, financial resources, etc. “We need to understand their motivations, what’s driving their decision, and what’s important to them. We want to make sure they understand what they’re looking at and how it fits their criteria,” Magid says. “We can see early on if the model will be a good fit, which allows everyone to use their time wisely.”

Step 3 Document Q&A

Everything you wanted to know about us will be covered in this in-depth session where we review the Franchise Disclosure Document. The business relationship, mutual expectations, and a detailed overview of financial expectations will all be covered in this step. Step 3 is fairly standard, consisting of an overview of key items in the FDD. Where it differs is the level of disclosure in Item 19, the FPR. Griswold operates nine of its own franchises—including Jean Griswold’s original location across the street from company headquarters in Erdenheim, Pa. In response to the “Can I make money?” question all candidates ask, Magid says the company uses P&Ls from each of its corporate locations to disclose revenues, all expenses, net profit, client count (broken down by live-in vs. hourly), and average billable hours per client per week. “With our Item 19, they can look at our corpo-

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead

rate P&Ls and compare that with gross revenues of our franchisees, which are disclosed, and connect the dots,” he says. “We are the only home care company in the U.S. that has net earnings claims in its FDD based on our nine corporate locations, which provide audited P&Ls,” he says. “Most candidates say they appreciate our transparency around such an important component of the discovery process. They tend to gain comfort knowing we have invested in the same business they’re considering. This builds trust and credibility.” Typically, he says, “When you show

only gross revenues, you force candidates to try to extract expense information from franchise owners, but many don’t want to share on that level.” Providing audited P&Ls from the corporate locations, he says, is a huge help in validation (Step 5). “It helps take the pressure off franchisees to have to disclose financial information, and from candidates having to extract it from them.” To help candidates sort out all the data, his team tells them there are three important factors in determining their potential ROI: client count, rates, and number of billable hours per week per client.

She Liked It So Much…

bout two years ago, Christine Friedberg was employed at FRANdata working on a project involving best practices in the home care industry. One of her assignments was to shadow discovery day at Griswold Home Care. “Someone there jokingly suggested I join,” she says. She laughed it off. Soon afterward, she became a mother and took maternity leave to spend time with her new daughter. She began thinking about having more time and flexibility, asking herself, What’s next in life? “It randomly came to me one night on the treadmill: ‘I think I know what I should do.’” Today she’s a Griswold Home Care franchisee with two contiguous territories in Northern Virginia. Labor Day will mark her first full year. So, with all her knowledge and experience of franchising, why Griswold? “I thought it was a great model and was impressed with the people,” says Friedberg. Also, she says, “It’s a great industry—we get to help people at that point in life when they need that extra help.” She also liked the company’s transparency, not only with its franchisee candidates, but also with its customers. Price is one of the first things people look for when shopping for home care, says Friedberg, and she liked how the company posts its pricing on its local websites. “Of course you’d put that on your website, that’s how Christine Friedberg people do shopping nowadays,” she says. Friedberg also liked the rebranding button the company pushed in 2012, aimed at updating the brand while staying true to the values and culture laid down by founder Jean Griswold three decades ago. “It’s a good company, it’s growing, and the marketing team is doing a lot of new things,” she says. Following its rebranding, she says the 31-year-old company is now in “version 2,” with a new name, new logo, new websites, and a marketing team that she says is ahead of the industry with its online advertising, blogs, technology, and goal of empowering clients and candidates with information. “Marketing was a huge thing for me—finding new ways to help franchisees and bring in clients,” she says. “There are tons of companies in this space. None operate the way we do. It felt right.” n

Franchiseupdate Iss u e III, 2 0 1 3

Step 4 Executive Call

Enjoy a conversation with a member of our executive team. Our caring philosophy starts at the top and you will quickly understand how we became a leader in the non-medical home care industry. This is a newer step, says Magid, added about 3 years ago at the request of franchisees who asked for someone on the executive team to more carefully vet candidates before sending them out for validation. “It’s an opportunity for me to talk to our candidates and be certain they understand our model,” says Magid. “Ultimately, I want to make sure they’re an ideal candidate.” That means a discussion to review the five criteria candidates must meet (Step 1). It’s also the point in the process when the sales team involves the spouse, if they haven’t already participated in a video call. And if Magid still has doubts, he’ll send it back to his sales team for more digging. Step 5 Meet Our Franchisees

In this very important validation process, you will have the opportunity to meet some of our franchisees to learn about their experiences in the industry and with us. Since they have been in your position, they have a unique understanding of how you feel and they will be able to share their experiences with you. There are many philosophies on franchisee validation, says Magid. “Our franchisee validation process starts with random calls,” he says. “We work closely with attorneys who feel that random validation is not only best, but also most compliant with FTC regulations.” The sales team shows candidates Exhibit E in the FDD, listing all of the brand’s franchisees by state. Before visiting a franchisee, candidates are asked to send an email that includes an introduction, a brief professional and personal overview, and why they would be a good cultural fit for the company. “We prep candidates on how to get the most out of the experience, what questions to ask, basic protocols to follow, etc.,” says Magid. “We encourage candidates to talk with anybody they

Step 6 Discovery Day

Come to our Corporate Office in Philadelphia and meet our personable and highly qualified team. Visit our flagship office and experience a “day in the life” of a Griswold Home Care owner. Before candidates attend a discovery day, Magid says he likes to complete two important tasks: the territory development process and the franchise agreement review. “The goal of our discovery day, from

the candidate’s perspective, is to evaluate our commitment to supporting their success, our passion for what we do and how we do it, and our subject matter expertise—and, of course, anything else they want to know,” he says. “From our perspective, it’s a final opportunity for the entire home office team to ensure a candidate has the five characteristics we consider essential to success.” This is not a day for inking a deal. “We ensure that they’ve reviewed the franchise agreement on their own or with a franchise attorney and are comfortable with signing, but we don’t use discovery day as a signing event,” says Magid. “We like to huddle as a team before deciding to award a franchise or not.” “We” in this case is Magid, the CEO, the vice presidents of marketing, operations, compliance/regulation, finance, general counsel, and director of corporate operations. Candidates also meet with all members of the team they’ll be

working with at the home office. Discovery day is almost always spent at one of the company’s nine corporate locations, where they meet the executive director (franchisee) of that office and the marketing and care coordinators to see how the business is run. “Spending a day in an ongoing home care business allows candidates to see and hear the activity and get a sense of ‘a day in the life,’” says Magid. “It is truly eyeopening and transparent.” After discovery day, the only step remaining is a final decision. “We want to make sure that both sides have a chance to debrief and download,” says Magid. “Assuming we award during this ‘cooling off’ period, candidates are given up to 14 days for exclusivity on the territory and time to make their decision.” If all agree and move ahead, it’s time to sign an agreement and move to the next step: training at Homecare Academy to prepare for launching the new business. n

Grow Market Lead

want—but they can always ask for recommendations for people with similar background, experience, circumstances, etc.,” he adds. “Our franchisees appreciate the consideration candidates show for their time. They also enjoy learning a little bit about who they are speaking with before they engage in discussion. The transparency works for both parties,” says Magid.

Multi-Unit Franchisees Dream. Build. Grow. Succeed. To provide a deeper sense of their journeys, insights, and personalities, we’ve selected from our most inspiring print interviews to create a new series of videos of these franchisee leaders.

We call them Empire Builders.

