Franchise Update Magazine - Issue IV, 2015 by Franchise Update Media

Franchise update BUSINESS INTELLIGENCE FOR

GROWING

FRANCHISORS

Q4 | 2015

UNVEILING THE 2016

ANNUAL FRANCHISE DEVELOPMENT REPORT WE SURVEY 134 FRANCHISORS REPRESENTING 51,004 UNITS

SEE PAGE 52

✔ SALES BUDGETS ✔ CLOSING RATIOS ✔ CONVERSION RATES ✔ ONLINE SPENDING ✔ BROKER PRICING ✔ THE COST OF REFERRALS ✔ SOCIAL MEDIA

CMY

BUSINESS INTELLIGENCE FOR

GROWING

FRANCHISORS

Q4 | 2015

4 From the Editor’s Desk The legacy of Subway founder Fred DeLuca

Leadership 6 8 CEO Proﬁle: Dan Tarantin Recharging growth at Chem-Dry and N-Hance 12 CEO Proﬁle: Jonathan Barnett Making great things happen at Oxi Fresh 16 Feature: Anatomy of a Brand Wetzel’s Pretzels: taking the pretzel seriously

Consumer Marketing 18 20 CMO Q&A Pam Harper leads the marketing charge for The Dwyer Group’s 11 brands 24 CMO Roundtable “What changes to your marketing strategies and tactics do you plan for 2016?” 25 Millennials Here comes Gen Z! Are you ready for the next generation? 26 Customer Service Adding hospitality to speed pays off for Domino’s largest franchisee

Growing Your System 28 30 Feature: 2016 AFDR Annual Franchise Development Report Benchmark your development against 134 other brands! 38 Feature: 17th Annual Leadership & Development Conference Sales pros gather in Atlanta to “Super Structure” their growth 44 Feature: Mystery Shopping Results The good, the bad, and the best practices 48 Feature: STAR Awards Recognizing the top performers in franchise development 56 Challenge the Pros “Discuss the importance of franchisee validation and how you use it as a sales and development tool.” 58 Sales Smarts Silo busting: integrating franchise development across the brand 60 Market Trends Giving franchise prospects the information they need requires standards 62 International Finding and processing international leads takes work— and patience! 64 It’s Closing Time Be the master of growing faster 2

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Fromtheeditor’sdesk BY KERRY PIPES

CHAIRMAN Gary Gardner

A Legend Passes

red DeLuca, Subway co-founder and franchise industry giant, passed away this fall, after a two-year battle with leukemia. His story is well-known but demands another look because of all he did to build, establish, and promote

franchising, not only in the U.S., but worldwide. In 1965, just 17 and looking for a way to earn money for college to study medicine, DeLuca opened a sandwich shop in Bridgeport, Conn., with $1,000 he bor-

CEO Therese Thilgen EXECUTIVE VP OPERATIONS Sue Logan EXECUTIVE VICE PRESIDENT Diane Phibbs VICE PRESIDENT BUSINESS DEVELOPMENT Barbara Yelmene BUSINESS DEVELOPMENT EXECUTIVES Jeff Katis Judy Reichman EXECUTIVE EDITOR Kerry Pipes MANAGING EDITOR Eddy Goldberg

rowed from Dr. Peter Buck, a family friend who became his co-founder and partner

CREATIVE DIRECTOR Peter Tucker

in Doctor’s Associates, better known to millions worldwide as Subway. As DeLuca

DIRECTOR OF TECHNOLOGY Benjamin Foley

wrote years later, “I knew nothing about making sandwiches, nor the food industry.” But that didn’t matter: he had the smarts, determination, and will to succeed. And that’s just what he did, founding what would become the world’s largest fast food chain with 44,364 locations in 111 countries (as of November). In October, this year’s Leadership & Development Conference opened with a moment of silence to remember Fred DeLuca and reflect on his life and what it meant, and still means, for franchising. Many in the room had known Fred and shared their personal stories throughout the three-day Fred DeLuca

event. You could almost sense his presence in the sessions and workshops as sales and development executives explored

ways to identify and improve their recruiting, positioning, and sales and marketing strategies—with the phenomenal growth of Subway serving as inspiration for their own hoped-for success. I think Fred would have enjoyed the conference this year. He would have seen

WEB DEVELOPER Don Rush WEB PRODUCTION ASSISTANT Esther Foley TECHNOLOGY PRODUCTION ASSISTANT Juliana Foley MANAGER, SOCIAL MEDIA Cheryl Ryan SENIOR SALES, EVENT & OPERATIONS SUPPORT MANAGER Sharon Wilkinson SENIOR PROJECT MANAGER, MEDIA AND BUSINESS DEVELOPMENT Christa Pulling MARKETING ASSISTANT, SPEAKER LIAISON Katy Geller FRANCHISEE LIAISON, SUPPORT COORDINATOR Leticia Pascal CREATIVE PRODUCTION ASSISTANT Phi Le VIDEO PRODUCTION MANAGER Wesley Deimling

identified with the franchise development executives seeking to make their brands

CONTRIBUTING EDITORS Jim Bender John DiJulius William Edwards Darrell Johnson Steve Olson Adam Pierno

bigger and better. And he would have provided some great insight and advice.

CONTRIBUTING WRITER Helen Bond

himself and his ideas in talks and discussions throughout the event. He would have

DeLuca told Inc. magazine a couple of years ago, “I tell everybody there are only three things that we do. We build sales at the store level, we build profits at the store level, and we build more stores.” It’s a simple strategy that has worked spectacularly for Subway, and it can work for other brands too. When you have a great concept and want to grow, the franchising model is a fantastic tool. The key is always fundamentals. DeLuca knew that and executed the fundamentals well. Frederick Adrian DeLuca succumbed on September 7, 2015, a few weeks short of his 68th birthday, and just a few weeks after Subway celebrated its 50th anniversary. Fred DeLuca is gone, but his legacy lives on through the thousands of franchisees he has helped to realize their entrepreneurial dreams. n

Franchise update|Q4

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Leadership FRANCHISE LEADERSHIP AND MANAGEMENT

8 CEO Proﬁle: Dan Tarantin

Recharging growth at Chem-Dry and N-Hance

12 CEO Proﬁle: Jonathan Barnett Making great things happen at Oxi Fresh

16 Feature: Anatomy of a Brand Wetzel’s Pretzels: taking the pretzel seriously

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ceoprofile

BY KERRY PIPES

CLEANING UP

Dan Tarantin puts Chem-Dry and N-Hance on the fast track

an Tarantin is president and CEO of Harris Research, franchisor of Chem-Dry and N-Hance Wood Renewal. Chem-Dry, founded in 1977, is a carpet and upholstery cleaning brand with more than 3,500 locations in 50 countries and provides services to nearly 10,000 homes daily. N-Hance is a cabinet and floor restoration service with more than 370 locations in the U.S. and Canada. Tarantin was hired in late 2011 to reinvigorate and grow the brands. From 1999 to 2001, he was president and CEO of Jackson Hewitt Tax Service. During those years, the company doubled from 1,700 to 3,400 locations, customers increased more than 100 percent, revenue

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NAME: Dan Tarantin TITLE: President and CEO COMPANY: Harris Research, Inc. BRANDS: Chem-Dry: 3,500 locations worldwide (2,083 in the U.S. and Canada); N-Hance: 379 units in the U.S. and Canada AGE: 47 FAMILY: Iâ&#x20AC;&#x2122;m originally from New Jersey and now live in Nashville with my family

grew 200 percent, and EBITDA was up 600 percent. And there was more. He restructured $30 million of marketing initiatives to expand the customer base, increase brand awareness and influence, and boost client retention. The company was named the #5 overall franchise in 2000 and #3 in 2001 by Entrepreneur magazine. Tarantin was only 31 when he took the

helm at Jackson Hewitt. It was the first franchise system he led, and itâ&#x20AC;&#x2122;s where he fell in love with franchising. He says he had some very good mentors in the company that have remained inspirations to him ever since. Along the way, Tarantin held other leadership positions including president and CEO of Direct General Corp., vice chair of Cendant Marketing Group, and president and CEO of Progeny Marketing Innovations. Now 47, Tarantin still brings a youthful exuberance to the job and still loves tackling challenges. Last year, Entrepreneur named Chem-Dry the top carpet cleaning franchise for the 27th consecutive year. Chem-Dry finished 2014 by adding

ceoprofile more than 100 franchises in the U.S. and Canada and expanding its global network to 45 countries, and the company is maintaining that torrid pace in 2015: to date it has increased its global footprint to 50 countries and is on track for another year of strong growth.

Leadership What is your role as CEO? I see one of my primary roles as being a recruiter. My top priorities are to bring on great new franchisees and then create a culture dedicated to serving franchisees. The single biggest impact I can have as CEO is to ensure that every employee in our company fully understands and embraces our mission of supporting franchisees and helping them to succeed. Once you’re confident that you have the right people on board to execute the right culture, your focus shifts to team-building, which has a huge impact on a franchise system as well. Describe your leadership style. I operate with a servant leadership style. It is my job to surround myself with capable, committed people and give them the leeway to do their jobs, while also providing guidance when needed or desired to help them do their jobs. I have a few “pet areas” where I tend to get more involved than others, such as our annual convention and our franchise advisory council. Overall, I like to make myself available to help when needed, but I prefer to give people enough room and watch them succeed at what they do best. What has inspired your leadership style? My biggest mentor is former Burger King CEO John Chidsey. When working on his team I respected his leadership style and ability to inspire others. But when it gets down to it, I’m inspired simply by treating others the way I want to be treated and seeing them be successful. I like helping others just as I like and appreciate when people help me with my job. What is your biggest leadership challenge? Finding good people. Not only do you have to find people who are smart, successful, intelligent, and accessible, you

“The biggest impact I can have is to ensure that every employee fully understands and embraces our mission of supporting franchisees and helping them to succeed.” also have to find people who are genuinely passionate about what they do and who are passionate about their customer. They also have to understand who the customer is. In our case, the customer is our franchisee. We need people with empathy because we’re dealing with peoples’ livelihoods, dreams, and families—we’re not just selling them something. That’s why I speak with each potential new HRI employee. No one gets hired until I speak with them and ensure they understand and are passionate about our mission to support franchisees to succeed. I grew up in a family with a small business, so I understand what it’s like to be on the other side. But not everyone has that experience. It’s my job to help them see things from the franchisee’s perspective and help them understand how everything they do affects our owners’ businesses. How do you transmit your culture from your office to front-line employees? I think culture starts with the mission that you establish for the business and communicate to your organization. Our company mission statement is: We are committed to the entrepreneurial success of our franchisees as well as industry leadership by providing innovative products and processes and unparalleled service, while enriching the lives of all of our customers and associates. I think that puts in very clear terms where our focus is every day. At the start of every employee meeting, we read our company’s mission statement together out loud, and we also have a franchisee call in and share with us their story, con-

cerns, questions, and feedback. It’s a way for all of our employees to get to know these franchisees and interact with them, because they always come first. It is also important to make sure everyone knows exactly what impact they have or can have on peoples’ lives. Where is the best place to prepare for leadership: an MBA school or OTJ? For leadership, I would definitely say on-the-job experience. There is no replacing real-life interaction. In real life, you see and meet people from all different backgrounds. You tend to see more diversity when you immerse yourself in the field than at a business school. Plus, franchising is a unique business model, something you really can’t learn all about in a classroom. Are tough decisions best taken by one person? How do you make tough decisions? The process of making a complicated decision includes multiple people. I will ultimately make the final call, but it’s important to get input and opinions from others as part of the process. It’s a waste of money to put together a team of smart people and not ask for and incorporate their input. I like and appreciate hearing from others because it helps identify every possible scenario. It’s better to make a wrong decision with all scenarios laid out in advance than to be blindsided by one you didn’t even consider. Do you want to be liked or respected? It has to be both. Advice to CEO wannabes: The biggest piece of advice I can give, and the biggest key to success, is listening. Listening is the best way to learn, and it’s important to listen to both employees and customers.

Management Describe your management style: I like to have a balanced split between managing groups and individuals. Some issues you address as a group, while others need to be dealt with one-on-one, and you have to know the difference. Generally, I do not micromanage, but I do like Franchiseupdate I S S U E I V, 2 0 1 5

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to get closer to and be more involved in certain individual projects. What does your management team look like? It is a very diverse team filled with people who have specific skills that I don’t. Having a diverse team opens the door to different opinions and ideas. I also feel that diversity needs to happen naturally. You can’t force diversity. How does your management team help you lead? They believe in the same principles that I believe in and play a key role in carrying out our culture. I have a great team that I love to support and get behind. The people on our team are never afraid to speak up, ask questions, challenge a thought, or instigate a conversation. They also work extremely well with our franchisees and model the kind of behavior we expect from everyone in our company. Favorite management gurus: Do you read management books? I’m not into following gurus or manifesting their philosophies and approaches in a company. I believe you have to know what’s best for your individual company and team. However, I do read case studies based on real situations and the challenges companies have faced and how they handled them. I find that more meaningful and more beneficial than guru books. What makes you say, “Yes, now that’s why I do what I do!”? I love when people get promoted or earn the ability to get promoted. I also love seeing franchisees do great things that in turn allow them to do great things for their families and for their staff.

Personal What time do you like to be at your desk? I am much more of a night person so I normally get to my desk at about the same time as everyone else, around 8 a.m. But I typically stay later than everyone else. Exercise in the morning? I’m more of a night owl, so I exercise at night. Wine with lunch? The days of “Madmen”

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“If people are reaching their goals and are happy, that is success to me. Helping people realize their dreams is a tremendous feeling.”

Favorite company product/service: I like Southwest and how they love their customers. They also follow one of my favorite principles: make it easy to do business with me. They make it easy (or at least easier than the other airlines) to do everything from checking bags to making changes to flights you’ve already booked to booking rewards travel. And they bring their personality and have fun taking care of their customers.

are gone, so only when I’m on vacation.

Bottom Line

Do you socialize with your team after work/outside the office? Yes, but I don’t foster a culture where that is mandatory. I respect people’s wishes when they want to spend time with their families. I think that’s really important. That being said, we do have fun, team-building social events. Most recently we enjoyed a baseball game and made plans to go to an amusement and water park. Last two books read: The Big Short and Flash Boys, both by Michael Lewis. What technology do you take on the road? Believe it or not, I still own a BlackBerry. In fact, I just upgraded to a new one. I just love the keyboard. I also bring a laptop. How do you relax/balance life and work? I spend a lot of time working and traveling, so when I do spend time with the family, I make the most of it by being 100 percent focused on them. It’s truly quality time. Favorite vacation destination: I will go anywhere that has a beach, any time of the year. Favorite occasions to send employees notes: I really like sharing the news of people getting promoted, and I like passing along the message that our employees can leave early before a holiday to spend a little more time with their families and friends. I also enjoy sharing any positive feedback from franchisees about one of our employees so they can see and feel how their work is making an impact.