For more information call: (408) 997- 7795 ext. 202

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead

Challenge the pros “In an era of increasing automation, how do you maintain a personal, one-to-one touch with prospects?” Jennifer Durham Checkers Drive-In Restaurants Vice President of Franchise Development

At Checkers and Rally’s, we’ve been in the business of “Big, Bold Flavor” for more than 27 years. But there is one aspect that sets our guests, our restaurant teams, and our support teams apart—and that’s Passion. We offer crazy good, one-of-a-kind menu items at a great value to our guests—and which are also easy to execute operationally for our franchisees. Our unique buildings and restaurant designs stand out from the pack and provide a retro feel with a contemporary edge. The same passion holds true with franchise prospects interested in a Checkers/Rally’s franchise opportunity. From the very first phone call, we seek to understand the passion that drives the aspirations of the prospect and exactly how that aligns with ours. We have an amazing franchise sales team based locally within their region to allow for easy travel access to the franchisees and markets they serve. Our franchise opportunity is not for everyone, but we really connect with those energetic, goal-oriented restaurateurs who see the value in a proven operating system. Our brand is a perfect fit if you are as passionate as our fans and love food, growth, and real opportunity more than any peer. If our visions align, we invite a select

Franchiseupdate Iss u e III, 2 0 1 3

few to our Candidate Day monthly to meet individually with our executive team and experience a behind-thescenes tour at a local restaurant as well as an introduction to our fantastic support teams. With only 130 franchisees, we know every Checkers and Rally’s franchisee personally and are connected to them and their businesses. This commitment to each franchisee has allowed us to make innovations in our brand that have propelled us to lead the quick service hamburger category in same store sales for the past two years, rate highest in overall value with guests, and score among the highest in franchisee satisfaction.

Kurt M. Landwehr Regis Corp. Vice President Franchise Development

At Regis Corp. we are committed to using technology as much as possible to increase the speed and delivery of important information, and to enrich our candidates’ experience in the discovery process. Yet, technology does not take the place of people, it simply enhances it! We have a very specific investigation process that we lead all of our candidates through. The process is designed to share as much detailed information with people as possible to help them make an informed business decision. We combine the use of technology

(webinars, for example) with simple telephone communication, face-to-face meetings, and extended one-on-one time at discovery day. All are designed to enhance the connections we make with our prospects. Where we really leverage technology in the development process is with lead generation. Gone are the days where we sift through stacks of unqualified Internet leads, trying to find the diamond in the rough. Today we deploy a digital lead generation campaign targeted at a very specific audience with a very specific message, which produces a much higher-quality candidate entering our process. We also leverage technology when working with franchise consultants. It is much easier to keep consultants informed on our brands by holding Lunch & Learns, Consultant Cafes, and other educational opportunities, all done with the use of technology. We recognize that today’s professional franchise consultants can help us target specific markets for growth and introduce us to high-quality candidates who would never have thought of hair care on their own. In my nearly 20 years in franchise development, if there is one thing I have learned, it’s that people make buying decisions based on emotion. Big parts of the emotional connection our candidates have to our brands are the people they meet during the discovery process. Those relationships are not limited to their development representative. They can be corporate employees, franchisees, vendors, and even other prospective franchisees they meet along the way! We demonstrate the depth and breadth of the organization to make people feel comfortable with their decision to move forward with Regis Corp. Although technology has dramatically changed the way we conduct our business, from lead generation to awarding a franchise, what has not changed is the importance of human connections throughout the process. n

KEYNOTE SPEAKERS

JORDAN BELFORT Author & The Wolf of Wall Street

JUDGE REINHOLD Emmy Nominated Actor

GET to the Head of the Class My first day in franchising came in May 1985, when I was a young college student. I had no idea where that decision would lead. After all, it was just a summer job! It turned out to be a great decision, introducing me to the world of “franchise development and growth through the addition of new franchisees”—something many of us still refer to as franchise sales. The world has taken many twists and turns since then, constantly challenging those of us in “franchise development and growth” to innovate, improve, or be left behind. One reliable way we stay ahead of the curve is to attend the Franchise Leadership & Development Conference every fall. It’s a chance to meet with other “forward thinkers,” put our heads together, and look for ways to improve ourselves, our teams, and our brands. What can you and I look forward to at this year’s event? A lot! Beyond the excellent speakers, sessions, and panels featuring new and refreshed content dealing with today’s needs, there also are opportunities for: • E xperienced CEOs to meet with fellow CEOs and press each other on the constraints and opportunities they’re facing. • N ewer franchise development executives to participate in basic skills sessions focused on the fundamentals of franchise sales success. • S ales managers to work on leadership skills to improve the performance of their teams and to review some ground breaking research that gets to the very heart of motivating and coaching outstanding sales talent. And of course there’s more—from inspiring keynote speakers to engaging educational sessions on how to build appropriate content, leverage technology, and attract the best candidates for our systems—as well as business solution roundtables and plenty of time to meet with your peers and solution providers and potential partners. One of the most interesting things about such a large group of talented sales professionals coming together for this conference is seeing how some of the greatest and biggest egos in our business interact, share, and work together. Let’s face it. We’re in sales! We like to close transactions, and to do that we must have supreme confidence in our own abilities and the systems we work within. I look forward to seeing you at the opening of the event, and to how we all respond to the many opportunities this conference provides. I hope you’ll join me in making this the best event yet, stretching our individual skill sets to new limits and challenging our peers around us to do the same. See you in Atlanta! Tom Wood, President & CEO, Floor Coverings International 2013 Conference Chair

Art Coley President AlphaGraphics

Debbie Shwetz Co-Founder Nothing Bundt Cakes

Greg Vojnovic Chief Development Officer Popeyes Louisiana Kitchen

Steve Dunn SVP of Global Development Denny’s

Shelly Sun CEO and Co-Founder BrightStar

Tom Wood President & CEO Floor Covering International

Mike Hawkins VP of Franchise Development The Dwyer Group

Greg Tanner National Director of Franchise Development Aaron’s

Grant Kreutzer Franchising Licensing & Recruiting Jack In the Box

John Teza Chief Development Officer Jersey Mike’s

Pete Lindsey VP Franchising Sport Clips

3 VP 6% 3 so C Fo 0% f D hie un C ev f D de EO elo ev rs, s, pm elo Pre 4% a n p en m d C sid CF 3 t, V en o-F ent Os, De 0% Ps t Of ou s, ve D CO of fic lop ire n Os d De ers ers ,C me cto ve , S MO nt, rs o l e o n s p Sa f F me ior les ra nt an nch d R ise ecr uit me nt

Richard Leveille EVP of Franchise Development Smoothie King Franchises, Inc.

Eric Little Senior VP Franchise Development Right At Home

Lori Merrall National Director of Franchise Sales Massage Envy Spas

Scott Nichols Director of Franchise Business Development SEARS Hometown & Retail Stores

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I look forward to this conference every year…It’s a great 3 days…I get to see old friends, meet new friends, visit with current suppliers and meet new ones. The educational content is always excellent, I have not left a conference yet without learning something new that I’ve taken back to my company and implemented immediately. Keep up the good work! Bill Chemero Jake’s Wayback Burgers Executive Vice President

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JORDAN BELFORT, Author & The Wolf of Wall Street In the 1990s, Jordan Belfort built one of the most dynamic and successful sales organizations in Wall Street history. During that time, he soared to the highest financial heights, earning over $50 million a year, a feat that coined him the name “The Wolf of Wall Street.” As the owner of Stratton Oakmont, Belfort employed over 1,000 stockbrokers and raised over $1.5 billion and started more than 30 million-dollar-companies from scratch. He’s acted as a consultant to more than fifty public companies. Along the way, he succumbed to some of the traps of the high-flying Wall Street lifestyle, going through a spectacular—and well-publicized—fall from grace. Taking invaluable lessons from the mistakes he made and the prices he paid, he has re-emerged as a globally recognized potent force behind extraordinary business success. Jordan’s two international bestselling memoirs, The Wolf of Wall Street and Catching the Wolf of Wall Street, have been published in over forty countries and translated into eighteen languages. His life story is currently being turned into a major motion picture, with Leonardo DiCaprio to star and Martin Scorsese set to direct.

JUDGE REINHOLD, Emmy Nominated Actor Judge Reinhold has been seen in over seventy-five motion picture and television roles and enjoys a 25-year relationship with an international audience of all ages. His many films include STRIPES, the multi-generational hit, FAST TIMES AT RIDGEMONT HIGH, RUTHLESS PEOPLE, and Disney’s box-office hit Christmas franchise, THE SANTA CLAUSE 1,2,3. Paramount Pictures’ BEVERLY HILLS COP 1,2,3 have played continually internationally over the past 25 years, making JUDGE a familiar presence worldwide. His cumulative box office ranks him the 50th highest grossing actor of all time (the-movie-times.com), and both FAST TIMES and BEVERLY HILLS COP were voted by the American Film Institute as two of the “Top 100 American Comedies.” He received an Emmy nomination for his performance in “Close-Talker” on Seinfeld and both his guest star appearances in Seinfeld and Arrested Development received two of the highest ratings on both series.