What are your long-term goals for the company? To continue to help franchisees grow their businesses and expand in their markets, along with building brand recognition and value. How has the economy changed your goals for your company? The economy does not change our goals. It may change our approach and how we get there, but we are never going to change our goal of helping franchisees grow and be successful. Where can capital be found these days? Capital can be found anywhere if you have a great business concept with a great team of people. How do you measure success? If people are reaching their goals and are happy, that is success to me. Helping people realize their dreams is a tremendous feeling. What has been your greatest success? It really isn’t about my success, it’s about the people we help and the people we work with. If those people are happy and successful, that is my greatest success. Any regrets? The only things I regret are the few times where I didn’t listen to my instincts. My instincts are pretty good. What can we expect from your company in the next 12 to 18 months? Even better support for our franchisees with the next set of initiatives and tools that we can give them. We will also be further solidifying our brands into the hearts of our customers and creating an even stronger emotional connection. n

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BY KERRY PIPES

CHANGE AGENT Making the world a better, cleaner place

onathan Barnett has a portfolio full of ideas and plans for expanding the Oxi Fresh Carpet Cleaning brand. As an enterprising college graduate, he founded the brand in 2006 because, he says, “Carpet cleaning has a low barrier to entry, is excellent for creating repeat business, offers a service in high demand, and has the potential to net millions of dollars.” Today, nearly a decade after launching his dream, he remains atop the brand as CEO, directing its growth and pushing the boundaries of an old-school industry. His track record to date is promising. Barnett opened the first Oxi Fresh in Denver, and within 6 months the company had expanded to 17 locations in 5 states. He gave the first five franchises away free, including one to his mother, who remains a major influence in his life. Today, the business has grown to 280 locations in 45 states and Canada. In 2014 alone, Oxi Fresh opened 55 new

NAME: Jonathan Barnett TITLE: Founder, CEO COMPANY: Oxi Fresh Carpet Cleaning BRANDS: 280 Oxi Fresh Carpet Cleaning; 12 Midtown Chimney Sweeps AGE: 35 FAMILY: Natalie Ehrlich, Mom

units, more than the two previous years combined. Nearly 30 additional new units have opened since the beginning of 2015. Barnett says he’s more interested in developing the largest market share, rather than the largest number of franchisees. Over the next 5 years, he says, “We’re looking to award 50 franchise opportunities to qualified candidates every year in the U.S. and Canada.” He’s passionate about his brand, his team, and their customers, whether talking about the brand’s innovative cleaning processes, which use Earth-friendly

chemicals and require a fraction of the water used by traditional carpet cleaners; or the brand’s scheduling system, which answers about 2,500 calls a day and schedules appointments for all franchisees and allows franchisees to “work on their business, rather than in their business,” he says. Barnett says he learned early on to lead from the front. “That’s especially important given that my company is trying to change an industry that’s been doing the same thing for decades. The only way we can become the numberone carpet cleaning company in the world is if I’m actively leading my team and working relentlessly every day.” As a leader, he says, it’s his duty “to make great things happen.”

Leadership What is your role as CEO? To cast the vision for my company, create a culture that inspires everyone in our brand, establish our goals, develop and execute strategies that lead us toward our goals, and make the tough decisions that put the brand first. I also have to develop top talent at the home office while establishing policies and processes that will help ensure Oxi Fresh’s success. Describe your leadership style. Driven and aggressive. I learned very early on that it’s best to lead from the front, and that’s especially important given that my company is trying to change an industry that’s been doing the same thing for decades. The only way we can become the number-one carpet cleaning company in the world is if I’m actively leading my team and working relentlessly every day. After all, I believe that to be successful, you have to be willing to do whatever it takes and work as hard as possible. I feel like that belief has also really influenced my company’s culture.

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What has inspired your leadership style? It all starts with my mom, Natalie Ehrlich, and her incredible will power. She raised me as a single mom while working multiple jobs and getting her degree, going to graduate school, and eventually earning her doctorate. That took a lot of determination, and while she taught me a lot of valuable things, her refusal to quit—or let me quit—has stuck with me. Just to give you an idea of how determined she is, she once ran 52 marathons in a single year. Another major inspiration for me was not a person, but rather a position I held. In high school and college, I was a point guard and it fell on me to identify my teammates’ strengths and weaknesses, to learn how to manage a team’s emotions and personalities, how to communicate quickly in high-stress situations, and how to inspire hard work and determination among very different kinds of people. I first witnessed the power and value of delegation through Coach Sutton of Oral Roberts University. I had coaches in the past who screamed and yelled the whole time, running around like crazy. Coach Sutton, however, would evaluate a situation, communicate his plan and directions to his offensive, defensive, and scouting coaches, and then send them out to work with the team. By doing this, rather than trying to micromanage everything, the team got a much better understanding of his vision and how to implement it. That’s a lesson I use to this day. What is your biggest leadership challenge? Effectively communicating my vision. Everyone at Oxi Fresh shares the overall vision of being the numberone carpet cleaner in the world, but it’s communicating the finer aspects of that vision—the many plans and goals I have—to my franchisees that can be challenging. How do you transmit your culture from your office to front-line employees? One of the main ways we accomplish this is through the principle of “Ownership through Scoring.” Every technician in

our system gets an individual Customer Feedback Score and has their sales data tracked. Letting them see these scores helps give them a sense of ownership in their position that can drive them to work harder and improve. Where is the best place to prepare for leadership: an MBA school or OTJ? Having earned my MBA and then having the experience of being the CEO of Oxi Fresh has left me with the opinion that while an MBA can teach you some great things, real OTJ experiences are where you learn true leadership skills. Are tough decisions best taken by one person? How do you make tough decisions? I would say they are best made by one person, but they are best advised by a team. When a tough situation presents itself, I want to hear what my VPs’ thoughts are and, if appropriate, my managers’ opinions as well. They can offer important perspectives that can help shape my decision. However, it’s ultimately my job to put our brand first and make those tough and sometimes unpopular decisions to do what’s best for the brand. Do you want to be liked or respected? Everyone wants to be liked, but as the leader of Oxi Fresh, it’s more important for me to be respected. I may not always be able to make everyone happy, but you earn the respect of your employees and franchisees when they know your decisions are made with the company’s best interests and overall goals in mind. Advice to CEO wannabes: Don’t be afraid to fail but make sure you fail fast, pick yourself up, dust yourself off, and keep pushing forward. Also, remember that you can’t just sit around and idly wait for great things to happen. As a leader it’s your duty to make great things happen.

Management Describe your management style: I’ll put my team members in charge of the projects they’re experts on and get up-

dates from them multiple times a day. I’m a big believer in Ownership through Scoring, Trust through Transparency, and Delegation. So a useful tool for all of us is our weekly meeting where we see how projects are progressing, discuss issues as a group, and come up with a plan of action. What does your management team look like? I have a young, passionate management team who primarily have worked their way up in the company. They aren’t content to just be good— they’re hungry to be great. How does your management team help you lead? I rely on the strengths of my management team to help me execute the vision. I am creative and can build concepts, so I’ve surrounded myself with talented individuals who are amazing at turning my ideas into reality. Favorite management gurus: Do you read management books? Traction by Gino Wickman, and The 21 Irrefutable Laws of Leadership by John Maxwell. What makes you say, “Yes, now that’s why I do what I do!”? I love working with passionate people. When I talk to a franchisee who’s excited about their franchisee opportunity and their business, that gets me really excited. Just the other day, I was talking to one of our franchisees, Jesse Keyser, who told me that when people ask him about the various franchise concepts he owns, he tells them: “If I could do it all over again, would I do the same concepts? The answer is a solid YES. All my brands are strong and make great money for us. I do share that if I could have changed the order of the brands I invested in, I would. Oxi Fresh would have allowed me to have faster growth for my company in the early years when cash and capital were tight. The cost to grow the Oxi Fresh concept is less resource-intensive than my retail concepts. Without a doubt, I would have a higher net worth today if I would have utilized the growth efficiency that is available with the Oxi Fresh concept as my first brand versus my fourth brand.”

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Personal What time do you like to be at your desk? Anyone who knows me will probably tell you that I can be a bit annoying since it’s tough for me to “turn off.” Whether it’s very late at night or early in the morning, I’m typically emailing and talking with my team. As long as I have my iPhone (and a phone charger), I’m always at my virtual desk. Exercise in the morning? My days are so much better when I’m able to get a workout done in the morning. Wine with lunch? Wine is for celebrating a win, like when someone embraces our franchise opportunity or we launch a new program. Typically for lunch I’m at the office working through things, so no wine then. Do you socialize with your team after work/outside the office? I believe culture is king. You can have the best business plan in the world, but without a good culture your business won’t succeed. I love socializing with my team and we take one Friday a month for a team event. Each manager gets to pick one, so it’s different each time. Last two books read: I like to read multiple books at the same time, but generally I just read a couple of chapters in each to find the best nuggets of information. A couple that have really helped are The 21 Laws of Leadership and Traction, but there are tons of great reads out there. Something that fits my personality a little more are TED Talks, which are short, online, educational videos that have a ton of great information. What technology do you take on the road? All I really need is my iPhone and Mac and I can manage the whole business. We’ve built everything to be hosted in the cloud so I can work from anywhere. How do you relax/balance life and work? I like to unwind and watch a TV series or just kick back with close

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friends. Colorado is a pretty active state, so there’s always something to do.

our franchisees funded typically in less than 30 days.

Favorite vacation destination: I’m not too picky, but if you put me somewhere warm with a beach, I’m very happy!

How do you measure success? There are so many different ways to measure success, but I like to view it as how many lives we’ve affected. For me, Oxi Fresh is bigger than just money—it’s a way to give people a means to achieve their dreams and to make the world a better place. Since we started cleaning carpets, Oxi Fresh has saved the planet more than 25 million gallons of water. That’s incredible. If Oxi Fresh can continue to leave this positive footprint on franchising, the environment, and our franchisees, I’ll definitely feel we’ve been a success.

Favorite occasions to send employees notes: I’m huge on celebrating wins so when people on my team complete a project, I love to send a “Congrats” or a “BOOM!” message. Favorite company product/service: I love pretty much anything Apple makes, from my Mac to my Apple TV. I love the ease of use and how they are always pushing the envelope of technology.

Bottom Line What are your long-term goals for the company? The ultimate goal for us is to be the world’s number-one carpet cleaner. For us, that means our franchisees having the most market share, rather than having the highest number of franchisees. In terms of the next half decade, we’re looking to award 50 franchise opportunities to qualified candidates every year in the U.S. and Canada. We’re also starting to award international master franchise opportunities to qualified candidates. In other words, Global Domination! How has the economy changed your goals for your company? A business that can’t adapt will die. That’s a lesson we’ve learned from the changing economy, and one we took to heart. We’ve created a responsive, efficient business system that allows franchisees to focus on growing their business, rather than getting stuck in it dealing with the details. Where can capital be found these days? It’s no secret that since 2008 the funding world has changed, but through our proven model and ability to build relationships with our funding vendors, we can find funds for almost any candidate. Our development team has established contacts that can get

What has been your greatest success? When I started this carpet cleaning franchise as a young man, I couldn’t have imagined the growth it would undergo or the impact it would have on others. Giving folks the chance to change their lives and pursue their financial dreams and goals through our franchise opportunity has been both an honor and a responsibility that I don’t take lightly. My team and I are committed to serving our franchisees, to giving them our absolute best—and we’re excited about the future. Any regrets? I’ve made a lot of mistakes along the way. When I started Oxi Fresh in 2006, I was 26 years old and I didn’t know what I didn’t know. Of course, I believe nothing is really a failure as long as you learn from it, but I can tell you that I’ve had to learn a lot of lessons over the years. Looking back, though, I wouldn’t really change much. Those difficult times helped shape me, drove us on to even greater opportunities, and helped make Oxi Fresh the company it is today. What can we expect from your company in the next 12 to 18 months? For Oxi Fresh to continue to grow as we award 50 to 75 franchise opportunities to qualified candidates over the next 12 to 18 months. We’ll also award our first international master franchisee and continue to have our franchisees gain market share in the areas they service. n

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ANATOMY OF A BRAND BY BILL PHELPS

FRESH-BAKED APPROACH

We take our pretzels seriously, not ourselves

n the fast food industry, taste will always rule. The past few years, however, have seen a shift in the way guests connect with brands, with elevated expectations regarding food quality, transparency, and authenticity. While evolving with your guests is mandatory for success, doing it in a way that aligns with your brand’s ethos is the difference between average and thriving. For all the growth Wetzel’s Pretzels has experienced, ensuring that our products, marketing, and guest experience have been brand aligned since day one is an element we’re incredibly proud of. We were the 10th player in the freshbaked pretzel category when we entered in 1994, and people said we’d maybe get to 30 locations. We will end 2015 with 320 units, with another 35 to 40 opening in 2016. Here’s how we’ve done it. Building a brand Before co-founding Wetzel’s Pretzels, my business partner Rick Wetzel and I spent years as marketing executives at Nestle. When we launched Wetzel’s, having the

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best-tasting pretzels was a top priority. While we hired a Culinary Institute of America chef to create our recipe, we gave equal focus to the in-store experience. In the 20-plus years that we’ve continued to be at the helm, a rarity in this business, we’ve never let the company waver from that. Freshness was a buzzword back when we launched, and is an even bigger deal now (think Chipotle’s open kitchen with cooking happening in full view). We always had a freshness vision for Wetzel’s, so we put our mixers in the middle of our units so guests can see dough being made throughout the day. The location of our mixer may seem like a little thing, but it’s these seemingly innocuous elements that ladder up to the guest experience. Pretzels are also rolled in full view, what we call our “theater of rolling.” We love that our customers see pretzels being mixed, rolled, and baked fresh in front of them. Knowing who butters your bread As much as we focus on pretzels, we focus on the profitability of our franchisees even

more, so everything we implement has to be easy to execute and make money for those who represent our brand systemwide. Around 12 years ago we started to see consumer demand for more bite-sized and shareable products. Out of that came our Wetzel Bitz, which are our original pretzels cut into individual pieces. Not only did this cater to what our guests were craving, it also enabled us to increase check size with a negligible food cost increase. When we launched Wetzel Bitz, they made up 5 percent of our total sales. Today, our Bitz offerings are a core part of our brand, with variations including salted, cinnamon sugar, and even a pizza version, with melted cheese and pepperoni. At some locations Bitz account for 40 percent of sales. This goes back to knowing who we are as a brand, and innovating on that playing field. Menu boards that don’t bore Another area where we’ve honored our brand ethos is with our menu boards, which are somewhat unique in the restau-

ANATOMY OF A BRAND rant space, in that they contain virtually no text. How do we get away with that? Simple: we replaced text-heavy boards with big photos of our most popular items. Children can simply point at what they want, and parents love that, leading to an enjoyable in-store experience. In 2014, we digitized our menu boards and added animation. They show our animated bakers creating some of our most popular products in a fun way, like a ninja slicing dough to create Wetzel Bitz, or pepperonis being launched from a cannon to create our Pepperoni Twist Pretzel. It’s another way we’re innovating within our area of expertise. By the end of 2015, the digital menu boards will be in 25 percent of all Wetzel’s locations, and we’re seeing a measurable bump in sales in locations that use them. Listening and reacting What we have done throughout our 22-year history is listen to our guests and, above all, to franchisees, to make updates, product introductions, and refreshes where it aligned

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with our brand and showed additional profitability for our operators. Case in point: If you walked into a Wetzel’s Pretzels today, almost two-thirds of the available products were not in-store when we launched the company more than 20 years ago, including some of our top sellers. I enjoy speaking with franchisees about how we can continue to drive the company forward, and we’ve had some great ideas come out of these candid conversations. At the end of the day, Wetzel’s is a fun, irreverent brand, and we pride ourselves on being the category innovator. As the saying around here goes, we take our pretzels seriously, not ourselves, and everything we do, from new product introductions to store design and guest interaction, reflects that. Being true to our original brand position and keeping it top of mind when pursuing success cannot be overstated, whether applying it to one singular element or system-wide. n Bill Phelps is the co-founder and CEO of Wetzel’s Pretzels.

10/2/15 10:10 AM

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Consumer Marketing CONSUMER MARKETING INITIATIVES

20 CMO Q&A

Pam Harper leads the marketing charge for The Dwyer Group’s 11 brands

24 CMO Roundtable

“What changes to your marketing strategies and tactics do you plan for 2016?”

25 Millennials

Here comes Gen Z! Are you ready for the next generation?

26 Customer Service

Adding hospitality to speed pays off for Domino’s largest franchisee 18

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CMOQ&A 11 Brands!

Orchestrating The Dwyer Group’s marketing charge BY KERRY PIPES

am Harper says she learned at an early age the commitment and tenacity it takes to run a small business. She drew inspiration and strength from observing her own parents toil to make their businesses succeed. Empathizing with small business owners is something she believes makes her successful in her role as vice president of marketing for The Dwyer Group. Harper began her marketing career with Sysco in Wisconsin. She moved on to become the director of marketing for a dry cleaning franchise, worked in special events management and fundraising for the National Multiple Sclerosis Society, and spent a year in healthcare marketing before joining the home services industry in various marketing capacities. In her current role, she says, “I have the opportunity to guide an in-house team of nearly 50 marketing, communications, and creative professionals responsible for growing all of The Dwyer Group’s brands: 11 franchised and one corporate-owned.”

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Harper, who joined The Dwyer Group in October 2012, says that in the months following her hire, Mike Bidwell, the company’s CEO, confessed to her that he questioned whether her resume was truly accurate or simply drafted to closely match the demands of the position. “Many times since then he has told the story and acknowledged that ‘Yes, Pam really does have the extensive marketing experience noted on her resume,’” she says. This broad experience, specifically within the home services industry, has equipped her with the knowledge and leadership skills necessary to guide the consistent growth of all the company’s brands. Describe your role as vice president of marketing. The role involves so much more than growth goals and tactical execution for 11 franchise brands. As a leader, you have to be a lot like an orchestra conductor. Each person has their role and is an expert in that role. It’s my job to ensure that each musician is not only

great at what they do, but that they are harmonizing with the other team members. Every key played or note struck must be a benefit to all the other instruments or we are all out of sync. We are nowhere near the perfect symphony, but continuous practice and learning from our missteps is bringing us closer every day. What’s unique about the position at The Dwyer Group? Providing marketing leadership for 11 service brands that are similar in that they all serve residential and light commercial customers, yet are uniquely different in that they all have different brand leadership and, consequently, different brand personalities. I also have our overall Dwyer brand to manage, which is very important as we continue to grow our brands through franchise development. In addition, ownership by private equity partners brings an added layer of complexity and accountability. On top of the responsibilities that come with marketing for multiple successful service brands, the past 18 months included not only preparing for a PE sale/acquisition, but also prepping for the anticipated rapid growth expected by investors. For us, part of that growth is through acquisitions. Since Q4 of 2014, Dwyer has acquired Rainbow International in Germany, Five Star Painting, Grounds Guys Canada, and Service Brands International, which included Molly Maid, Mr. Handyman, and ProTect Painters. As we navigate through

the acquisitions there is much due diligence and subsequent team integration to execute, all the while keeping 7, then 8, then 11 brand marketing balls in the air! What’s the most challenging part of being a VP of marketing today? Speed of change that has come through technology! There are so many options coming at us every day: various marketing automation platforms, each offering subtle differences; automated review generation and response monitoring platforms; and online marketing agencies touting all of the greatest technology and support, just to name a few! It is difficult to not be distracted by “shiny squirrels” for fear of missing out on that “newest thing” that will catapult one or more of our brands to new heights. Because of this technological revolution, there is also an enormous influx of data we now have access to that could lead us down millions of rabbit holes. We have to be diligent in choosing the right data to scrutinize or we can get lost in analyzing for analyzing’s sake. Of course, the benefit of having this unparalleled access to customer data is that it gives us a holistic, 360-degree understanding of our customer on levels we never would have even dreamed of diving into in the not-so-distant past. What are the 3 most important keys to being an effective marketing leader today? 1) Staying agile. 2) Taking risks, a necessity in today’s world of rapid change because of technology advancements. 3) Talent acquisition and retention—while traditional marketing skill sets are needed, specialists with additional skill sets are a necessity as well, and many of those skills are relatively new and therefore difficult to find. How do you prepare a marketing plan and execute the strategies? Marketing plan development for a single brand is managed by the brand managers. They work with the operations team as well as the brand advisory council to solidify the plan the ad fund dollars will support. The brand manager is also responsible for overall execution of the plan, including tracking and reporting results, which prompts responsive changes to the marketing plan throughout the year. In addition, we have a team of local marketing managers who influence the overall local spend, which

is much greater than the ad fund budget. While the brand managers create strategic plans to implement system-wide, franchise owners are not required to implement the plans on a local level. This is where our local marketing managers serve to educate franchisees on the benefits and importance of using the corporate campaigns, which are thoroughly researched and anchored by deep data analytics.

How do you go about creating a “customer-centric” marketing and brand philosophy for 11 brands at once? We have done a lot of research into who our core customer is, what their lifetime value is, and how we can tailor our marketing to those segments that bubble to the top as “high value.” Because of the nature of our business, we have to ensure that every experience with our brands revolves around providing the customer with an outstanding, value-added experience. Everything—from our websites and advertisements to our home visits—is designed to offer our customers a beneficial experience on every level, building a reciprocal relationship between the customer and the brand.

internal communication with our franchisees and consults with the brand team or franchisee on public relations initiatives. The in-house team is supported by three outside agency partners. 3) Creative Services, which includes a team of in-house graphic designers as well as video production specialists. All collateral for our brands is produced in-house (franchiseefacing as well as consumer-facing). Our video team produces top-quality video used online, as well as TV commercials. In addition, they provide a wide variety of franchisee testimonial videos used by our franchise development team with prospects. 4) Franchise Development Marketing, which is responsible for all marketing needs supporting our franchise development efforts including online, outbound telemarketing, traditional, and trade shows. 5) Marketing Operations, which encompasses management of programs that cross more than one brand such as our NPS program and oversight of call center partnerships. They are also responsible for our cross-brand marketing initiatives between the Dwyer brands. They analyze data and report on current customer as well as emerging customer insights. We are at the tail end of building out a comprehensive data warehouse that will revolutionize the way we crossbrand to our existing and future consumers. This warehouse contains in-depth consumer data gathered from more than 2,500 franchisees worldwide. This will be a game changer for our brands. Finally, this group keeps on top of all the latest disruptive technologies that are surfacing—some of which are changing the way consumers purchase services. 6) Marketing Administration, which is responsible for overall administration, including department budget oversight and management as well as advertising fund accounting and management.

Describe your marketing team and the role each plays. We have nearly 50 full-time in-house professionals broken into the following areas and teams. 1) Brand Management and Support, which works closely with their individual brand operations teams. The brand managers provide strategy and growth direction while the local managers provide consultation and local marketing plan support. 2) Communications, Public Relations, and Social Media, which produces all

When it comes to helping the brand connect with franchise prospects, why is it so important for the marketing department to have a “personal touch”? We don’t “think” about ways to provide a personal touch, we just inherently do it. It’s ingrained in our culture and our Code of Values. We aren’t looking to sell a territory, but to create a vibrant long-term relationship built on trust and commitment. That relationship starts and continues on a personal level.

How do you measure marketing results and effectiveness? Depending upon the brand, we have various KPIs that include organic traffic and conversion metrics for our websites; call-to-appointment conversions; quality leads generated; and, of course, overall revenue increases. Discuss your core consumer marketing strategies and objectives. Our core marketing strategies evolve around digital, as nearly 75 percent of our leads come directly to us through our digital presence. Our objectives vary from brand to brand, but often include improving on the KPIs mentioned above.

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CMOQ&A How does this help your franchise sales and development effort? It has helped us become one of the world’s leading franchisors. Our prospective franchise buyers come to know us at a personal level. They experience our culture, our Code of Values, our organization, and the people who will be supporting them. What ways/tools do you rely on to do this? From the use of our CRM tool to engage and educate the prospective buyer during the early stages of the sales cycle, to the personal touches provided by the development team and executive team during orientation and training. Do today’s prospects expect more from the franchise marketing department? What, and how do you provide it? Yes, and they should, as we are looking for partners with a desire to grow. A “one-sizefits-all” approach doesn’t work. As their business grows, owners expect marketing to continue providing programs that fit their size and needs. A new owner may be more focused on low-cost/no-cost tactics because of monetary constraints, while a $10 million owner requires an altogether different approach. Our franchise partners do not have to worry about becoming experts on the digital front. Marketing provides complete solutions that are fully researched and vetted for effectiveness. How is technology changing the way franchise marketing is done in terms of one-on-one contact? We leverage various digital and automated communication tools (email, SMS, ringless voicemail) to keep our franchise partners informed. We recently launched a new training and educational portal that delivers a variety of content designed to help our partners grow their business. How are you assisting your franchisees with more contact and transparency? What are their immediate needs? Creating easy access to our local marketing support team has been a focus of the team. We work closely with the franchise consultant team to ensure they keep us apprised of franchise partners who could benefit most from a proactive personal touch from marketing. As noted above, we launched a new franchise marketing support portal that offers our franchisees 24/7 access to the most requested pieces

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Be agile, take risks, don’t be distracted by technology’s “shiny squirrels.” Don’t get stuck in the past—simply learn from it. of information or marketing support. This is a place they can get marketing collateral as well as learn about the latest programs available for them to execute locally—including a step-by-step guidebook on how to execute each tactic. And of course they can get great answers to the frequently asked questions relating to the digital marketing landscape. How do you work with other internal departments. Does technology help? At Dwyer headquarters in Waco, the marketing department is located off campus. The brand-specific marketing folks typically spend several hours a week on campus meeting with their operations teams as needed. The addition of our office in Ann Arbor has created new opportunities to use Skype and other online meeting resources. We find it is important to not only hear, but also to see our peers when meeting, and various technologies make that easy to accomplish. How do you manage costs and budgets for the marketing department? In 2012 we made the decision to pull the marketing support teams out of the individual brands and into one team. At that time, we assigned a single full-time marketing team member to be responsible for monitoring and reviewing the general ledger detail for each budget to ensure accuracy and remove that responsibility from the brand managers. The end result was a win for everyone as brand managers could keep their focus on driving more leads. With single oversight, many inefficiencies and inconsistences were uncovered, which ultimately saved ad fund dollars that could be reallocated to additional programs. Do you see vendors as business partners? Why/why not? Our guiding principles have evolved in recent years, and the pendulum is swinging back toward a

healthy mix of external partners and an in-house team. With marketing being so technology-heavy, we know that we need external partners to assist us with our digital presence—they can easily stay abreast of the latest changes and help us stay ahead of the curve. From a marketing perspective, we are diligent about partnering with agencies that truly understand franchising and the importance of not only supporting us internally, but also supporting our franchisees directly. We live by our Code of Values, two of which relate to customer focus: 1) continuously striving to maximize internal and external customer loyalty, and 2) making our best effort to understand and appreciate the customers’ needs in every situation. How have marketing strategies and tools changed over the past decade? How have you adapted? Marketing has gotten extremely complex over the past 10 years. Effectively marketing home services used to be as simple as placing a great Yellow Pages print ad, executing targeted direct mail for acquisition, and sending thank-you notes following service to aid in retention. While this may sound oversimplified, it really didn’t require much more to keep a service schedule full. Today, the majority of consumers purchase these services by turning to their desktop, tablet, or mobile device. While brand recognition is important, of equal importance is ensuring that our brands “present themselves” with relevant information and provide easy scheduling options when a consumer has a need for one of our services. Our marketing professionals must be digitally savvy and stay on top of the latest trends. They must monitor analytics from a variety of sources daily to ensure the greatest return on investment. We are diligently working toward making this complex marketing landscape simple for our franchisees to understand and manage, thus providing the greatest opportunity for their success. What advice would you offer to aspiring marketing executives? Be agile, take risks, don’t be distracted by technology’s “shiny squirrels.” Align with strong partners who will keep you apprised of what lies ahead in the digital landscape. How we make buying decisions is rapidly evolving: Don’t get stuck in the past—simply learn from it. n

ATE ! D E H T E V A S

20 16 Franchise

Consumer Marketing Conference JUNE 21-22, 2016

INTERCONTINENTAL BUCKHEAD HOTEL AT L A N TA , G A

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CONSUMER MARKETING

CMOroundtable “WHAT CHANGES TO YOUR MARKETING STRATEGIES AND TACTICS DO YOU PLAN FOR 2016?” Matt Smith Chief Marketing Officer sweetFrog Frozen Yogurt From a strategic perspective, we will be looking to connect with our customers in a more personal way to help strengthen repeat business. A major tactical change will be the standardization of a national loyalty and rewards program with a move to a new vendor. In the past, sweetFrog has offered a fragmented effort with some franchise owners using a different platform than others. The new platform will change everything from the messages we deliver to their frequency and time of day—all built to give customers the kind of offers they want, when they want them. Another change aimed at supporting this strategy will be the thorough review of our in-store guest experience and the creation of a new store planogram. We will be reviewing everything from signage to product placement to merchandise selection and its display. Our stores have remained relatively unchanged for the past five years and we recognize the need to enhance the customer experience. From a digital standpoint, we will launch a new website with improved content and navigation. This content shift will extend to our social media channels as we look to move from “cute” to giving our customers more valuable and pertinent content. We have a number of other new tactics slated for sweetFrog in 2016. These range from the creation of a system-wide direct mail program that provides timely offers and introduces new products, to the introduction of reusable bowls to reduce waste and appeal to customers who are environmentally conscious. From a franchise growth perspective, in 2016 we will be pushing forward with aggressive plans to expand sweetFrog’s footprint. Currently we operate 358 stores in 29 states, England, the Dominican Republic, and Egypt. We are negotiating deals in