Fred Beilstein, Burger King Franchisee, Equicorp Partners

Jack Hough, Multi-Brand Franchisee

Dave Buzza, Chief Development Officer, AlphaGraphics

Madison Jobe, Chief Development Officer Pizza Inn/Pie Five

Art Coley, President, AlphaGraphics Greg Delks, VP Franchise Development, Firehouse of America, LLC

Darrell Johnson, President & CEO, FRANdata

Steve Dunn, SVP Global Development, Denny’s

Marc Kiekenapp, Founder, Kiekenapp & Associates

Jennifer Durham, EVP Franchise Development, Checkers

Grant Kreutzer, Director, Franchising Licensing & Recruiting, Jack In the Box

Kimberly Ellis, VP Franchise Development Snip-its Haircuts for Kids

Abid Khutliwala, Franchisee Checkers, T-Mobile

John Metz, President, RREMC Restaurants, LLC. Denny’s, Dairy Queen, Hurricane Wings, Old Chicago and Marriott Multi-Brand Franchisee; Franchisor of Hurricane Grill and Wings Hurricane, DQ, Marriott Scott Nichols, Franchise Business Development Director, SEARS Hometown & Retail Stores Anthony Padulo, VP Franchise Development Goddard Systems, Inc. Todd Peterson, VP Franchise Sales, Togo’s Sandwiches

Tom Epstein, CEO, Franchise Payments Network

Richard Leveille, CFE, EVP of Franchise Development Smoothie King Franchises Inc.

Paul Pickett, VP Franchise Development, Wild Birds Unlimited

Rocco Fiorentino, President, Benetrends, Inc.

Pete Lindsey, VP Franchising, Sport Clips, Inc.

Lorne Fisher, Founder, Fish Consulting

Mark Rinna, Franchisee, Popeyes Louisiana Kitchen

Eric Little, SVP Franchise Development, Right At Home

Sean Fitzgerald, EVP Franchise Development BrightStar Care

Gordon Logan, CEO & Founder, Sport Clips, Inc.

Brian Sommers, VP Franchise Development Jersey Mike’s Subs

John H. Longstreet, President & CEO Quaker Steak & Lube

Dan Stone, VP Franchise Development, Front Burner Brands, Inc.

Don M. Fox, CEO, Firehouse of America, LLC

Paul M. Mangiamele, President & CEO Bennigan’s Franchising Corp.

Shelly Sun, CEO & Co-Founder, BrightStar Franchising

Marty Greenbam, Founder, Greenbaum Marketing Communications

Scott Mellon, VP Franchise Sales Papa Murphy’s International

Martha Flynn, Director, Global Franchise Services Dunkin’ Brands, Inc.

Mike Hawkins, VP Franchise Development The Dwyer Group

Lori Merrall, National Director of Franchise Sales Massage Envy Spa

Greg Vojnovic, Chief Development Officer Popeyes Louisiana Kitchen Edward Waller, Co-Founder, CertaPro Tom Wood, President & CEO Floor Covering International Peter Wright, VP Franchise Development McAlister’s Deli

* At press time. View most up to date list of speakers at: FranchiseDevelopmentConference.com

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(Franchise Presidents and CEOs only – Lunch Included)

(Senior Executives and Sales Managers only)

The Franchise CEO Summit provides a private, high-level, and interactive environment for franchise CEOs to have strategic business conversations that typically wouldn’t, or simply couldn’t take place anywhere else. This year, through engaging discussions and facilitated roundtables, executive leaders will tackle challenges and share best practices that drill deep on culture, franchise growth, unit economics for franchisees and franchisor, new areas of growth, and risk management…

How do you effectively recruit, interview and vet candidates to make the right selection? In this engaging session, you’ll discover the attributes and profile characteristics of franchising’s best, revealed in a ground-breaking survey of top franchise sales professionals! Learn what’s in their DNA that can help you make better hiring decisions…

Program Leader: Gordon Logan, CEO & Founder, Sport Clips, Inc.

9:00am – 12:00pm Mastering Franchise Sales Fundamentals (Open to all) Are you seeking an accelerated course for closing qualified candidates? The market has shown encouraging signs of bouncing back from the recession. What, if anything should we adjust in our recruitment efforts to be more successful? This interactive session addresses the basic “how to’s” of constructing a franchise development program in today’s economy… Facilitator: Grant Kreutzer, Director, Franchising Licensing & Recruitment, Jack In The Box Panelists: Marc Kiekenapp, Founder, Kiekenapp & Associates; Scott Nichols, Franchise Business Development Director, SEARS Hometown & Retail Stores; Brian Sommers, VP Franchise Development, Jersey Mike’s Subs

Facilitator: Art Coley, President, AlphaGraphics Panelists: David Buzza, Chief Development Officer, AlphaGraphics; Eric Little, SVP Franchise Development, Right At Home

1:00pm – 4:00pm Building First-Class Programs for Multi-Unit Franchise Growth (Open to all) Learn from our panel of multi-unit franchisees and development pros in the know! 52% of today’s franchise units are now operated by multi-unit franchisees, and experienced multi-unit/multibrand operators continue expanding in spite of the economy. These high achievers seek opportunities to grow existing brands and diversify their portfolios by adding new franchise concepts. In order to attract these successful operators, you need to understand how empire builders find, investigate and buy additional brands for their portfolios… Facilitator: Rocco Fiorentino, President, Benetrends, Inc. Panelists: Lorne Fisher, Founder, Fish Consulting; Mark Rinna, Franchisee, Popeyes Louisiana Kitchen; Peter Wright, VP Franchise Development, McAlister’s Deli

* For full session descriptions visit: FranchiseDevelopmentConference.com

Wednesday, Oct. 9th 5:30pm – 8:30pm PEP RALLY – EXHIBITS OPEN

Thursday, Oct. 10th 7:45am – 8:25am BREAKFAST CAFETERIA – EXHIBITS OPEN 8:30am – 10:15am GENERAL ASSEMBLY OPENING BELL Therese Thilgen, CEO, Franchise Update Media Group

STATE OF THE INDUSTRY Darrell Johnson, Franchise Economist & President, FRANdata

WORLD-CLASS KEYNOTE: Jordan Belfort, The Wolf of Wall Street

10:15am – 10:25am BREAK 10:30am – 11:10am GENERAL ASSEMBLY Steve Olson, President, Franchise Update Media Group; Tom Wood, President & CEO, Floor Coverings International

Annual Franchise Development Report Card Get the latest top-line intelligence on sales and marketing costs, budgets and top sales sources; online sales results from ad portals, pay-per-lead, site optimization and social media; close ratios, cost per lead, cost per sale, application and discovery day closing ratios; and much more…

2013 Franchisor Mystery Shopping Scores Are your recruitment grades high or low? Discover what franchisors today are doing well and not so well in the competition for franchise candidates. Each year our team of mystery shoppers posing as qualified franchise candidates contact participating franchisors attending this conference to rank their website development and follow-up performance. (Award winners will be announced at the STAR Awards Dinner.)