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“We will be reviewing everything from signage to product placement to merchandise selection and its display.” —Matt Smith Southeast Asia, the Middle East, and South America. The opportunity for international expansion is huge. As a result, we’ll be selecting the expos and trade shows we attend more strategically. While our U.S. stores are concentrated on the East Coast, we have franchises doing well in California and we will look to continue growing in that part of the country. We also are looking to enter into more non-traditional locations like ballparks, arenas, airports, and college campuses. Angela Zerda Director of Marketing Mosquito Joe The marketing landscape, particularly in the digital space, is constantly evolving. To be a leader in our industry we must always be looking out for new opportunities. As we plan for 2016 I expect a continued increase in digital marketing spend, as well as a focus on tying those campaigns to our offline campaigns for greatest impact. For example, if we’re using direct mail in an area, we’re serving up banner ads to that same area. Frequency remains vital in marketing, and with new technologies we have additional opportunities for touchpoints throughout the day. Pay-per-click advertising used to be syn-

onymous with Google AdWords, but new options exist for highly targeted campaigns across social platforms where potential customers are spending hours daily. We plan to expand our presence in some of these areas where we can better target both geographically and demographically. Facebook has some great options for building custom audiences that we will incorporate in our planning, and LinkedIn has released new display network options as well. Like many brands, we have a good foothold with a mobile-friendly website and we will continue to explore the mobile space in 2016. We must keep mobile top of mind when designing emails and determining customer communication preferences, as well as consumer preferences for receiving marketing messages. Content marketing is imperative for lead generation but will require more time and resources moving forward. Developing content that catches the interest of our audience means more blogging, infographics, videos, and visual graphics. In 2016 we will drive customer-centric marketing, leveraging our existing base of happy customers to help tell our story and develop marketing messages. No one can sell our service better than our customers, as consumers look to one another for advice on purchase decisions. Social listening, online reviews, and regular surveying keep us tied in to what our customers think so we can ensure relevant marketing messages based on that feedback. Finally, an essential priority for any brand should be tracking. That is a key initiative for all Mosquito Joe campaigns in 2016. Tracking phone numbers, landing pages, and Google Analytics are great tools to help us recognize our return on investment and what’s working most effectively. In a constantly changing marketing environment we must always be testing new things, but without the right tracking and measurement in place, we lose our ability to learn from these opportunities. n

CONSUMER MARKETING

Millennials Here Comes Gen Z! Meet the next wave of customers and employees BY ADAM PIERNO

n case you hadn’t noticed, a new generation has begun applying for fulland part-time jobs: Generation Z. The giant wave of 80 million Millennials is still the dominant generation for many franchise operators, but Gen Z is coming of age and bringing new attitudes with them. It’s early to completely define this generation, whose oldest members are just entering the workforce, but here are some preliminary conclusions based on studies to date. With Millennials, employers saw a new focus on diversity. With Gen Z, this is even more pronounced: just over half (55 percent) of Gen Z are Caucasian, and almost a quarter are Hispanic. Along with this diversity comes tolerance. Beyond simply being a diverse group, they have seen an African-American president voted into office and re-elected early in their lifetime. They have seen a relaxation of restrictions to domestic partnership and specifically to same-sex marriage. As a result, they are more open to these ideas. This means they are more tolerant by nature than previous generations and will expect similar attitudes from their employers and co-workers. Growing up during the end of the Great Recession, Gen Z saw their parents and others fail during the downturn and witnessed firsthand the hard work required to come back. Consequently, they are finance-focused, already expressing worry about the cost of higher education and associated debt and finding a job in the future. According to the Cassandra Report, they claim to value money over perks and are willing to put their

interests and individual passions second to earning more. They are willing (or will be) to learn to love what they do if it provides a satisfactory income, and not sacrifice potential wealth to be working on their interests. This may change as they mature into the workforce. Early indications are that Gen Z is less idealistic than the group preceding them. Life balance will be important, but they won’t expect as much to be provided by work as the generation before them.

They claim to value money over perks and are willing to put their interests and individual passions second to earning more.

More space, more money Gen Z will be a smaller generation than the Millennials they follow. With less direct competition and less of a crowd everywhere they turned, Gen Z learned how to think and act as individuals. (Millennials have been chided for succumbing to group-think.) Some believe that the focused, hard chargers of Gen Z will end up managing Millennials, but it’s still too soon to draw that conclusion. Gen Z also grew up during the explosion of social media and mobile sharing. Many observers have assumed this would make them more attached to their devices and more relaxed about sharing and privacy than previous generations. This may not be true. Teens have shown a preference for in-person conversations and actual face time to conversations using FaceTime. A study by Northeastern University found that 66 percent of Gen Z respondents said they prefer to interact with friends in person, while only 15 percent would rather do so online. This might be because they’ve had a chance to explore the technology as it emerged, and are ready to shed it as they hit their social prime and their ability to socialize and control their leisure time grows. It is early in the development of this generation to jump to conclusions. Moving through college and into the workforce will continue to shape their attitudes. The early indicators tell us this group appears to display traits that are almost a response to the critique of the generation before them. There are still many major life experiences, along with the shifting U.S. and global economies, that will tell us who this generation will become as adults. n Adam Pierno, director of brand strategy and planning at Santy, unearths Millennial insights at the convergence of media, technology, and the marketplace that lead to positive and revenueenhancing change for clients. Contact him at apierno@santy. com or 480-710-4243.

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CONSUMER MARKETING

Customer service Speed and Hospitality

On-time delivery was not enough at RPM Pizza BY JOHN DIJULIUS

n 2011, RPM Pizza (the largest U.S. franchisee of Domino’s Pizza) made major improvements in its speed-ofdelivery service by improving its percentage of on-time pizza deliveries by 17 percent. However, according to an independent third-party mystery shopper survey, RPM ranked last among its major competitors in hospitality—demonstrating how a company can get overly focused on one component of their business while letting other key components slip away. So in 2012 RPM committed to changing its culture from being solely an operationally excellent organization, which they called being “Brilliant at the Basics,” to also being known for being a world-class hospitality company. They started by creating a “day in the life of a customer” video, to teach their employees to view things from the customer’s perspective. Remember, many employees have never been their own customer, have never needed the services and products their 90 company provides, and cannot comprehend what the customer’s mindset is. 88 Therefore, they do not relate well and find it 86 difficult to empathize, be compassionate, and anticipate customer needs. 84 Think about the last time you ordered pizza 82 to be delivered to your home. Why did you do that? It was critically 80 important for Domino’s employees to truly

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understand the “why” piece. Were their customers hungry? Yes, but they could get food from thousands of places to satisfy their appetite. Why pizza, and why Domino’s? Bringing the vision to life This is where the “day in the life of a customer” video, titled Creating Smiles, played a major role. To illustrate RPM’s service vision, to really make it come to life and not just be another stale company quote, the video needed to show all the benefits of what delivering great pizza in less than 30 minutes really provides to its customers—beyond just filling their bellies. This video showed people being in a rush, with their busy lives, some away from home traveling, others trying to get home from work and get the family fed. In certain instances, it showed people trying to please everyone’s

tastes, and wanting to spend more quality time with their loved ones instead being in the kitchen preparing food and having to clean up afterward. When a “day in the life of a customer” video is done well, watching it makes it obvious and clear what your company’s customer service vision statement should be. At RPM, it was vital that every team member understood that they were not just making and delivering pizza, but that their purpose—what their customers truly needed from them—was easy and simple: Domino’s pizza delivered to their door, exactly as they ordered it, promptly, by someone smiling with genuine hospitality. Thus, the customers smiled because their lives were made easier. This ensured that every team member clearly knew why their service vision was “Creating smiles by making lives easier.” This is a great customer service vision that is measurable, accountable, and trainable. At RPM, their three pillars are: Operational Excellence ~ Customer Delight ~ Deliver the WOW. By 2013, RPM Pizza’s service culture had made a drastic turnaround. Not only was its customer satisfaction score significantly better than the previous year, but it also hit the highest score in RPM’s history. n John R. DiJulius III is the author of The Customer Service Revolution and president of The DiJulius Group, a customer service consulting firm whose clients include Starbucks, Chick-fil-A, The Ritz-Carlton, Nestle, PwC, Lexus, and many more. Email him at john@ thedijuliusgroup.com.

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Growing Your System FRANCHISE DEVELOPMENT INTELLIGENCE

30 Feature: 2016 AFDR Annual Franchise Development Report

Benchmark your development against 134 other brands!

38 Feature: 17th Annual Leadership & Development Conference

Sales pros gather in Atlanta to “Super Structure” their growth

44 Feature: Mystery Shopping Results The good, the bad, and the best practices

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Recognizing the top performers in franchise development

56 Challenge the Pros

“Discuss the importance of franchisee validation and how you use it as a sales and development tool.”

58 Sales Smarts Silo busting: integrating franchise development across the brand

60 Market Trends Giving franchise prospects the information they need requires standards

62 International Finding and processing international leads takes work—and patience!

64 It’s Closing Time

Be the master of growing faster 28

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2016 AFDR

HOW ARE YOU DOING?

BENCHMARKING THE GOOD, THE BAD, AND THE BEST PRACTICES

esults from the 2016 Annual Franchise Development Report (AFDR) were unveiled in October at the 17th annual Franchise Leadership & Development Conference. The 2016 AFDR is based on responses from 134 franchisors representing 51,004 units (48,431 franchised and 2,573 company-owned). Responses were aggregated and analyzed to produce a detailed look into the recruitment and development practices, budgets, and strategies of a wide cross-section of franchisors. The data, with accompanying commentary, provide the basis of the 2016 AFDR. Highlights from the report were presented in a 90-minute general session. Gary Gardner, chair of Franchise Update Media, moderated a panel of four high-powered franchise development executives, who interpreted and discussed the data and research findings before responding to questions from attendees. Panelists were Conference Chair Steve Dunn, senior vice president of global development at Denny’s; Pete Lindsey, vice president of franchising at Sport Clips; Paul Pickett, vice president of franchise development at Wild Birds Unlimited; and Josh Wall, vice president of franchising and strategic development at Christian Brothers Automotive. The mystery shoppers this year were Franchise Business Review, FranConnect, and Landmark Interactive. See page 44 for their thoughts and comments on this year’s results and more on the mystery shopping research. Growth plans for 2016 from the 134 respondents aim for a total of 6,442 additional franchise units, 40 percent (2,620) through existing franchisees, and 60 percent (3,822) from new franchisees. For comparison, last year’s growth plans from 139 brands targeted a total of 6,063 additional units. Below are additional highlights from the 2016 AFDR. Ordering information can be found on page 34.

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• Recruitment budgets. Six in 10 respondents said their 2016 recruitment budget will be higher than in 2015, 8 percent said it would be lower, and 32 percent will keep it the same. Among respondents, the average media budget for franchise sales and recruitment (advertising and media expenses, not including brokers and employee compensation) in 2016 will be $162,821, with a median of $120,000.

• Where the money goes. Planned allocation of respondents’ 2016 recruitment budgets remained essentially the same as in previous years, with some variation in print and trade show spending. At 48 percent, spending on digital is up slightly from 2015 (44 percent), approaching its peak of 50 percent in 2010. Trade show spending, at 18 percent, has risen steadily since 2011, while annual print spending (10 percent) has slowly declined over that period. Public relations spending, at 14 percent, is up slightly from 2015, but is essentially the same as four years ago.

• Where the digital money goes. This year saw the introduction of a new survey question, asking franchisors to break down their digital spend. The largest category by far, accounting for more than one in three dollars spent in this category (36 percent), was franchise opportunity sites. Pay-per-click (18 percent) and SEO (15 percent) together accounted for another third, with email marketing, social networking, remarketing, and other business media sites split about evenly to account for the remaining third of digital spending for recruitment.

• Top sales producers. Digital wins again, accounting for more than four in 10 sales (42 percent). Remarkably, this number has remained exactly the same the past four years. Referrals remained second at 27 percent, dropping slightly from the past four years. Sales through brokers, at 15 percent, have essentially held steady since 2010. Sales attributed to print (3 percent) remained the same as the previous year, about the same as sales from trade shows (4 percent) and public relations (2 percent). One encouraging trend is that the “Other” category continues to decline, indicating that franchisors are doing a better job of tracking the sources of their sales. However, looking into the number of sales attributed to online/ digital sources, Gardner said, “The last click gets the credit,” and he urged attendees to consider the extent to which their other efforts contribute to the digital share of spending.

portals in 2015 (33 percent)—which fell significantly in 2013 (to 23 percent from 43 percent in 2012) before bouncing back to 35 percent in 2014—were the largest sales producer, about the same as last year. Possible reasons include better performance by portal operators, better communication and collaboration with franchise sales departments, and changes in how prospects search for brands. Pay-per click, at 15 percent remained steady.

• Measuring costs. Six in ten of respondents said they track cost per lead (60 percent) and cost per sale (58 percent). This means that four of every 10 respondents said they still do not. The average cost per lead in this year’s report was $97, and the average cost per sale was $6,300 (down from last year). When it comes to those franchisors not tracking cost per lead, this year’s 40 percent figure compares with 42 percent last year, 28 percent in 2013, and 35 percent in 2012. Although this year’s 42 percent who do not track cost per sale—clearly the most important metric for a franchise development department—should be a serious concern at those brands, overall that figure is down from last year’s 52 percent, about the same as in 2013, and a strong improvement from 65 percent in 2012. So while the trend is positive, it remains inexplicable that in 2015 four in 10 professional franchise development departments still don’t track cost per lead and cost per sale. “If you’re not tracking this, you have to start. You need these metrics,” said Gardner. • Closing ratios. Mixed news here. For whatever reasons— perhaps the uncertain economy and low consumer confidence, or perhaps simply that 2014’s respondents reported unusually high numbers (in the opinion of last year’s expert panel)— closing ratios in 2015 fell for leads to sales, applications to sales, and discovery days to sales compared with 2014. For

• Top digital sales producers. Since digital spending accounted for four in 10 sales, we asked respondents to segment their digital spending as it relates to sales. The numbers for 2015 were nearly identical with those of the previous year. Following a steep decline in sales attributed to SEO last year (24 percent compared with 49 percent in 2013), the number for SEO remained the same this year. Sales from online ad Franchiseupdate I S S U E I V, 2 0 1 5

2016 AFDR AFDR: HOW THE PROS USE IT

Following the conference, we asked three of the panelists on the AFDR panel how they use the AFDR (the fourth, Steve Dunn, was out of the country). Here’s what they had to say.

METRICS AND SPENDING

“I use the report to analyze my individual metrics: my requestto-application ratio, applications-to-‘join the flock’ day (discovery day) ratio, and lead conversion from unique visitors to our website to those who fill out a request for more information,” says Paul Pickett, vice president of franchise development at Wild Birds Unlimited, which took first place in Best Overall Performance in this year’s STAR Awards. “I also look at how we’re spending money as a percentage of our advertising budget compared to others.” Pickett also uses the report’s extensive benchmarking data to determine if there are any opportunities he might be missing out on to improve his franchise development results. For example, he had moved away from using print for several years, but when he studied the data on how other brands were using print ads, he decided to give it another try and took out two print ads in Entrepreneur magazine for December and January. “If you’re willing to have your mind opened, this report is a way to do it,” he says. “I look at areas we can improve, where we’re doing well, and how we can do better,” he says. “Just because you’re #1 doesn’t mean you’re going to stay there.”

UNIQUE INFORMATION SOURCE

“This is the only place we can get a benchmark—the numbers to give us an idea of how we’re doing. It shows us where we are, where the industry is, and where it’s going,” says Pete Lindsey, vice president of franchising at Sport Clips, which took secondplace STAR Award honors this year for Best Overall Performance. The industry averages in the AFDR also give his team a number they can use in determining their own goals. In terms of cost per sale and cost per lead, he says, “Everybody’s trying to look at the benchmarking and beat it.” He also uses the report to continually improve his sales process, based on the annual mystery shopping for telephone and website response, using the judging criteria as a guide to ensure that best practices are followed throughout his company’s sales process.

example, while the leads-to-sales ratio fell from 7 percent in 2014 to 3 percent in 2015, that 3 percent figure is still higher than in the four preceding years. And while the applicationsto-sales ratio fell from 27 percent in 2014 to 18 percent in 2015, it is still higher than three out of the four preceding years. However, this year’s discovery days-to-sales ratio of 61 percent, which fell from 67 percent in 2014, is lower than in any of the five preceding years. The message here? Franchisors must examine their discovery day process to see where candidates are dropping out. Are more unfit candidates getting through the earlier stages of the process? Are franchisors becoming more selective? How much is the economy or securing financing a factor? • Referrals. Referrals accounted for 15 percent of all leads for this year’s respondents, but at 50 percent had the highest lead-to-close ratio of all lead generation sources. Almost half (45 percent) of franchisors provide incentives to franchisees who refer prospects that sign. The average referral fee is $3,505. • How multi-unit franchisees find new brands. In a separate survey of multi-unit franchisees, we found that twothirds (67 percent) said they attend trade shows to find new opportunities, up 5 percent from 2014. However, this number might be high, as it came from surveying franchisees who attended our Multi-Unit Franchise Conference; however, it’s also worth noting that by attending trade shows multi-unit operators can speak with their peers, as well as with brands exhibiting at the shows. Oddly in this same survey, referrals from associates dropped from 52 percent in 2014 to just 28 percent in 2015. Slightly more than a third (36 percent) cited personal experience with a brand, down from 42 percent in 2014.

COMPARATIVE BUDGET TOOL

“The report is so helpful to us in making budget comparisons. We were in a vacuum building out a budget. We expected results, but didn’t get them,” says Josh Wall, vice president of franchising and strategic development at Christian Brothers Automotive, which won a STAR Award last year for Best Website Prospect Follow-Up. “The first time I got hold of the AFDR, I knew we were grossly behind in our lead generation budget. I saw we weren’t getting the lead generation we wanted because we were under budget. This was as recent as 3 or 4 years ago.” He says the benchmarking data is especially good for smaller franchisors who don’t have the internal resources larger brands do. The AFDR benchmarks also provided him with comparative data to show his CFO and CEO what other companies were spending in their recruitment budgets. “It allowed us to bolster our budget. We’re closer to the median now,” he says. “The report helps me evaluate how we’re doing on budget and metrics compared with our peers.”

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• Franchisors exceeding vs. below goals. There are several clear patterns here. Brands exceeding their sales goals had a lower cost per lead and cost per sale than brands that fell below their goals in 2015; they also had higher ratios of applications to sales, discovery days to sales, paid their senior executives more, and provided them with more benefits. In terms of categories, 59 percent of food brands exceeded their goals, with 17 percent below; retail non-food was a wash (11 percent exceeding and 10 percent below); and more service brands fell below their sales goals than exceeded them by a factor of two to three. Brands with higher system-wide gross revenue (over $40 million) did well, with 69 percent exceeding goals; while among brands with system-wide gross revenue below $8 million only 12 percent exceeded their goals, while 32 percent fell below. Brands with an investment level of more than $250,000 per unit also did well.

2016 AFDR kers, down slightly from last year’s 49 percent, 48 percent in 2013, and 44 percent in 2012. Of those who do use brokers, 86 percent used a broker firm that specializes in franchising (up from last year’s 78 percent) and 58 percent used an independent broker/consultant. n

CONVERT!

Pete Lindsey has a big word on his office wall: Convert. “You have to measure conversions, but a lot of people get too complicated,” he says. For him there are three conversions to watch: 1) lead to inquiry, 2) lead to discovery day, and 3) discovery day to contract. His approach is to give his sales team numbers to meet, then help them hit those numbers. “When your team realizes they can move conversion metrics, you have a really powerful team,” he says. “We goal set every year and move them up. It doesn’t work if people don’t know exactly what they’re responsible for.” And, he’s found, when someone on his team is struggling to meet their numbers, team members will rally around that person and ask what they can do to help.

• Mobile/smartphones. Franchisors who have not optimized their online presence for mobile devices (smartphones and tablets) are at a disadvantage when it comes to lead generation. More than half of Internet leads (51 percent) now come from smartphones alone, according to research conducted by Landmark Interactive this summer. These results, combined with Google reporting in October that mobile searches surpassed desktop searches, are a wake-up call for franchisors. The shift to mobile should surprise no one: more searches are conducted from mobile devices each year for everyday purposes, and prospects will shop for brands using the same tools and methods they use to find shoes or restaurants. In addition, not only are desktop searches declining, so are searches from tablets. Franchisors who do not tailor their online presence to meet prospects where they are—on their phones—deserve what they don’t get. “If you’re not mobile-optimized, you’re losing leads,” said Gardner. • Brokers. Franchisors love brokers. Franchisors hate brokers. Regardless, franchisors use brokers. Almost half (46 percent) of this year’s AFDR respondents said they use bro-

WHAT IS FRANCHISE DEVELOPMENT? “What I have learned over the years is that it’s not rocket science—it’s just attention to detail, and a mentality of honoring the fact that people are interested in investing in your brand,” says Paul Pickett. “And when you’re able to create a culture like that, it is very rewarding and easy to attend to your candidates in the way they want to be attended to.” Pickett takes his role seriously. “When I see people not attending to candidates, or not answering their questions, I think, ‘Are you looking at candidates as an honor to serve them?’” he says. “You’re there to help grow your brand. If you don’t believe in that, you might consider another career path,” he says. “It’s a commitment to doing the right thing for your potential candidates and for your brand.”

Broker specializing in franchising

Independent broker/ consultant

Received qualified applications from brokers in the past 12 months

85%

50%

Broker applications produced sales in the past 12 months

60%

40%

13.4%

8.5%

1.1

Average number of sales expected from applications provided by brokers in 2016

8.0

5.1

Average commission fee paid to brokers per single-unit franchise agreement signed

$11,963

$6,519

% of broker applications closed in the last 12 months Average number of franchise deals made with brokers in the past 12 months

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2016 AFDR NEW WEBSITE APPROACH PAYS OFF

ne number that’s extremely important to Josh Wall at Christian Brothers Automotive is unique website visitors to lead conversion. “I watch that one like a hawk. We spend a large portion of our budget on our website,” he says. This wasn’t always the case. Two years ago the company launched a new recruitment website—and unique visitor traffic rose 394 percent year-over-year, he says. “Spending a little bit of money on SEO had a tremendous impact on leads,” he says. His first goal was to drive up the number of people coming to the recruitment website. “If I get enough people in front of that site, and if it’s sticky and interesting enough, it will convert a reasonably high number of those unique visitors,” he says. The next goal was finding a way to make visitors stick around. Having learned about the relationship between the amount of time visitors spent on a website and further activity, especially conversion, he began working to boost the amount of information available online. “I realized we didn’t have enough content, so we beefed it up, including video,” he says. Visitors were spending very little time on the company’s website. “Our average time was less than a minute. That’s when we decided to throw more out there. We needed more content to interest the right people,” he says. Before the change, he says, “Our website had very little

2016 AFDR NOW AVAILABLE !

he 2016 Annual Franchise Development Report (AFDR) delivers data collected from 134 franchisors representing 51,004 units, with responses organized by industry, unit investment, system-wide sales, and more. The annual report provides franchisors with the ideal tool for studying their development practices, benchmarking their sales and recruitment budgets against their own industry categories, and setting goals and budgets for the year ahead. The report also includes research into online recruitment practices, the growing use of mobile and social tools by prospects, and best practices by franchisors. The AFDR, the only sales and lead generation benchmark report available in franchising, identifies industry sales trends and top lead generation sources for meeting sales goals. For example: • How does your sales budget compare with those of other brands in your segment? • Are your closing ratios in line with your industry and investment level? • What conversion rates should you expect from your website? • Is your online spending paying off? How do you know? • Are your brokers delivering—and is their price per deal too high?

content and our process was ‘gated.’ So if someone wanted more, they’d have to come to us.” He calls this an old theory, the idea being to get prospects on the phone with a sales rep. The new approach, which is working much better, is to “ungate” the information—“to put it out there and let the right people gravitate toward the opportunity,” says Wall. This approach is paying dividends. “Candidates in our qualifying process are much more educated. It feels more natural,” he says. “They’ve educated themselves, which allows me, as a recruiter, to drill down and ask them questions to see how well they qualify for one of our franchises.” And conversion is up—significantly. “Our conversion rate now is a little bit higher than 6.5 percent. I’m pleased because our number is close to twice the benchmark in the AFDR,” he says. “By having a recruitment website and continuing to spend SEO dollars, and a little bit of an SEM campaign, we expect it to continue to grow,” he says. Managing more leads demanded further change. The company had no lead qualifier and a very poor contact rate, says Wall. “We were not stewarding our lead flow very well. That’s one of the changes we made. It allowed us to really jump up our contact rate,” he says. “Without this report, we might have continued floundering.” Walking the talk, the company won a STAR Award in 2014 for Best Website Prospect Follow-Up. ■

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• Are you using referrals, and how much are you paying for them? • How are franchisors using social media to recruit candidates? • Some franchisors are exceeding their sales goals. What are they doing differently from those falling short? The 2016 AFDR is packed with timely information and benchmarking data that can help your franchise system grow faster and close more deals—while saving thousands of dollars in cost per sale. Based on in-depth surveys from 134 franchise companies, this thoroughly researched report reveals the success drivers that are sure to boost the output and quality of your sales department. Filled with the most comprehensive sales and lead generation data in franchising, the 2016 AFDR, at more than 250 pages, is a must-buy tool for franchisors, development consultants, and advertising, marketing, and technology suppliers—and is ideal for benchmarking and building budgets and media plans. The complete 2016 AFDR, with analysis and benchmarks, is available for $199. New this year is a 1-hour video of the discussion and analysis of the results by four development pros, held at this year’s Franchise Leadership & Development Conference in October. For ordering information, visit franchiseupdate.vizigy.com or go to franchiselearningacademy.com, Franchise Update Media’s online learning resource.

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! D E R U T C U R T S R E SUP 17th Leadership & Development Conference focuses on growth

ranchise development executives seeking inspiration, guidance, and expertise on how to grow their brands convened in Atlanta this past October 14–16 for the 17th annual Franchise Leadership & Development Conference. This year’s theme, “Super Structure Your Growth,” was designed by an advisory board consisting of more than a dozen top franchise development pros in collaboration with Franchise Update Media. The conference continues to post bigger numbers every year. This year, 420 attendees representing 185 franchise brands across the food, retail, and service sectors were on hand for the event. In addition were 160 sponsor representatives from 72 sponsoring companies. Topical, timely sessions filled the twoand-a-half days as high-powered speakers and panelists shared insights and interacted with attendees in the packed meeting rooms. The two keynote speakers (more below) challenged and encouraged attendees with practical advice they could apply as soon as they returned home. The Expo Hall, packed wall to wall with sponsor tables, provided ample opportu-

2015 CONFERENCE NUMBERS 420 TOTAL ATTENDEES

185 FRANCHISOR BRANDS

258 FRANCHISOR PROFESSIONALS

72 SPONSORING COMPANIES

160 SPONSOR REPRESENTATIVES

Meeting and eating at the STAR Awards dinner at Maggiano’s Little Italy

Franchiseupdate I S S U E I V, 2 0 1 5

nity for franchise development executives to build new relationships and explore solutions to the common problems they share across their different brands and industries. The Platinum Sponsor this year was FranchiseGrade.com. Gold Sponsors were Benetrends Financial, GbBIS, and Hot Dish Advertising. Getting started Wednesday morning began with early registration and breakfast as attendees gathered outside the meeting rooms to chat with old friends and make new acquaintances. Three dozen franchise CEOs, founders, and presidents hunkered down for the annual all-day CEO Summit that explored issues including system growth, culture, risk management, and unit economics. The program leader was John Metz, who as CEO of Hurricane Grill & Wings and RREMC Restaurants, is both a franchisor and a franchisee. Franchise sales and development executives chose from two concurrent allmorning sessions. “Identify, Attract & Recruit the Right Prospect” panelists were Chris Cheek, chief development officer

AFDR panel: Paul Pickett, Steve Dunn, Pete Lindsey, Josh Wall

at Newk’s Eatery; Dan Doulen, director of franchise development at Buffalo Wings & Rings; Shelley Harris, regional vice president of operations for Coverall North America; and Dave Wells, director of franchising at Sport Clips. Dawn Kane, president of Hot Dish Advertising, facilitated the session, which delved into topics that included determining the right candidate for your brand, the best ways to communicate with prospects, choosing the best marketing media to match your sales goals, and more. The other all-morning intensive, “Mastering Franchise Sales Fundamentals,” was facilitated by Joe Mathews, founder of Franchise Performance Group. Panelists in this lively, highly interactive session were Michael Arrowsmith, chief development officer at Captain D’s; Matt Flagler, director of franchise development at Brightway Insurance; Aaron Goldberg, vice president of franchise development at ZIPS Dry Cleaners; and Jack Humbert, vice president of sales and finance at J.D. Byrider. There was much discussion about establishing the value proposition of your brand, establishing target franchise candidates, lead generation and conversion, and how to improve your sales process by focusing on the individual needs of each candidate. A lunch break was followed by two concurrent all-afternoon sessions. “Build & Evaluate Your Franchisee Recruitment Plan & Budget” focused on how many franchisee deals a brand needs to meet its goals, building a recruitment budget to meet those goals, how to evaluate the results on an ongoing basis throughout the year, determining the best metrics to measure your goals, and finding the tools to do that with. Madison Jobe, CEO of

Development Strategies International, facilitated the panel, which consisted of Ronn Cordova, vice president of development at The Maids International; Bill Schreiber, vice president of global business development at Church’s Chicken; Brian Sommers, vice president of franchise development at Jersey Mike’s Subs; and Jeff Sturgis, chief development officer at McAlister’s Deli. The other afternoon session, “Build High-Performance Sales Teams,” explored the nuts and bolts of how to build a great team, including what positions are required, how to find the right people for each role, what to pay them and how (salary, commissions, bonuses), setting goals or quotas, using brokers, keeping each sales team member accountable, and more. The panelists, who detailed their own sales team structure and ap-

Steve Dunn, Conference Chair

Scott McKain, keynote speaker

proach, were Josh D’Agostino, director of new business development at NAPA Auto Parts; Chris Goethe, vice president of franchising at Primrose Schools; Gillian Harper, chief development officer at Noble Brands (Shelf Genie, Outback Gutter); and Kevin Kruse, chief development officer at Hurricane Grill & Wings. Bob Franke, senior vice president of franchise sales and international development at Sonic Drive-In, facilitated. Following a day rich with discussions, education, and problem-solving at the four sessions, attendees gathered for the opening social in the Expo Hall, where food and drink were served amidst a room filled with exhibitor tables that overflowed into the hallway. Everyone from technology solution providers to PR firms to data analysts were on hand to rub elbows with franchise development executives and chat up solutions to brand-specific issues. Franchiseupdate I S S U E I V, 2 0 1 5

Unwinding in the bar at Maggiano’s before the STAR Awards

She just won $500 in the Expo Hall!