11:15am – 12:15pm CONCURRENT CLASS ROOMS I. Leveraging Recruitment Technology: Closing Performance Gaps in Every Stage of Your Development Lead and sales process automation delivers performance intelligence that can significantly increase your selling success. Capturing critical metrics helps uncover and overcome weaknesses in your franchise recruitment. Session leaders will address the benchmarks to greater recruitment success… Facilitator: Mike Hawkins, VP Franchise Development, The Dwyer Group Panelists: Jennifer Durham, EVP Franchise Development, Checkers; Sean Fitzgerald, EVP Franchise Development, BrightStar Care II. Growth Targets: Building Out New & Underdeveloped Markets What research and tools are most productive for identifying key expansion markets for your brand? How do you determine competitive, economic and consumer trends, ethnicities, behaviors and lifestyles to make intelligent planning decisions? What about entrepreneurial climates and regional preferences or lack of preferences that may come into play for your products or services? In this session our panel of experts will provide anecdotes and resources you can turn to for help with your planning and execution… Facilitator: Richard Leveille, CFE, EVP Franchise Development, Smoothie King Franchises Inc. Panelists: Martha Flynn, Director, Global Franchise Services, Dunkin’ Brands, Inc.; Madison Jobe, Chief Development Officer, Pizza Inn, Inc.; Todd Peterson, VP Franchise Sales, Togo’s Sandwiches

* For full session descriptions visit: FranchiseDevelopmentConference.com

III. Attract Quality Candidates! How to Capture Buyers with the First Class Marketing Successful prospect generation fuels franchise growth. Developing a productive lead generation plan isn’t easy, for what worked yesterday may not be cutting it today. This session will address short and longer term strategies that can prove most effective; defining your prospect audience; crafting compelling messages for each medium you use; identifying lead sources that target your buyers to produce inquiries; and measuring your results to improve performance… Facilitator: Pete Lindsey, VP Franchising, Sport Clips Panelists: Greg Delks, VP Franchise Development, Firehouse of America, LLC; Scott Mellon, VP Franchise Sales, Papa Murphy’s International; Kimberly Ellis,VP Franchise Development, Snip-its Hair Cuts for Kids; Dan Stone, VP Franchise Development, Front Burner Brands, Inc.

12:20pm – 2:00pm LUNCH ROOM – EXHIBITS OPEN 2:10pm – 3:15pm GENERAL ASSEMBLY CEO Panel: Building Recruitment From All Sides The tight race for franchise performance has spawned a new organizational mindset, driven by a holistic approach to growth. Learn how growth-driven brands are engaging their senior executives to take on more active participation in their franchise development program… Panelists: Don Fox, CEO, Firehouse of America, LLC; John Longstreet, President & CEO, Quaker Steak & Lube; Shelly Sun, CEO & Co-Founder, BrightStar Franchising

3:20pm – 4:30pm CONCURRENT CLASS ROOMS Taking Buyers Across The Finish Line This dynamic breakout session is for franchisors seeking better answers for increasing sales in our very competitive recruiting environment. How do you adapt your presentations to today’s more discerning buyers? What types of incentives are you offering to fuel growth with new and current franchisees? What about franchise brokers, or outsourcing your development? For those with area development programs, what are the keys to ensuring your AD’s are achieving their recruiting goals?… Session A. For Franchisee Investments of up to $150,000 Facilitator: Ed Waller, Co-Founder & VP, CRM, CertaPro Painters Panelist: Paul Pickett, VP Franchise Development, Wild Birds Unlimited Session B. For Franchisee Investments of $150,000 to $500,000 Session C. For Franchisee Investments of $500,000 and higher Panelists: Paul Mangiamele, President & CEO, Bennigan’s Franchising Corp.; Anthony Padulo, VP Franchise Development, Goddard Systems, Inc.

4:35pm – 5:30pm Shop Talk: Business Solutions Roundtables I plan on sending my entire team. It is among the best ways to raise the bar of performance, by keeping my organization up to speed with the latest trends in sales. Bob Franke, VP of Global Franchise Development Steak N Shake Enterprises, Inc.

Tackle today’s hottest development issues and solutions, engaging with your peers on specific drill-down topics that matter most to you. Tables will be facilitated by industry experts and rotate after 25 minutes to maximize your learning experience…

* For full session descriptions visit: FranchiseDevelopmentConference.com

Thursday, Oct. 10th 5:40pm – 6:30pm GENERAL ASSEMBLY Commencement Address Principal Judge Reinhold, Emmy Nominated Actor

7:00pm – 9:00pm GRADUATION CEREMONY & BANQUET Honoring the Best in 2013 Franchise Development

FRIday, Oct. 11th Admission to the STAR Awards Dinner is included in conference registration. Judge Reinhold to deliver awards.

Hall of Fame Awards Presentation Franchisor - Presented to the outstanding franchisor for their superior performance as a STAR Award winner in franchise development best practices at the Franchise Leadership & Development Conference. Sponsor - Presented to the outstanding business services supplier for providing years of quality services and education to franchise executives at the Franchise Leadership & Development Conference.

8:30Aam – 9:30am Breakfast Session: Show Me the Money! Franchisors & lenders share traditional and creative funding successes: the steps to take and how to position your brand to help get the capital you need. Facilitator: Darrell Johnson, President & CEO, FRANdata

9:30am – 10:30am Mindshare: Open interactive forum with successful multi-unit franchisees Panelists: Fred Beilstein, Franchisee; Jack Hough, Multi-Brand Franchisee; Abid Khutliwala, Multi-Brand Franchisee; John Metz, Franchisee & Franchisor; Mark Rinna, Franchisee

Hands down, the FLDC is a must attend event! I recommend this conference so often that franchisors are starting to think I get kick-backs. This conference provides the best networking and learning opportunities for both franchisors and supplies. You will not regret your attendance! Kim Woods, Senior Client Consultant Franchise Solutions

Franchise Updateâ&#x20AC;&#x2122;s Leadership and Development Conference is the must-attend conference for anyone in Franchise Development. If you work in franchise sales or franchise lead generation, this event offers the most valuable insight. Thomas Scott Sr. Consultant, Lead Generation Franchise Performance Group

InterContinental Buckhead 3315 Peachtree Road NE Atlanta, GA 30326 404- 946 - 9191 or 877 - 422 - 8254

Hotel Reservations: For the best rate, please call to book your room as soon as possible. Identify yourself as part of the Franchise Leadership and Development Conference to get the special rate. A limited number of rooms have been put aside for conference attendees. This rate expires on September 9, 2013, or when the room block is full.

Our Special Nightly Rates Single/Double $179.00 | Triple $199.00 Quad $219.00 | Suites $399.00 For further information regarding the event please visit the Conference site at:

FranchiseDevelopmentConference.com

The educational sessions were very insightful no matter what level an individual may be in their franchise business career. Definitely a great ROI. Look forward to next yearâ&#x20AC;&#x2122;s conference. Jesse Curry, Director of Franchise Sales Massage Envy

4 easy ways to register:

Only franchisors are eligible to register for this conference. If you are a supplier interested in sponsoring this event, please call

800-289-4232. Ext. 202

Main Conference Includes:

Wed., October 9 – Evening Welcome Reception. & Thurs., October 10 – Breakfast, Keynotes, Lunch, All Sessions, Star Awards Dinner. Friday October 11 – Breakfast and Morning Sessions Full Agenda and session descriptions are available on the conference website at: Franchisedevelopmentconference.com

MAIN Conference: Early BIRD Rate (exp. 8/31/2013)

$895

1. Online: FranchiseDevelopmentConference.com

2. Phone: 800-289-4232 ext. 216 3. M ail Registration form

(available for download on website) with check made payable to:

ranchise Update: F 634 N. Santa Cruz Avenue Suite 200, Los Gatos, CA 95030

4. Fax Registration form with credit card information to: (408) 402-5738

Refund and Substitution Policy: Please provide cancellations to Franchise Update Media Group in writing by Sept. 13th, 2013. Your registration fee will be refunded, less a $100 processing fee. After Sept. 13th, 2013, no refunds or credits will be issued. Substitutions may be made at any time. Group discounts ARE available.

Call (408) 997- 7795 ext. 216

Regular RatE $995

Wednesday, October 9th Accelerated Pre-Conference Workshops (Additional Fees Apply)

arly Bird Rate E

9:00am to 4:00pm Franchise CEO Summit $300

Regular Rate $600

(Franchisor Presidents and CEOs Only: Lunch Included)

9:00am to 12:00pm Mastering Franchise Sales Fundamentals

$150

$300

(Open to all)

10:00am to 12:00pm Create Compelling Content & Capture More $150 $300 Franchise Buyers 1:00pm to 4:00pm Achieving High-Performance Sales Management

$150

$300

(Franchisor Sales Managers & C-level Execs Only)

1:00 PM To 4:00 PM Building First-Class Programs for Multi-Unit Franchise Growth (Open to all)

$150

$300

Hurry! Don’t Miss Out oN the Best Rates!