Day Two The second day of the conference kicked off with breakfast and coffee outside the meeting rooms before the first general session began at 8:30. Therese Thilgen, CEO of Franchise Update Media, welcomed everyone. She noted that this was the largest Franchise Leadership & Development Conference ever, and highlighted its reputation for “transparency and a place where professionals can share with each other.” Next up was Steve Dunn, senior vice president of global development at Denny’s, who served as this year’s conference chair. In his welcoming address, he recalled attending the first Leadership & Development Conference 17 years ago, noting how far it has come and how much it has grown. He also praised the openness and sharing aspect of franchising before introducing the day’s first speaker, FRANdata CEO Darrell Johnson. In his annual “State of Franchising” economic address, Johnson delivered his overview of the economy and its likely effects on franchising. He advised attendees to view the coming years with “cautious optimism,” and to keep aware of risks and trends that could affect their business. Positive factors included rising consumer confidence, rising disposable income, credit easing somewhat, and interest rates at historic lows that are unlikely to change appreciably in the near future. On the downside, he noted that while the stock market has had a positive run for the better part of seven years, part of the reason is stock buybacks, which lift share prices; busi-

Franchiseupdate I S S U E I V, 2 0 1 5

ness confidence remains cautious; and that while household debt is steady, there are no significant reserves for increased consumer buying power in an economy where consumer spending accounts for about 70 percent of activity. This works against franchise brands raising their prices. Also, he said, there’s a dichotomy between sales and pressure for raising wages. “Sales are down, wages are rising, which is usually not a very stable situation.” In a sluggish economy plagued by Congressional gridlock, franchising will likely remain a “battle for market share,” he said. Noting historical GDP patterns in presidential election cycles, he said 2017 should be a “pretty good year” with 2016 just “so-so.” Although franchising is outperforming the economy as a whole (in terms of GDP and the stock market, for example), and unit growth continues to be strong, he said there are many potentially destabilizing factors on the radar. These include regulatory changes driven by unions pushing for higher wages, and governmental actions at the city, state, and federal levels.

Johnson cautioned franchisors to keep an eye on a general societal perception that franchisors have “gained too much control” and warned that the government could react with additional legislation and regulations. “The franchise business model has been painted into a corner—wrongfully,” he said, and franchisors and franchisees alike need to become active to correct misperceptions and change the narrative about franchising, focusing on its role in creating new businesses and jobs across the country. Keynote: Create distinction Next up was keynote speaker Scott McKain, author of three Amazon.com #1 business best-sellers (ALL Business Is Show Business, What Customers Really Want, and Collapse of Distinctions) and founder and CEO of the Distinction Institute. His newest book, 7 Tenets of Taxi Terry, is based on a taxi driver McKain encountered in his travels whose approach to customer service impressed him so much that he based a book on him. McKain pushed attendees to examine their business practices and outlook with provocative, practical questions such as, “When you sell a franchise, what are you really selling?” He soon followed with another question: “Are you selling what you say you’re selling?” Many of today’s selling points have become commodities, he said, and to stand out from the competition brands must play up their unique and distinctive attributes. “I’m going to suggest to you that

Franchisor Profiles BY TITLE 16%

CEOs

CFOs, COOs, CIOs

30%

CDOs, SVPs development

39% Directors and managers of franchise development Therese Thilgen presents the Hall of Fame award to Andy Johnson and Roy Oteo, Wall Street Journal

no business has to be a commodity,” he taxi ride not only was different, but resaid, citing the examples of Starbucks and ally was the best taxi ride of his life. The Evian turning coffee and even water into point, he said, is how every employee can something special. “We even have a favor- create and deliver the ultimate customer ite water!” he said, with people willing to experience. “He set the expectation not pay a premium price for a “commodity” only for the customer, but for himself.” He wrapped up by summarizing his they can get free. In an exercise designed to explore the “Four Cornerstones of Distinction”: clarquestion of “How do you stand out from ity, creativity, communication, and a focus the competition in a hypercompetitive mar- on the customer experience. Other comketplace?” he asked ments worth noting attendees to write included a warning against the compladown three things they sell beyond cency of success. their products and “Great today will not services. Responses ensure you are great included community, tomorrow,” he said, experience, fun, inacknowledging that come, wealth, conalthough “change fidence, trust, ethics, is uncomfortable,” a system, and family. it’s also necessary to He urged francontinue to grow as a brand. chisors to examine how they engage After the standwith and connect ing ovation for Mcwith candidates, Kain, Thilgen reNetworking in the Expo Hall franchisees, and custurned to the stage tomers, with the holy grail being “that to announce the company’s Hall of Fame connection that transcends the transac- award winners, which recognize a longtion.” Training employees is critical in time attendee and a longtime sponsor. standing out from the crowd. “Seventy Tom Wood, CEO and president of Floor percent of your franchise’s employees Coverings International, was the individual can’t explain why your brand is superior winner. In 2013, Wood served as the firstover the competition,” he said. “You have ever chair of the Leadership & Development Conference and is a member of the to sell internally, not only externally.” He illustrated this point by citing Taxi conference advisory board. The Wall Street Terry as an example. “What’s more ge- Journal, which has been involved with the neric than a taxi ride?” he asked. Yet, he conference for its 17 years, was honored said, one person changed everything he as the sponsoring company. thought about that. Stepping off the taxi Gary Gardner, chair of Franchise line at the airport in Jacksonville, he said, Update Media, then took the stage to the first thing Taxi Terry said to him was, introduce the 2016 Annual Franchise De“Are you ready for the best cab ride of velopment Report (AFDR) and highlight your life?” In his book, he tells how this key findings from the report and from

7% Real estate, communication, and compliance professionals

BY CATEGORY Service

40%

Food

32%

Retail Non-Food

18%

Retail Food

10%

BY INVESTMENT LEVEL Under $50,000

$50,000–$100,000

$100,000–$250,000

28%

$250,000–$500,000

27%

$500,000–$1 million

15%

Over $1 million

16%

BY NUMBER OF UNITS 0

< 25

26–100

19%

101–250

22%

251–500

21%

501–1,000 > 1,000

9% 18%

BY ANNUAL SYSTEM-WIDE GROSS REVENUE < $1 million

$1 million–$8 million $8 million–$20 million

13% 9%

$20 million–$40 million

$40 million–$60 million

$60 million–$80 million

$80 million–$100 million

> $100 million

47%

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the annual mystery shopping survey. For more on the AFDR, see page 30; more on the mystery shopping begins on page 44. Gardner moderated a high-level quartet of franchise development executives who interpreted and discussed the research findings, and responded to many questions from attendees. Panelists were Conference Chair Steve Dunn; Pete Lindsey, vice president of franchising at Sport Clips; Paul Pickett, vice president of franchise development at Wild Birds Unlimited; and Josh Wall, vice president of franchising and strategic development at Christian Brothers Automotive. After a stimulating, inspiring, and datapacked morning, the Expo Hall reopened for an extended time so attendees could catch lunch and catch up with the suppliers they were interested in meeting—as well as another opportunity for networking, socializing, and relaxing outside in the warm Atlanta sun. From 2 to 4:30 p.m., the afternoon offered two rounds of concurrent breakout sessions, broken into three tracks: Franchise Sales Basics, Build a World-Class Brand, and Market Planning and Development. Sessions included “Identify & Qualify a Warm Lead,” “Strategic Market Planning for Optimum Penetration and Growth,” and “Inter-Departmental Alignment: Imperative for Growth.” At 4:45, attendees gathered back in the general session room for the day’s second keynote address and an interactive workshop, led by David Nour, social networking and growth strategist and author of Relationship Economics. He grabbed people’s attention immediately, opening his talk by saying, “Several things about your industry make me cringe.” He was referring to the transactional part of franchising versus the relational aspect of doing business. He then proceeded to list his “Top 10 Nour Market Observations,” which included: misalignment or under-align-

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ment of strategy and execution; lack of consistent investments in infrastructure technology; nimbleness (willingness) and agility (ability) are more critical than ever; and the dangers of company or industry “group think.” He leavened his more serious points with humorous, pithy observations and stories, such as the CFO asking the CEO, “What happens if we invest in developing our people and they leave us?” The CEO’s response? “What happens if we don’t and they stay?” Nour spoke about “transformational thinking” that included his observations on “the importance and value of business relationships in a global economy that is

David Nour, keynote speaker

becoming increasingly disconnected.” His observation? Business leaders need fewer contacts and more relationships. “Success is fueled by relationships,” he said. He also was full of statistics and a big proponent of moving to mobile, noting that more people do searches from their mobile devices than from their desktops. Returning frequently to the idea of building relationships, not transactions, he provided attendees with what he called a Relationship Currency Roadmap, which he tied into a roundtable “thinking exercise.” Teams were instructed to work

out answers to the questions: What am I trying to get done? Who do I need (2 to 3 names)? Who do I know? What am I willing to do to help these individuals? And what will I do differently when I get back? “We’re typically 3 degrees separated from most people we’d like to meet and develop a relationship with,” he said. Following a heartfelt round of applause for the philosophical and practical advice Nour provided with both humor and style, attendees broke for the day and prepared for the evening’s festivities: a family-style Italian dinner at nearby Maggiano’s Little Italy where the winners of this year’s STAR Awards were announced (see page 48). Friday morning and home The final session, “The Right Value Proposition,” drew a large, and very interactive crowd. Art Coley, president and CEO of Franchise Source Brands International, facilitated. Panelists were Jennifer Durham, vice president of franchise development at Checkers, and Martha O’Gorman, CMO at Liberty Tax Service. The trio did a great job of unpacking ideas such as brand positioning, proper marketing and communication, and an examination of the kinds of commitments brands make to their prospects. “The better you can articulate your value proposition, the more powerful your brand will be,” noted Durham. With lots of great ideas tucked away, the 250-plus franchise sales and development professionals went home to strengthen their foundations and “super structure” their growth well into the future. For more on this year’s event—and to learn about registering for next year’s 18th annual Franchise Leadership & Development Conference, which returns to the InterContinental Hotel in Atlanta, September 28–30, 2016—visit franchisedevelopmentconference.com. ■

FRANCHISE LEADERSHIP& CONFERENCE ATLANTA, GA DEVELOPMENT OCT 14-16, 2015

THANK YOU ATTENDEES, SPEAKERS AND SPONSORS FOR MAKING THE 2015 CONFERENCE GREAT!

SAVE THE DATE

FOR THE 2016 FRANCHISE DEVELOPMENT CONFERENCE - SEPT 28-30 SUPERSTRUCTURE

YOURGROWTH

BY KERRY PIPES

The Mystery Persists Our annual mystery shopping survey shows some improvement, with much room for more

ranchise recruiting is serious business. Incredibly, year after year, franchise brands continue to fumble the fundamentals. They are not executing the X’s and O’s. They are failing to meet prospects where they are (mobile devices anyone?), providing flat-out wrong information, responding too slowly to prospect inquiries, and worse, not getting back to them at all. These are just some of the key findings of Franchise Update Media’s 2015 annual mystery shopping survey. Every brand that registered by August 15 to attend this year’s Franchise Leadership & Development Conference was mystery shopped by a “qualified, perfect candidate,” said Gary Gardner, chair of Franchise Update Media, during his presentation of the survey results at the conference in mid-October. The brands were evaluated by telephone query, website response, website best practices, social media, and franchisee satisfaction. Gardner noted a few eyebrow-raising statistics during his presentation. “Of the 137 brands that were shopped this year, 34 percent never returned a call from the initial contact from the prospect,” he noted. And 14 percent simply referred them to their website. “To me that’s inexcusable,” he said. “Some people are doing some great things, and some people have some work to do.” Response to Inquiries

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But there is good news. The needed improvements can be made, and the strategies and tactics for doing so are simple to implement. Brands and their development teams just need the discipline to do it. We asked each of the mystery shopping researchers who participated in this year’s study—Franchise Business Review, Landmark Interactive, and FranConnect—to discuss and interpret their findings and provide their thoughts on how brands can make positive changes (see Best Practices sidebar). Franchisee satisfaction Franchise Business Review (FBR) measured franchisee satisfaction and performance at 44 franchise companies representing more than 19,000 business units. Survey responses from 5,775 franchisees were compared with FBR’s benchmark data from more than 21,000 franchisees representing franchise brands across all industry segments. Eric Stites, FBR’s CEO, said franchisees completed an independent survey consisting of more than 50 questions related to their business performance, satisfaction with their brand, and general business demographics; 33 of the 50 questions were rated on a 100-point scale called the Franchisee Satisfaction Index (FSI). Satisfaction was measured across eight

key areas: Training & Support, Franchise System, Leadership, Financial Opportunity, Core Values, Franchisee Community, Self-Evaluation (franchisee performance), and General Overall Satisfaction. Individual question ratings ranged from the low 80s down to the mid 50s, with an average overall FSI score of 70. FU: Describe the key findings and results of your research. Stites: Overall, the Franchise Update test group FSI score (70) was nearly identical to FBR’s franchise sector benchmark (70.7), which represents more than 350 leading franchise brands. The 1 percent overall variation is not statistically significant and is within the research margin error. That being said, several key areas did show a statistically significant negative variation from the benchmark, specifically in the area of Financial Opportunity. FU: What were some of the key strengths identified by the benchmark satisfaction questions? Stites: There were four strong areas. 1) Franchisee Self-Assessment: “I enjoy being part of this organization” (82.0 FSI); “I enjoy operating this business” (81.8 FSI); 2) Core Values: “I respect my franchisor” (80.3 FSI); “My franchisor acts with a high level of honesty and integrity” (78.9 FSI); 3) Community Engagement: “My fellow franchisees are supportive of the brand” (77.0 FSI); and 4) General Satisfaction: “I would recommend my franchise to others” (77.8 FSI). FU: What challenges were identified by the benchmark satisfaction questions? Stites: 1) Financial Opportunity: “Current financial picture” (57.9 FSI); “The total investment in my business, including both time and money, has been consistent with my expectations” (60.4 FSI); and “The fees I pay my franchisor

are fair” (60.4 FSI). 2) Training & Supdidates and franchisees, and have them port: “Marketing and promotional prodo the exercise of a 10-year financial plan grams” (58.2 FSI); and “Effective use of (assuming median performance within technology” (59.4 FSI). 3) Leadership: your system) to gain a clear and realistic “Senior management involves franchiunderstanding of their potential return sees in important decisions” (60.8 FSI). on investment. FU: What surprised you most about Prospects’ online search behaviors your findings? Stites: We found that franchisees in To better understand franchise prospects the test group reported annual pre-tax and the franchise buying process, Landincomes 8 percent lower than other franmark Interactive analyzed data from more chisees, despite being in business slightly than 40 million Internet visits since 2010 longer on average ($74,216, compared to the leading franchise portals. These with $80,479 reported by other franchiincluded Franchise.com, FranchiseOpsees across all industries). • Update your Item 19 to clearly il- portunities.com, FranchiseSolutions.com, FU: What are you seeing in the lustrate both the median gross and net FranchiseGator.com, and BusinessBroker. overall performance numbers of earnings of your entire system. Too many net. Landmark President Michael Alston franchisees? companies share only gross numbers, or said they looked for changing patterns in Stites: Looking at trend data over the massage their financial data to focus only how prospects access the Internet, how last three years, the Franchise Update test on top performers. Also, break out Item they use portals, and how the profile is group has shown slight improvement in 19 data by franchisee tenure to clearly changing among late-stage prospects who all categories year over year, improving illustrate the typical ramp-up period of contact a franchisor through a lead form. on average by 3 to 5 percent from 2013. your business and time to break-even, as FU: What are franchisors/devel- well as typical time to median unit perFU: What were the key findings opment teams doing well? formance. Great Item 19 examples in- and results of your research? Stites: The data clearly shows that the clude Wild Birds Unlimited, Fastsigns, Alston: The number of high-value brands within the test group are providing and BrightStar Care. franchise prospects has surged in the past their franchisees with strong brand lead• Review your Item 7 data to make two years. Interest in franchises requirership and are building solid franchisee- sure it depicts the true experience of the ing more than $100,000 nearly doubled franchisor relations. The overwhelming majority of franchisees. Include an allow- in that time, up 91 percent, and intermajority of franchisees enjoy operating ance for initial working capital, as well as est in $250,000-plus businesses tripled, their business, enjoy being part of their any other items that may be required to with a 201 percent increase over summer brand, and ultimately would recommend get the business off the ground. 2013. Investment interest for $50,000 to • Require all new franchisees to take $99,000 franchises also nearly doubled, their brand to other franchisee candidates. FU: Where do franchisors/devel- a full-day small business financial course with 90.4 percent growth. And prospects opment teams need improvement? as part of their initial training, and offer for opportunities under $50,000 saw steady Stites: Based on the research find- refresher courses at your annual conven- growth, with a 12.9 percent increase unings, and specifically very low ratings on tions. Understanding income statements, der $25,000, and an 8.3 percent increase questions related to financial opportunity balance sheets, cash flow, and the key fi- in the $25,000 to $49,000 segment. Reand reported annual pre-tax income, it is nancial drivers of your business model is search also showed that mobile phones clear that many of the companies in the critical to their success. are now the predominant Internet channel • Share median resale data with can- for franchise development. Smartphones test group could be doing a much better job of setting clearer and more generated 51 percent of franrealistic financial expectations chise recruitment leads this with franchisee candidates dursummer, more than twice the ing the recruitment process. share of 2013, and up from a FU: Based on the findmere 2 percent of franchise CALLBACK RESPONSE TO WEB INQUIRY FORM ings, what are your recleads only 5 years ago. ommendations for franFU: Any other sur31% 0–4 hours chisors? How can they prises in your research 26% 4–24 hours do a better job of sales/ 8% findings? Within 48 hours recruitment? Alston: We were aston4% More than 48 hours Stites: Setting clearer fi- 18% ished at what a clear picture Did not respond with a call nancial expectations with canthe profile data painted for 13% No online inquiry form or broken form didates on the front end of us. Other measures of busi the recruitment process will ness optimism show the out2015 vs. 2014 2015 2014 go a long way toward movlook improving in fits and Returned calls within 24 hours 57% 35% ing franchisee satisfaction in starts, but this willingness to 67% 33% a positive direction. These Responded with a call and email invest in higher-cost busiCalled and left the “right messaging” 44% 20% specific steps will help: nesses is a stronger show of

Only 40% had video on their franchise website vs. 39% last year; not providing content how prospects want it

WEBSITE RESPONSE FORM MYSTERY SHOPPING RESULTS

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ANNUAL MYSTERY SHOPPING SURVEY were from a mobile device (according to Landmark Interactive’s data). Furthermore, there’s still not a majority using video. And socially, there was decreased activity on LinkedIn, despite it being the business social network. FU: Why do these poor performance numbers keep occurring year after year? Johnson: The franchise industry has historically been late to adopt technology trends because of the challenge of scaling for learning (a stepped approach to learn changes across a multi-location network. about the opportunity) almost doubled, In addition, they give too much credit and the number of those having a mobile- to their franchise website because that is optimized site rose from 17 to 52 percent. where most leads traditionally get comConversely, not all best practices on the pleted, regardless of the original source social front appear to have been as broadly that drove the interest. Social sites play a embraced. Having uniform branding on major role in driving awareness, and online local Facebook pages only went from 31 prospect research uncovers how you manto 38 percent, and sharing the franchise age your reputation and what customers opportunity on Facebook remained flat are saying about your franchisees. at 30 percent. FU: What are franchisors/develFU: What surprised you most about opment teams doing well? your research findings? Johnson: Social awareness and enJohnson: On the website front, it gagement are improving. Our research Websites and social media was that still only 52 percent of franchise showed a positive trend in responding to FranConnect analyzed two components of sites are mobile-friendly, despite the fact and managing online reputation/brand the franchise discovery process: the fran- that about half of all franchise inquiries perception—still at only 24 percent, but chise website and social media significantly more than the 4 presence. Tim Johnson, presipercent from last year. This dent of brand development at affects lead generation and FranConnect, says sites were ultimate conversion more scored based on adherence to than any canned copy on 25% provide unique starting points on franchise site proven best practices for the a franchise website. That (21% last year) franchise discovery process. said, there’s strong adoption 54% provide a process for learning (29% last year) “There was no judgment for of franchisors making their 40% have video on the franchise site (39% last year); not usability nor design, and the franchise sites more userproviding content how prospects want it results were based on actual friendly by guiding them content and functionality to through navigation. 46% have an investment chart (35% last year); not produce the overall score. FU: Where do franchiproperly qualifying? The search was conducted sors/development teams 44% have financials on the qualification form (34% last through the eyes of a franneed improvement? year); again, not properly qualifying? Johnson: By providing chise prospect, not a person 52% of franchise sites are mobile-friendly (17% last year) familiar with the franchise content in the format that industry,” he says. Uniform candidates and customers guidelines were applied to want it: mobile and/or video. It’s interesting that most all brand assessments, with 25% had responses to negative reviews on page 1 of brands are quick to provide very little left to qualitative Google Map results (4% last year) judgments, he said. that on the consumer side, but not on the franchise de60% of Google listings are not branded (profile image) velopment properties. FU: What were the key (85% last year) findings and results of FU: Based on the find38% had consistent branding on local pages on your research? ings, what are your recomFacebook (31% last year) Johnson: It appears that mendations for franchiattendees took heed of what sors? And how can they 30% communicate the franchise opportunity somewhere do a better job of sales/ was shared last year as imon their Facebook profile (30% last year) recruitment? portant and embraced the 28% have some level of activity in the last week on initiatives. Franchise webJohnson: Franchisors LinkedIn (40% last year) sites that contain a process need to evaluate their concept confidence among savvy entrepreneurs. As the economy improves, we expect more high-value buyers and first-time prospects to come off the sidelines. So understanding franchisee personas and profiles will become even more important for effective franchise development. We were not surprised to see a surge in high-value leads being submitted by mobile phone. For the Internet in general, that’s the new normal. Google recently announced that the majority of its global searches are now performed on smartphones. FU: Based on your research, how can franchise brands do a better job of sales/recruitment? Alston: As the U.S. economy continues to improve, prospective franchisees are likely to come to the table with greater financial assets. Successful franchisors will gather as much data as they can to better understand the changing investor profile, to improve the return on their development processes, and to choose the best franchise owners.

Just 28% had some level of activity in the last week on LinkedIn vs. 40% last year

WEBSITE MYSTERY SHOPPING RESULTS

SOCIAL MEDIA RESULTS

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ANNUAL MYSTERY SHOPPING SURVEY from the vantage point of a candidate. Google your brand for keywords and using different cities to see what your prospects see. Your franchisee presences and reviews play a major role in how you are perceived, and make the difference in generating an inquiry or ultimately awarding a franchise. Focus discovery on how they will be successful generating customers instead of all the wonderful things you do to train and support them.

AFDR STATS

• Only 45% of franchisors measure the percentage of unique visitors to their home page that convert to leads • 4,320 average unique visits monthly • 139 average leads monthly

• Only 37% of franchisors measure the percentage of visitors on their information request forms that convert to leads

FU: Any other thoughts or observations about any of your research? Johnson: Social media or what people are saying about your brand is more important than what you say about your brand, and it seems to be downplayed as still being a non-result–producing “nice to have” instead of a strategic “must have” that is a major component of the discovery process. n

Best Recruitment Website Practices

hen Tim Johnson and his associates at FranConnect set about measuring how well franchise brands were doing with their franchise recruiting websites for this year’s mystery shopping survey, they needed a standard to measure their analysis. They used the scorecard of Franchise Update Media’s best practices, created years ago and tweaked and updated continually to keep it relevant to the changing marketplace and technologies.

“The best practices represent the data point that drove the score,” says Johnson. “They are best practices because the most progressive and thriving brands execute on them. Most of these reflect common sense, can be substantiated, and will withstand any argument.” The following are the criteria FranConnect used to measure website effectiveness during their mystery shopping.

1. BASIC SEO (META/KEYWORD TAGS)

Benefits of franchising

Title tags (very important for SEO and social sharing) • company name only or title of page only • company name plus “franchise” and same on all pages or has title of page next to it • a few unique franchise or business opportunity keywords

Benefits of company franchise

2. WEBSITE USABILITY Franchise content accessibility (from home page) • 3 different links to access franchise page or 1 link in main and unique button • 2 different links (1 in main navigation, 1 elsewhere) • 1 link in main navigation • hard to find (only at bottom) Process of learning (how does someone find out more about the brand) Effective use of technology—video • Video testimonials • Video spokesperson • Click to call • Online chat • Twitter/Facebook/social media links Overall Site Presence (look and feel) 3. KEY CONTENT About Us/History • Dedicated page • Franchise team listed

Territory map • Standard map/detailed area • Map Investments • Investment chart • Mention build-out and franchise fee and royalty • No investment mentioned Requirements (what will it take to become a zee) Frequently Asked Questions • Solid FAQs with good descriptions and answers • Few basic FAQs • None Testimonials • Sprinkled throughout site or has a dedicated page with video, text, pictures, etc. • At least one testimonial • None Industry background and growth Earnings claims (Item 19 or other) Franchise award process (how things will happen) Initial request form • Short form with contact info only • Short form with financial qualifiers • Short form with time frame • Short form with lead source Application

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BY HELEN BOND

HONORING THE BEST IN FRANCHISE RECRUITMENT

hen it comes to being a “STAR” franchise development player, the best keep winning—and they keep working to get better. Franchise Update Media honored the top performers in franchise sales and development at its annual STAR Awards dinner, a highlight of the Franchise Leadership & Development Conference, held Oct. 14–16 in Atlanta. The STAR Awards (Speaking To And Responding) recognize brands for overall development performance and in the key areas of franchisee recruitment, online sales follow-up, telephone responsiveness, website effectiveness, social media, and franchisee satisfaction. “Franchise Update Media and the STAR awards are the only kind of awards in our particular part of the industry,” says Pete Lindsey, vice president of franchising at Sport Clips, a 2015 STAR Award recipient. “It is really the only way we can benchmark how we are doing. We really appreciate this environment so we can learn and measure ourselves against others.” STAR Award winners are chosen based on evaluations by a team of Franchise Update sales and lead generation experts. We caught up with representatives of the winning brands to uncover their secrets to business success. (See page 51 for a list of 2015 winners and top runners-up.)

BEST OVERALL PERFORMANCE

1st Place: Wild Birds Unlimited

Paul Pickett

When you capture two STAR Awards—one for Best Overall Performance and one for Best Franchisee Satisfaction in the retail category—you know your sales development program is on the right

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track. And for Wild Birds Unlimited, which placed second last year in this category, the two awards go hand in hand. “You can have the greatest franchise development response, the best website, the best process, and the most incredibly talented franchise development team, but if your franchisees aren’t happy, you are never going to grow your brand,” says Paul Pickett, vice president of franchise development for the backyard bird feeding and nature specialty brand, which began franchising in 1983. Thanks to the popularity of bird watching as a hobby, business is soaring at Wild Birds Unlimited—and so is interest from potential franchisees. The company has 291 stores and nearly 20 more in the pipeline—a growth rate that has prompted tweaks to an already successful development system. Nearly two years ago, anticipating future sales growth that would come with planned marketing programs, Pickett hired a manager of franchise development. In 2015, as franchisee interest continued to heat up, he added an extra step in the application process to include an in-depth write-up and full candidate interview with the chief operating officer or director of retail operations. “That was a change in our development process,” Pickett says. “We had the operations folks be part of the development process to ensure the quality of candidates was going to stay as good or get even better.” Transparency in the sales development process rules the roost at Wild Birds Unlimited. To make sure there is a cultural match, the brand includes validation early, encouraging prospects to study satisfaction results and speak with franchisees before turning over a financial disclosure document. “Making sure you know what you are looking for in your candidates and giving them the information they need to make a very solid, long-term business decision is really important,” says Pickett.

The company is passionate about bringing people and nature together, he says, and looks for that same passion in new franchisees—not only for birds, but also for running a business. “They have to be the right people to execute well in a way that is going to bring them joy,” Pickett says. “We talk about joy in our concept. We want our franchisees to have a phenomenal ownership experience that is joyful.”

BEST OVERALL PERFORMANCE

2nd Place: Sport Clips

At Sport Clips, successfully connecting with a prospect is all in the delivery. “We have a saying here: We don’t work to our convenience. We work to our prospect’s Pete Lindsey convenience,” says Pete Lindsey, vice president of franchising for the franchise, which not only took home second place honors for Best Overall Performance, but also a first place STAR Award for Best Overall Prospect Responsiveness. Lindsey credits his brand ambassadors—the call qualifiers—for a job well done for the chain, which has 1,443 salons in the U.S. and Canada. “What I have learned in my 27 years is that it is about the people working for you and if they are invested in what they are doing,” he says. “We also take the time to make sure they understand exactly what the process is. We go over scripting, and even the mystery shop questions that Franchise Update Media uses to help us. We use those to make sure we are collecting the right information from our prospects, because those change over time.” Quick prospect contact (five minutes or

less) in the competitive haircutting space is a Sport Clips best practice designed not to overwhelm prospects with too fast a response, but rather to build trust and move the process forward while interest is at its peak, says Lindsey. After noticing that it was losing 50 percent of its prospects in the handoff from the call center to the sales team, Sport Clips deployed a technology solution to close the loop in the early recruitment stage. Call center qualified leads are now entered directly into the online schedules of the internal sales teams and area developers, creating a seamless transition for prospects to the next stage of the sales process. “I’m convinced it is those little trench work things you do that make it easier for prospects to engage in your process,” says Lindsey. The multiple awards this year back that up.

BEST WEBSITE BEST PRACTICES Bach to Rock

On Bach to Rock’s recruitment website, what you see is what you get. It’s a winning formula for the fast-growing national music education brand that took top honors for Best Brian Gross Website Best Practices. The company, which began franchising in 2012, relaunched its recruitment website two years later with a commitment to transparency “in terms of unit economics, investment in the business, and who and what we are, as a brand,” says Brian Gross, president of Bach to Rock, which has six company stores and 37 franchised units. The website, says Gross, is designed to provide an engaging and easy way for prospects to experience Bach to Rock at whatever commitment level they choose. Information is brought to life with video, graphs, charts, and illustrations. Potential franchisees ready to dive into the process can download a thorough, 35-page brochure. The integrated platform also reaches out to recruits in various ways, including blogs, portals and remarketing. Potential franchisees can make inquiries directly by email or phone. “Our goal was to give them as much information as we have available, so they can make an informed decision and see if their objectives are consistent with our

brand—and, if so, help them take the next step toward ownership,” says Gross. The strategy is paying off. Since the website’s launch, web leads have risen 200 percent—quality leads that prompted Bach to Rock to adjust its best practices to ensure the company continues to handle the volume of interest promptly and with a personal touch. And sales are up 70 percent. Burgeoning business is matched by an aggressive growth plan. Bach to Rock anticipates adding as many as 500 units in the next decade, and ultimately expanding the music and community-centric franchise internationally. “As a new franchisee we want to build the system, but it has to be done in the most productive and healthy way—for both sides,” says Gross.