Receive Attendees its ed 300 CFE Cr

SUccESS IS In yoUr fUtUrE… GET IN THE GUIDE. THE #1 RESOURCE FOR EXPANSION - MINDED MULTI-UNIT FRANCHISEES.

WHO’S IN THE TOP M S RANKINGS A IS HAVING MORE BRANDS BETTER?

- 10,000 Multi-Unit Franchisees - New Multi-Unit Franchisee Magazine Subscribers

EVENT BONUS DISTRIBUTION Multi-Unit Franchising Conference: Las Vegas International Franchise Expo: New York City West Coast Franchise Expo: Anaheim 2015 Franchise Expo South

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ChOOSE BETwEEN TwO fORmaTS: MULTI-UNIT

Fast Franchise Facts Franchising Since: Founded in 1936, franchising since 1952. Total Franchise Operating Units: 109 Bob’s Big Boy Restaurants and 25 Frisch’s Big Boy Restaurants all operating in the US.

- Full Page listing with up to 3 images

Qualifications

Company Operating Units: 20 Bob’s Big Boy Restaurants

Bob’s Big Boy is seeking franchisees committed to the operations of their restaurants and an interest in multi-unit ownership. Business and restaurant experience preferred. Financial requirements include a documented net worth of $500,000 and cash liquidity of $250,000.

Capital Investment: $600,000 – $3,000,000

Demographics

SC, NC, WV and MD

Preferred trade area criteria includes: - Population of 30,000 within 2 miles and 10,000 daytime pop. - Heavy traffic with mix of economic generators e.g. quality retail, business, School, and hospitals.

and 96 Frisch’s Big Boy Restaurants all operating in the US. Franchise Fee (per unit): $40,000 Royalty Fee (per unit): 4% Advertising fee (per unit): 3% Earnings Claims: Yes Build-Out Options: Inline and Free Standing Available Territories: CA, AZ, TX, LA, NM, AL, MS, FL, GA,

Rankings & Awards Hot Concept 2007

Contact Steve Facione Vice President of Development (586) 755-8113 franchiseinfo@bigboy.com www.ownabigboy.com

MULTI-UNIT

If you enjoy working with the public in a fun retail environment, and have the ability to follow a well-defined successful program, Pet Supplies “Plus” is for you.

Bob’s Big Boy is a family casual dining restaurant, an iconic highly recognized Brand, and Home of the Original Double Deck hamburger. Bob’s is making Franchise Territories available to candidates who possess a passion toward restaurant service and creating the “It’s your Big Boy” guest experience.

Our in-depth training program and on-going operational support after your store opens will provide you with all the tools you need to become a successful Pet Supplies “Plus” owner.

OPPORTUNITY

Description

SITE LOCATION

Assistance

Be part of the growing $53 Billion Pet Supply Industry! Pet Supplies “Plus” is the largest franchised specialty pet supply retailer in the nation, with over 240 stores in 23 states. Our smaller store sizes and lower operating costs allow our franchisees to be successful in a variety of retail climates. PSP stores offer a selection of items that rival that of our big-box competitors, in a much more convenient and pleasing shopping environment.

Bob’s Big Boy provides: - A site criteria review package. - Support during design and construction, as well as, sources for equipment, millwork, smallwares, and food product. - Training of your management team. - Strategic marketing ideas. - A Franchise Business Director assigned in a support role.

Demographics Trade areas for successful Pet Supplies “Plus” stores have a population base of 75,000 or greater. We target middle to upper-income shoppers, and prefer high retail traffic areas. Our smaller-sized stores are convenience oriented, so we can locate our stores closer to our customers homes than the larger big-box warehouse style competitors.

Contact

Owning a Big Boy® franchise is like owning a piece of history. For over 75 years people have flocked to Big Boy® to enjoy delicious meals. For more information on becoming a Big Boy® franchisee visit the virtual brochure below.

Marc Kiekenapp Direct (480) 664-0851 Mobile (480) 266-0169 mkiekenapp@petsuppliesplus.com

www.ownabigboy.com

www.petsuppliesplusfranchise.com

This is not an offer to sell a franchise. An offer can only be made through our Franchise Disclosure Document (FDD). ©2012 Big Boy International LLC. Bob’s Big Boy and Big Boy are registered trademark of Big Boy Restaurants International LLC.

DON’T mISS ThIS aNNUaL OPPORTUNITY. Contact Sharon Wilkinson at 800.289.4232 ext 202 or email sales@franchiseupdatemedia.com

Franchisee candidates shouldhave a minimum net worth of $1 million and be able to make an equity contribution of no less than 50% of the total project cost.

FOOD

Fast Franchise Facts Franchising Since: 1989, founded 1988 Multi-Unit Franchisee Operating Units: 53%

TI-UNIT Buyer’MUL s Guide

Total Franchise Operating Units: 152 Company Operating Units: 92 Capital Investment: $650,000–$750,000

Demogra phics

Franchise Fee (per unit): $40,000 Royalty Fee (per unit): $3,000/mo +2.25% over OPPO $83,333/mo RTUN

Descript ion ITY

Advertising fee (per unit): 2,500 per month

Earnings Claims: No Fuddrucker ® s opera franc Build-Out Options: 8,000 to hises 10,000 squaretesfeet, and2nd SITE LOCATION restau rants that generation space, In-line orspeci Free-Standing alize in high qualit upsca y, hamb Available Territories: Single-leand multi-store urgers inareas availvariety of sizes Pet Supplies “Plus” will work able throught eastern and southern United States.aVisit www. that cooked are to order pspfranchise.com for detailed market availability. with you to secure the best . We use only the freshest sites in the best trade areas. ingredients and we give We can work with local real our guest the “pow s er estate brokers, if necessary. encourage of choice.” We guests to Franchisi Our demographic program their own garnish ng Since entrees can tell you not only how : 1984 by provid ing an array Multi-Uni many people live in a given t Fran of farmproduce Total Fran trade chise e Operatin and condi fresh types chise area, but what Our restau ments g Units : 65% Company of petsOpe rants sserve . theyratin own g and how Units USDA fresh, Operatin 100% : 122 much they never g spend Units:on them. premium frozen Capital 58 beef, and Investmen on-premise feature t: $250 Franchise ,000 to baker ies where 400,000 bread and Fee (per dessert unit): $50,0 Royalty baked fresh items are Fee (per 00 daily. unit): 5% Advertisin g Fee (per Earnings unit) Times Magazine: : 0.25% ClaimFranchise s: Yes Build-Out Consistently featured in the Options: “Top 200 Chains” Traditional FreeFranchising Standing, Venues ranking since End in 2006, and Cap, and Available NonTerritorie 2010 ranked as #119 in terms s: Territo ries availa of overall sales. ble throu ghout the U.S.

Assistance

Fast Fra nchise Facts

• Minim um popul ation 50,000 in a 3-mile of radius • Avera ge house hold incom of $55,0 e 00 and above • Predo minan and childr ce of families en • Conce ntration of office and/or s retail center s • Emplo yee popul ation 20,000 in a 3-mile radius • Traffic count cars a day s of 30,000+

Rankings & Awards

Contact

MULTI-UNIT BUYER’S GUIDE 2012

Keith Cole (800) 886-4 man | Vice President of Franc keith.colem 600 hise Devel an@fuddruc opment kers.com www.fuddr uckers.com

Qualifica tions

Potential Fuddrucker sees must s be comm franchito being itted hands-on owne operators and follow r/ through ing with requiremen all training financial ts. Minimum requir having liquid ements includ e resou rces of $250,000 to $400 K and a net worth of $750 ,000 to $1 millio n dollar s. SITE LOCA TION

Assistan ce

MULT I-UNI

T BUYE R’S

GUID E

2012

LD AS K

E D I T I O N

Qualifications

Description

our burgers.

MULTI-UNIT BUYER’S GUIDE 2012

A N N U A L

SHOU

Buyer’s Guide

SERVICES

OPPORTUNITY

An opportunity As big As

BUYER

6 TRENDS YOU NEED TO KNOW

Buyer’s Guide

FOOD

EVERY

THE 50 LARGEST MULTI-BRA N FRANCHIS D EES

- Digital edition available on Multi-Unit Franchisee Channel of Franchising.com: franchising.com/multiunitfranchisees

- 1/2 Page listing and 1/2 Page Ad

TIONS

S P E C I A L

DISTRIBUTION

10 QU ES

BUYER’S GUIDE

Fuddrucker s lection suppo provides site seinformation, rt, demograph ic broker coord services, ination site architectura survey trips, and l and bid review.

Right Market. Greater Results.

Grow Market Lead

International Challenges remain

By BILL Edwards

Coming to America? Overseas brands face opportunities and challenges

hile many U.S. franchisors are now expanding into other countries, seeking new growth and less competition, international franchisors are finding the world’s largest economy a target too good to pass up. But are the streets of the USA still paved with gold? “Many international franchisors salivate at the prospect of entering the United States, the world’s largest consumer market,” says Ray Hays, senior director of EGS in a recent Entrepreneur magazine article. “Perceived barriers to entry for non-U.S. franchisors include a litigious and highly regulated legal environment, complicated multi-cultural demographics, fierce competition, and high investment requirements. In short, the U.S. mar-

Franchiseupdate Iss u e III, 2 0 1 3

ket is often viewed as too expensive, risky, and complex, but many of these perceptions are overblown myths. In reality, the franchising opportunity in the U.S. far outweighs any barriers to entry,” he says. According to the IFA’s Economic Impact Study, in the United States: there are more than 900,000 franchise business locations; more than 3,500 different franchises; they create more than $2.3 trillion in sales annually; 1 in every 7 jobs is tied directly or indirectly to franchising; and 54 cents of every retail dollar is spent at a franchise. Every product and service in the U.S. is provided by a franchise. The U.S. has well-defined franchising laws. And, most important, the U.S. market is open to good new concepts from other countries.

Still, there are considerable challenges for a foreign franchise wanting to succeed in the U.S. market. Trademarks, domain names, intranets, franchise advisory councils, state franchise laws, extreme sector competition, property leasing, translation, detailed manuals and systems, marketing limits, and measurement conversions are just a few of the U.S.-centric aspects of franchising that many other countries do not have. Other challenges are dealing with the large geography, the diversity of the culture and economy, and the sheer size of 310 million consumers. And often, a foreign franchisor thinks they will find a country master franchisee to develop the entire USA. According to Mark Seibert, CEO of iFranchise, the attributes any franchise needs to succeed in the U.S. are: • It needs to be credible. Does your company have experienced management? A track record? Is the concept proven? • It must be unique. Is your business adequately differentiated from its competitors? Competition is high in the U.S. Does it have a sustainable competitive advantage? • It needs to be teachable. Are the systems in place? Are operating procedures documented in manuals? • Most of all, the franchise needs to provide an adequate return to its franchisees. In the U.S. today, franchising is all about good unit economics. According to Darrell Johnson, CEO of FRANdata, a company that documents the performance of franchises, two key topics are important to understand before a company starts taking active steps to enter the U.S. 1) Capital. How much capital will it take to get established, and what should be expected for a return on capital over time? 2) Competition. Who is the target audience? Will they be receptive to the product/service? Do U.S. brands provide similar products/services now? How established are these competitors? How many use the franchise business model? What are the franchised competitors’ growth models, pattern of geographic growth, franchisee characteristics, ap-

Inbound examples abound

Jeff Elgin, CEO of FranChoice, sees a broad swath of franchises entering the U.S. “A new entrant is Metal Supermarkets. They sell odd lots of metal to companies, and there is a huge market with lots of demand for this and great margins for the franchisee. This franchise’s tag line is ‘the world’s largest supplier of small quantity metals,’ and it comes from Canada. They consider themselves the ‘convenience store for metals.’” Filling a niche is a very good reason for an international franchise brand to enter the USA market. Le Pain Quotidien is an example of a foreign franchisor that took an intelligent, measured path to success in the U.S., says Jeff Kolton, principal of Franchise Market Ventures, who brought this high-end food brand to the U.S. some years ago. Based in Belgium, with international licensees in 17 countries, the company established an office in New York City and hired a management team with experience

at building similar chains in the U.S. Instead of launching a franchise program in the U.S., they grew organically through company-owned units, slowly creating the infrastructure to support future growth. “They continue to have all their tables and chairs made by the same company in Europe to maintain brand integrity, work off the same menus for their breads, and lean toward menu consistency around the world,” says Kolton. Ichiro (Roy) Fujita, president of I. Fujita International, helps Japanese brands enter the U.S. In 2010 he helped Gyu-Kaku, a Japanese BBQ brand, enter the U.S. Today the company has 23 units in 6 states—company owned and franchised. And Fujita says they are all highly profitable. In Australia, Alan Branch, managing director of Global Franchise Partners, is helping Floral Image enter the U.S. Floral Image founder Ben Trussell says, “The USA will be the biggest market for Floral Image and a challenge we are ready for. I smile every time I hear someone say, ‘I just can’t believe these aren’t real, they look better than real flowers!’” Again, filling a niche. Lesley Hawks, vice president, western region, for St. Jacques Marketing, believes another Australian import will ride the wave of success in the U.S., de-

spite delays. “I think Cherry Blow Dry Bar has been surprised at the long time it has taken to get under way here in the U.S.—selecting iconic sites, the lease process, disclosures, infrastructure, and the like. However, generally they find business much easier than in Australia, and the U.S. franchise arena much more vibrant.” The brand, which is tapping into the high-end, high-growth women’s hair blowout-only craze, has two sites in construction, in Florida and New York City, with a third location being finalized in Beverly Hills. In summary, if an international franchise fills a niche in the U.S. marketplace, follows the legal requirements, has strong operating systems, training, support, and good unit economics, there is a place for the brand in the largest franchise market in he world. n

Grow Market Lead

proach to product/service marketing, and strengths/weaknesses? Thousands of U.S. franchise companies with performance histories can be analyzed in many sectors for the inbound franchisor to answer these questions before they invest.

William G. Edwards, CEO of EGS, LLC, has 40 years of international business experience. He has lived in 7 countries and worked on projects in more than 60. In addition to having been a master licensee in 5 countries and in charge of international operations and development for a U.S. franchise, he has advised more than 50 U.S. companies on their international development. Contact him at 949-3751896, bedwards@egs-intl.com, or see his blog at edwardsglobal.com/blog.

Some Overseas Franchises in the U.S. Food

Education, Retail, Service

Beard Papa’s (Japan)

Aussie Pet Mobile (Australia via N.Z.)

Boston Pizza (Canada)

Bark Busters (Australia)

Giraffas (Brazil)

Benneton (Europe)

Gyu-Kaku (Japan)

Body Shop (United Kingdom)

Jinya Ramen Bar (Japan)

CertaPro Painters (Canada)

Le Pain Quotidien (Belgium)

Fibrenew (Canada)

Little Sheep (China, Yum Brands-owned)

Kumon (Japan)

Manchu Wok (Canada, Hong Kong-owned)

Liquid Capital (Canada)

Maoz Vegetarian (Netherlands)

Metal Supermarkets (Canada)

100 Montaditos (Spain)

Pirtek (Australia)

Pollo Campero (Central America)

ProntoWash (Argentina)

Tim Hortons (Canada)

TeaGschwendner (Germany)

Vom Fass (Germany)

Tutor Doctor (Canada)

85°C Cafe (Taiwan)

WSI (Canada)

Franchiseupdate I s s u e I I I , 2013

Grow Market Lead 62

Sales smarts By Marc Kiekenapp

Profiling Success Raise your odds of finding great candidates

ave you ever noticed over the years that you come across a candidate who seems to be a perfect fit for your franchise opportunity, and all you have to do is lead them down a mutual exploration process to the sale? What do you think caused that to happen? Is it just a “bluebird” candidate who would have invested in the first franchise they looked at? Or was it a candidate who truly understood your concept and believed there was a market for the product or service in their area? There are great lessons to be learned from a candidate who profiles so perfectly for your business. So how do we use this knowledge as professional sales consultants to facilitate a lead generation program and a sales qualification process that attracts the right candidate, along with a sales process that allows them to discover there is a good match for their personal and business goals? Profile, profile, profile. This is the key to more sales to better-qualified candidates. Knowing what the majority of your franchisees have in common that attracted them to your franchise concept is a fantastic tool. Use this information to determine where to advertise, and what your message should deliver, to create enough initial interest to allow the sales qualification process to start with that phone call or form fill. Taking the time to survey your existing franchisees to discover what they do when they are not operating the business could be very helpful in making media decisions for lead generation. Conducting a survey of your owners to find out what TV shows they watch, what radio stations they listen to, what publication they read, and what professional backgrounds they came from can reap large rewards. Franchiseupdate Iss u e III, 2 0 1 3

Learning this will allow you to choose the correct media to search for candidates with similar personalities and traits, and will get you in front of the correct audience. We have found that this kind of targeting generates many fewer leads at higher cost—but the end results of lower cost per sale and reduced wear and tear on your sales team are the upsides. Talking with candidates you have correctly profiled allows you and your team to focus your time and expertise to be more productive and helpful with candidates who have a high likelihood of becoming part of your system. 5 key points

Candidates must know the following five points to feel confident in signing on with your brand: • Sampling the product or service. Candidates must believe in and love the product or service. They need to feel they are making a difference in the community they serve, and that they can be the premier player in the market. When possible, this is a step that should be completed early in the process. • Establishing a need for the product or service in their market. Candidates need to establish that the market will support their new venture by understanding the competition and how they match

up, so they can be competitive and win. This can be accomplished by providing them with “homework assignments” and an organized approach to shopping the competition, and showing them how they will match up and what tools are provided to help them succeed. • Confidence to operate the franchise unit. Candidates must have the confidence in their ability to operate the business. This is accomplished by explaining to them your in-depth training, sharing the experiences of the key executives, and the support they can expect once they become part of the family. This can also be accomplished during the validation process by helping them seek out existing franchisees in similar markets and with similar previous careers. • Ability to attract customers at a reasonable cost. Candidates need to know that the marketing works! Sharing your marketing plans, advertising pieces, Internet presence, and all the tools that have been created and have been successful attracting customers is a huge confidence builder. This can also be accomplished by proper disclosure in your FDD. Results, matrix, cost per customer acquisition, and even average close rates can then be shared and validated by talking with existing owners. • Have a reasonable ROI. Finally, and most important to all candidates, is the ROI. This is an area that you can either be limited to in your conversation because of your Item 19 FPR, or be able to have a clear and concise conversation with your candidates on the actual operating numbers of the business. If you have decided not to give detailed information this process is much longer, frustrating, and must be discovered by speaking with existing owners. These five points, along with other key differentiating factors, have to be included in your sales qualification process. Spend your time and advertising budgets attracting candidates who have the best opportunity to fit your system and follow the process, and award more franchises to higherquality individuals. Happy Selling, Marc

By Darrell Johnson

Support Pays Off Fewer closings, higher royalties

n average, 43 percent of franchisor G&A—money and human resources—is spent on functions that directly support franchisees. These include franchise development, site selection/pre-opening activities, training, field operations, compliance, marketing, and legal. The question franchisors and franchisees both should be asking is how effective these resources are. We know we get what we measure. Let’s start with what might be good objectives to achieve. First, the franchisor perspective. Having a franchisee who opens a unit more quickly will generate more royalty revenue. If that franchisee also gets to breakeven cash flow more quickly, they will be a higher performer and require less downstream support. This is conceptually understood, but probably not fully appreciated. For franchisees who struggle to get to breakeven, downstream support can be significantly more costly in terms of actual franchisor dollars and human resources around field support, compliance, and legal. And, over the long term, even greater costs exist with underperformers in terms of perceptions around those operators—costs not often factored in. These perceptions affect other franchisees, prospective franchisees, lenders, and the general public. This is why franchisors try so hard to find the “right” prospects for their systems. While it is clearly important to get the front end of the process right, the impact that all the other functional activities can have on the outcomes is significant and generally goes unmeasured. If it’s unmeasured, it’s undervalued and, by extension, suboptimally managed. From the franchisor’s perspective, a lot of money is spent up front to get a franchised unit started. This includes such things as development, training, and site selection expenses. Recovery of those funds is in the form of initial franchise fees and royalty fees. Generally, it takes a franchisor the better part of two years or more to break even. Direct Contribution Margin per Franchise Unit Over 10 Years

There are many relationships on the franchisor side of the franchise business model that go unmeasured. The potential is significant for franchisors as they start to fully value

an understanding of those relationships. For instance, one should reasonably expect a relationship between the amount of initial franchise fees (IFFs) a franchisor charges up front and the amount of up-front support a franchisor provides. By extension, if a franchisor is charging more up front and actually providing more support, that franchise system should have a better performance outcome. Guess what? It turns out that logic prevails. We analyzed a sample of 100 franchise brands that have bank credit reports, allowing us to gain insights from the much more extensive information those reports provide. We found that there is a relationship between initial franchisee fees and the amount of support a prospective franchisee should expect. Take training, for instance: a sampling of 41 brands across 11 industries showed that brands with higher IFFs provide significantly more training. The same holds true for other functional support levels. But does higher support lead to better outcomes? Again, the answer is yes: a sampling of 100 brands (50 food and 41 nonfood) showed that higher IFFs correlated with both higher continuity rates and lower real unit failure rates.

Grow Market Lead

Market trends

Real Unit Failure Rate

These results aren’t simple data exercises. They are screaming at you about a better way to allocate capital and manage your functional responsibilities. Perhaps the single biggest untapped opportunity for franchisors is to understand the relationships between the functional responsibilities they have and the results those responsibilities produce. That can be done only if we begin to standardize some measurement terms and then participate in blind or open comparisons across brands and sectors. The hotel industry has shown the power of such efforts. I started out by noting that both franchisors and franchisees should be asking questions about the effectiveness of franchisor support. Then I took the franchisor’s vantage point to discuss it. From a franchisee perspective, how much of the above is of interest? I think the answer is all of it. If franchisors can justify their IFFs and royalty rates with a level of support that produces better outcomes, the best and the brightest franchisees will be at their doorsteps. n Darrell Johnson is CEO of FRANdata, an independent research company supplying information and analysis for the franchising sector since 1989. He can be reached at 703-740-4700 or djohnson@frandata.com. Franchiseupdate I s s u e I I I , 2013

Grow Market Lead 64

It’s closing time BY STEVE OLSON

Wasting Your Website? Don’t misuse your greatest development tool!

hen recruiting franchisees, all roads lead to your website. So ask yourself, are you capitalizing on this powerful prospect generator? How you design your website and promotional pages can make or break your online lead generation success. If your presentation isn’t first or second best in your business category, you can lose to your competitors. In the eyes and minds of the potential buyer, your web presence defines “who you are.” Invest the time and effort to get it right. As an exercise, think of your recruitment site as your own Broadway stage. The curtain goes up as interested visitors come to see your franchise act. Does your performance motivate and compel the audience to rise from their seats and applaud? After all, you may excel in driving visitors to your website, but if your story doesn’t engage prospects to respond, you’re just another Broadway flop. There is no second act, as buyers abandon your theater for a better franchise showing. Check these best practices for delivering a response-driven recruitment site. • Directly refer franchise inquiries to your franchise page, not your home page. Prospects are looking to find out about your opportunity, not to buy your products and services. If your franchise site is part of your consumer site, then create a franchise URL (e.g., “magicleanfranchise.com”) that sends visitors directly to your franchise page. This also helps you separate and track consumer visitors versus franchise visitors. • Avoid the sea of sameness with compelling messaging. Buyers yawn at generic statements like: “We provide great startup training and support for Franchiseupdate I ssu e III, 2 0 1 3

our franchisees.” Who doesn’t! Change that meaningless copy like one franchisor did to: “As a franchise owner, we help you 24/7 with our live support line during your first three months in business.” • Write “micro content” copy that is quick and concise. This is an electronic medium, a miniature TV screen that must tell your story in as few words as possible. Instead of “When you come to our comprehensive training class our operations team will share

You may excel in driving visitors to your website, but if your story doesn’t engage prospects to respond, you’re just another Broadway flop. with you everything you will need to know so that you can get off to the right start,” simplify this to: “Your 40 hours of training gives you the key tools and systems to start up your business.” • Less is more, don’t reveal the whole story. Franchise sites are often overloaded with information, which can confuse and lose visitors, forcing them to decipher too much at once. • Your site should deliver a multisensory experience. Engage guests with striking photos, videos, and/or audio to enhance your brand quality and professionalism. Still posting traditional web brochures? That signals “dated” to today’s discerning franchise buyers.

• Don’t burn $50 leads, which is the current median ad cost. Respond ASAP by phone and email. Post on your lead form “We will contact you within 24 hours.” Research of 900,000 leads by eMaximation last year revealed that 61 percent of applications are received with 24 hours from the time of initial inquiry. In short, first to the door wins. And, if you really want your brand to stand out, send a brochure or thankyou note by mail. The vast majority of franchisors no longer bother with this “high touch” correspondence. • Review your site for broken links. Too many times I hear stories of lead forms and links malfunctioning for weeks, or even months, before someone discovers what happens. Assign an employee to test drive your website every week to ensure that you aren’t throwing away potential prospects without knowing it. I once sat in the office of a client who complained that he hadn’t received a lead in quite some time. I asked if I could check out his website and he was dead right about no leads… his inquiry response form wasn’t working! • Improve your response rates. Google Analytics can help you increase your lead flow. It’s free, so there’s little excuse not to use it. The key metric to start with is determining what percentage of your site visitors currently submit your franchise response form. In a research study conducted for Franchise Update, the average rate was 1.7 percent. Through continuous measurement and improvements, some sites have doubled and more than tripled their performance by analyzing the effectiveness of their web pages, design, and content. It’s time to generate more deals. Your recruitment site has one objective: to engage and compel qualified prospects to respond to your franchise opportunity. Invest in this marvelous marketing engine and it can pay off handsomely! n This is an excerpt from my Amazon.com best-selling book, Grow to Greatness: How To Build a World-Class Franchise System Faster. For ordering information, go to www.growtogreatness.net.

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Franchise LAW

BRINGING FRANCHISORS AND LEGAL SERVICES TOGETHER

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Reducing Resistance to System Changes Cheng Cohen

FLN FranchiseLAW By Samuel G. Wieczorek and Michael R. Daigle

Reducing Resistance to System Changes

icture this: You’re a restaurant franchisor with a well-known brand and two day parts, lunch and dinner. Despite your famous hamburgers and fries, you’ve seen a decline in average unit sales. Consultants and market studies indicate that your competitors are experiencing significant sales growth during breakfast hours, so you’ve had your talented chefs develop a delicious new breakfast menu. To counter the sales slump, you want your franchisees to offer the new breakfast menu, but it will require that they purchase new equipment and hire more staff for the expanded operating hours. Franchisees are grumbling. One of the core advantages of a franchise system is the franchisees’ ability to associate with a well-known brand and to leverage the brand’s goodwill that derives from a consistent customer experience across all units. To maintain consistency, franchisors demand compliance with uniform system standards. But what happens when changing consumer preferences or being in front of consumer trends requires changes to the system? Reasonable franchisees will certainly understand that minor changes are necessary as systems and brands evolve. However, if system changes are frequent, unpredictable, or require large capital expenditures or substantial operational changes, the franchisor’s challenge becomes more difficult. What can franchisors do to reduce franchisee pushback? Two examples Despite a clear right under its franchise agreements, the La Quinta hotels franchisor ran into resistance when it required franchisees to adopt a new $35,000 system for computerized reservations. When a franchisee refused to implement the new system, the franchisor terminated the agreement, and the parties ended up

Franchiseupdate Iss u e III , 2 0 1 3

in litigation. The court sided with the franchisor because the license agreement, in that case, contemplated that the franchisor could add to, amend, and/or delete system standards, including the reservation system, at franchisees’ cost. In at least one instance, the Burger King franchisor was less successful when trying to require its franchisees to adopt a new POS system. The franchise agreement, in that case, provided that the franchisor could require updates if the system became “obsolete.” The franchisee argued that, though outdated, its current POS system still worked, so it wasn’t obsolete. The court ruled against the franchisor. These cases illustrate the importance of clear and strongly worded franchise agreements, but, as in most cases, litigation should be a last resort. What might the franchisor do to gain franchisee cooperation in rolling out system changes? Tips for implementation Four key factors will play into how willing franchisees will be to implement significant system changes: 1) cost, 2) affordability, 3) belief in the change, and, of course, 4) what the franchise agreement provides. Each of these should play into how franchisors approach implementing system changes. The first inquiry and last resort should, of course, be the franchise agreement. Determine whether the franchisor ultimately has the right to mandate the change, even if doing so means a large capital expenditure. Understand any contractual limitations on the franchisor’s power. For example, are there limits on frequency, type, or magnitude of the change the franchisor can require? Many newer forms of franchise agreement anticipate the potential for significant system change and give franchisors broad rights to require compli-

ance. Older forms of agreement, however, might either limit the franchisor’s power or not address it at all. Once comfortable that the requisite contractual power exists, franchisors should put that in their back pocket and sell the change to the system. Treat franchisees as business partners. Make the business case, and back it up with appropriate market research. If possible, test the proposed change and prove the business case in company-owned units. Franchisees who are making money and who have strong relationships with the franchisor are less likely to resist. If cost or lack of operating capital will be an issue, be prepared with potential solutions such as financing (direct or through third-party loan programs) and transition plans. If relationships need repair, use the roll-out of the proposed change as an opportunity to strengthen them. Finally, properly notify franchisees of the change. Even if the operations manual or franchise agreement allows system changes to be communicated by email, in the case of large system changes, a more formal method of communication may be appropriate. Significant system changes will almost always be difficult. The actual approach needed for a successful roll-out of system-wide changes will vary based, in no small part, on the dynamics and peculiarities of each system. Coming from a solid and proven business case, backed, hopefully, by a strongly worded franchise agreement, should go a long way toward achieving franchisee buy-in and helping reduce franchisee resistance. n Cheng Cohen LLC is a full-service boutique law firm providing practical legal advice to franchise and distribution clients. Contact Sam Wieczorek at samuel.wieczorek@chengcohen.com, Michael Daigle at michael.daigle@chengcohen.com, or go to www.chengcohen.com.

Sea of same, meet different. In just a few years, Cheng Cohen has emerged as a leader in the franchise industry. Our uncompromising client service and sound, practical legal advice have set a new standard. In fact, we are ranked in Tier 1 for franchising nationwide by US News & World Report. And we are the only boutique franchise law ďŹ rm speciďŹ cally recommended for both Client Service and Commercial Awareness by Chambers & Partners USA.

Look for us to keep raising the bar the world over.

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June 25-26, 2013 3rd Annual Franchise Consumer Marketing Conference, The Ritz Carlton Buckhead, Atlanta, GA Attendees: Franchisors; CEOâ&#x20AC;&#x2122;s, Presidents, Chief Marketing Officers & Marketing Managers franchiseconsumermarketing.com

October 9-11, 2013 15th Annual Franchise Leadership & Development Conference Intercontinental Hotel, Atlanta, GA Attendees: Franchisors; CEOâ&#x20AC;&#x2122;s, Presidents & Senior Development Officers

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April 23-25, 2014 13th Annual Multi-Unit Franchising Conference, Caesars Palace, Las Vegas, NV Attendees; Franchisors, Suppliers and Multi-Unit Franchisees multiunitfranchisingconference.com