BEST SOCIAL IMPLEMENTATION Home Care Assistance

For Home Care Assistance, the savvy use of online marketing and social media comes naturally. The Palo Alto-based company has grown up alongside the likes of Google, Jack Johnson Facebook, Apple, and Uber, and its Silicon Valley roots have given the provider of in-home senior care a competitive edge in sales development. “We are constantly testing social media marketing strategies to see what works best, and then we share these effective strategies with our franchise owners,” says Jack Johnson, vice president of franchising for the company, which began franchising in 2005. Home Care Assistance takes advantage of a wide array of social media tools to communicate its message—and both franchisees and clients are listening. An estimated 10,000 people turn 65 every day, and Baby Boomers, the company’s largest client segment, is the fastest-growing demographic on sites such as Facebook, notes Johnson. The company implements a comprehensive social media strategy for each social platform—Facebook, Twitter, Google+, LinkedIn, Pinterest, and Youtube—and shares best practices with franchisees through manuals and webinars to keep them up to speed on the latest strategies and tactics as social media marketing evolves, he says.

“If you want to win in today’s connected world, your brand needs to be ‘always on’ and ready to provide relevant information quickly and in ways that appeal to different personality types,” says Jackson. The use of social media dovetails with Home Care Assistance’s “game-changing” online tools, which include HCA University, which provides caregiving programs and training; and an online personality test designed to enhance the match between caregiver and client. Jackson says its online efforts have allowed the franchisor to handle some “heavy lifting” for the franchisees. Social media provides prospects with a way to instantly connect, but what comes next is critical to development success. “We follow up through every medium we can—email, phone, even text if they prefer,” says Jackson. “The key is to follow up quickly and multiple times. More and more, we are seeing electronic communication becoming the preferred method of contact.”

BEST OVERALL PROSPECT RESPONSIVENESS (TIE)

Great Clips and Sport Clips Interestingly, these two haircutting brands, at the top of the class in overall responsiveness to prospect inquiries, also tied for a f i r s t - p l a c e S TA R Award last year, in the Beth Caron category of Social Media Implementation. “We are extremely excited about being honored with the award,” says Beth Caron, franchise development director for Great Clips. “It is validation that we are doing the right things and executing. Consistency is key to make sure we aren’t missing anything.” At Great Clips, a winning sales development program begins and ends with the basics. With 3,800 stores in the U.S. and Canada, Great Clips counts on a lead qualifier—no matter the source inquiry—to make sure a candidate is qualified, a good fit, and that no promising prospects fall through the cracks. Automated responses to inquiries are followed up quickly by a personal connecFranchiseupdate I S S U E I V, 2 0 1 5

tion. “It’s the first impression of the brand,” says Caron. “Communication by email or maintaining that electronic communication is not who we are as a company. We want to get a feel for who that person is and understand them better. I think you are never going to be able to replace that person-to-person conversation to really understand people.” For Great Clips, consistency is king throughout its franchise sales process. “You can have a great social media strategy, but if you are directing everyone to your website and no one is following up with them, you have wasted your time,” says Caron. “If you have good programs and good marketing and a solid prospect follow-up system, that is going to be the recipe for success.”

BEST TELEPHONE PROSPECT FOLLOW-UP CruiseOne For first-time honoree CruiseOne, capturing the STAR Award for Best Telephone Prospect Follow-Up and a placing in the Top 3 for Best Franchisee Satisfaction (Service) Tim Courtney was no fluke. “We talk every year about what we need to do to improve,” says Tim Courtney, vice president of franchise development. “Our goal is to win an award, and what makes it special is getting the team engaged in that goal.” As the nation’s largest home-based franchise travel agent network, no one may understand the value of a stellar telephone sales strategy and execution better than CruiseOne, whose 1,000-plus franchisees operate virtually. “We try to make the experience rich and unique all the way through,” he says. “We are looking for long-term partnerships. Building relationships over the phone helps.” CruiseOne employs a variety of online and social media tools to boost franchise sales leads and counts on click-to-call to get the job done, including VOIP and a call management system tools to manage calls and recruitment metrics, and conducts mystery shopping to evaluate best practices. At CruiseOne there is no middleman:

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the same sales development specialists work with prospects from start to finish. “The most important aspect is speed to the lead. You have to strike while the iron is hot,” says Courtney. With its first Star Award under its belt, CruiseOne hopes to be on stage again next year to be honored for results that other brands can learn from and “that matter,” he says.

being heard, says Durham. The brand also provides a weekly system-wide communication and hosts a quarterly conference call between the leadership team and franchisees that doesn’t end until the last question is answered.

BEST FRANCHISEE SATISFACTION—FOOD

MaidPro

Checkers Drive-In Restaurants

The executives at Checkers & Rally’s take franchisee satisfaction to heart. Since participating in their first Franchise Business Review franchisee satisfaction survey three years ago, Jennifer Durham the Tampa-based chain of 815 restaurants has set its sites on annually increasing overall franchisee satisfaction. The effort to dig deep into the response data is paying off. The brand’s STAR Award this year is the latest example. “What gets measured gets done. But you have to do something with the data,” says Jennifer Durham, vice president of franchise development. “We aren’t just preaching,” says Durham. “We own 40 percent of the system and it means our decisions are grounded in profit and not necessarily in top-line sales.” Along with the general survey, the company uses supplemental data to give franchisees a candid chance to assess operations across the board. Responses to open-ended questions specific to the brand and the various marketing, training, construction, and real estate support teams are where you find the “gems” that help the franchisor truly understand the job it is doing, says Durham, who also has found a little interdepartmental rivalry to be the best is good for business. “We are a pretty competitive group,” she says. “So any time I can create competition, over and above, it is good for the franchisees because we are all striving to be better at our respective functions.” Early survey findings provided the company with opportunities to increase franchisee feedback and improve communication to ensure they felt they were

BEST FRANCHISEE SATISFACTION— SERVICE At MaidPro, life is an adventure. For the past five years, franchisees have joined the MaidPro staff on an annual trip for some offthe-beaten-path fun. The group has rafted Mark Kushinsky down the Grand Canyon, played on a remote island off the coast of Belize, and will sail around the British Virgin Islands fl otilla-style in 2016. While some companies opt for vacations to reward top performers, MaidPro includes any and all franchisees who want to come. The memorable excursions work wonders to create deep system-wide connections, says Mark Kushinsky, founder and CEO of the Boston-based maid service brand. “It’s all about community,” he says. The unconventional is MaidPro’s approach to business success. The company opts for internal employees who know the business, rather than hiring hard-core sales people, to recruit franchisees and filter the proper people into the organization, says Kushinsky. “It starts with franchise development where franchisees’ expectations are clear from the get-go,” he says. “Once you have crossed that hurdle you are obviously much more likely to have a happy franchisee because they made a good decision for themselves.” With 175 units in the U.S. and Canada, MaidPro’s expansion has pushed Kushinsky to become more creative in his efforts to retain the company’s strong personal connections. An idea forum, for example, allows for an open exchange of information to comment on and implement, including a recently launched strategy to help units obtain five-star reviews. MaidPro tested the plan with “amazing” results, he says, giving the franchisees credit where credit was due. ■

AND THE WINNERS ARE… Franchise Update’s annual STAR Awards are a big deal. There are many players but only a select few claim the winning trophies. Based on this year’s research, we present the winners and top runners-up by category.

Top 20 BEST WEBSITE BEST PRACTICES

First Place Winner: Bach to Rock Runners-up: AAMCO AdvantaClean Big Frog Custom T-Shirts Chem-Dry Carpet Cleaning Christian Brothers Automotive DreamMaker Bath & Kitchen Fastsigns FirstLight HomeCare Handyman Connection Hungry Howie’s Pizza Hurricane Grill & Wings Link Stafﬁng Services Little Caesars McAlister’s Deli NAPA Auto Parts Pie Five Pizza Company PostNet The Melting Pot WIN Home Inspection

Top 20 BEST TELEPHONE PROSPECT FOLLOW-UP First Place: CruiseOne Second Place: Taco John’s Runners-up: AAMCO Big Frog Custom T-Shirts Brightway Insurance Buffalo Wings & Rings Express Oil Change Great Clips Häagen-Dazs Johnny’s Italian Steakhouse Marco’s Pizza McAlister’s Deli

Right at Home Shirley’s Gourmet Popcorn Company Sport Clips The Melting Pot The Spice & Tea Exchange Tommy Gun’s Original Barbershop Tropical Smoothie Café Wild Birds Unlimited

Top 20 BEST WEBSITE PROSPECT FOLLOW-UP

First Place: Pearle Vision Second Place: PostNet Runners-up: Aire Serv Heating & Air Conditioning Arby’s BurgerFi Captain D’s Christian Brothers Automotive Denny’s DreamMaker Bath & Kitchen Executive Care FastSigns Great Clips Homewatch CareGivers Hungry Howie’s Pizza Safeguard Sears Outlet Sport Clips The Entrepreneur’s Source Two Men and a Truck ZIPS Dry Cleaners

Top 20 BEST SOCIAL IMPLEMENTATION

First Place: Home Care Assistance Runners-up: AdvantaClean Bach to Rock Christian Brothers Automotive Fastsigns Homewatch CareGivers Hungry Howie’s Pizza Hurricane Grill & Wings J.D. Byrider Liberty Tax Service

Marco’s Pizza Massage Envy McAlister’s Deli Molly Maid Mr. Electric Mr. Handyman Papa Murphy’s PostNet Sport Clips Two Men and a Truck

Top 3 FRANCHISEE SATISFACTION—FOOD First Place: Checkers Drive-In Restaurants Runners-up: Denny’s Tropical Smoothie Café

Top 3 FRANCHISEE SATISFACTION— RETAIL

First Place: Wild Birds Unlimited Runners-up: Christian Brothers Automotive Fastsigns

Top 3 FRANCHISEE SATISFACTION— SERVICE First Place: MaidPro Runners-up: CruiseOne Two Men and a Truck

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Captain D’s Fuddruckers McAlister’s Deli Pollo Campero Tropical Smoothie Café EXHIBITOR FRANCHISORS

GOLD

9Round 30 Min Kickbox Fitness Aaron’s, Inc. AFC Urgent Care (AFC/Doctors Express) Another Broken Egg Café Arby’s Restaurant Group Arooga’s Grille House & Sports Bar Back Yard Burgers Batteries Plus Bulbs Bojangles’ Famous Chicken ‘n Biscuits Boston’s Restaurant & Sports Bar Brewster’s Chicken Brixx Wood Fired Pizza Bruegger’s Bagels Bruster’s Real Ice Cream Buffalo Wings & Rings BurgerFi International Captain D’s Charter Fitness Franchise, LLC. Checkers & Rally’s Restaurants, Inc. Church’s Chicken CKE Restaurants Holdings, Inc. Colors On Parade Corner Bakery Café Costa Vida, Fresh Mexican Grill Dairy Queen DEL TACO Denny’s, Inc. Dessange Group North America DRNK coffee + tea/QWENCH juice bar Dunkin’ Brands East Coast Wings & Grill Fazoli’s Restaurant Group Firehouse Subs First Watch Restaurants Fuddruckers Giordano’s GNC Golden Corral Ground Round Grill & Bar Hooters of America, LLC Huddle House HuHot Mongolian Grill Hungry Howie’s Pizza Hurricane Grill & Wings Interstate All Battery Center J.D. Byrider Franchising, LLC Jackson Hewitt Tax Service Jersey Mike’s Subs Jimmy’s Egg Johnny’s Italian Steakhouse®

Jon Smith Subs Krispy Kreme la Madeleine Liberty Tax Service Massage Envy Spa MASSAGE HEIGHTS body+face McAlister’s Deli Moe’s Southwest Grill MOOYAH Burgers Fries Shakes Newk’s Eatery Nutrition Zone OneClick Cleaners Oxi Fresh Carpet Cleaning Pancheros Mexican Grill Papa Murphy’s Take ‘N’ Bake Pizza Pet Supplies Plus Pieology Pizzeria Pita Pit USA Pollo Campero Popeyes Louisiana Kitchen Primrose Schools Quaker Steak & Lube R Taco Rosati’s Pizza Russo New York Pizzeria & Russo Coal Fired Italian Kitchen Salsarita’s Fresh Cantina Schlotzsky’s Bakery Café Scooter’s Coffee Siempre Tax SmashBurger Smoke’s Poutinerie Inc. Smoothie King Sonic Drive-In Steak ‘n Shake Sub Zero Ice Cream & Yogurt Taco John’s Taziki’s Mediterranean Cafe The Greene Turtle Sports Bar and Grille The Joint The KASE Tide Dry Cleaners Togo’s Toppers Pizza Tropical Smoothie Café uBreakiFix Village Inn Walk-On’s Bistreaux and Bar Watermill Express Franchising, LLC Wayback Burgers Which Wich? Superior Sandwiches Wienerschnitzel/Tastee Freez Wing Nutz Wing Zone WINGSTOP Zaxby’s ZIPS Dry Cleaners

Granite Telecommunications International Franchise Association INFINITI HR Joyal Capital Management LookOurWay Modern Business Associates Modernistic N3 Real Estate NRD Capital Patriot Creative Group Patriot Software Restaurant Facility Management Association Retail Data Systems RFCP talentReef The Rawls Group – Business Succession Planners Watchfire Signs KEYNOTE SPEAKER SPONSOR

Popeyes Louisiana Kitchen Arby’s Restaurant Group ADVISORY BOARD MEETING SPONSOR

FRANdata Corporation Modern Business Associates The Rawls Group – Business Succession Planners SnagAJob GOLF RECEPTION SPONSOR

Tropical Smoothie Café FRANCHISEE CONFERENCE TOTE BAG SPONSOR

Jersey Mike’s Subs LANYARD SPONSOR

FranchiseGrade.com ESCALATOR METAL STRIPS

FranchiseGrade.com STAIR GRAPHICS SPONSOR

Papa Murphy’s Take ‘N’ Bake Pizza CUBE SIGN SPONSOR

Arby’s Restaurant Group AGENDA AT A GLANCE SPONSOR

Modern Business Associates COFFEE CUP SPONSOR

First Watch Restaurants

EXHIBITOR SUPPLIERS

COVER CARD SPONSO

1851 ApplePie Capital Balboa Capital BBVA Compass Brixmor Property Group Comcast Business Direct Capital FastTrack Franchise Business Review

McAlister’s Deli BRONZE SPONSOR

Johnny Rockets Localbiz360 MOD Pizza Spirit Realty Capital

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GROWING YOUR SYSTEM

Challenge the pros “DISCUSS THE IMPORTANCE OF FRANCHISEE VALIDATION AND HOW YOU USE IT AS A SALES AND DEVELOPMENT TOOL.” Michael Powers Managing Director Painting with a Twist Unit franchise growth is the fuel that supplies life and sustainability to every franchisor’s existence. Without significant annual unit growth, your brand and market share will eventually erode away while your growing competitors will gladly capture the excess and continue to grow their own brands. Simply put, you are either growing or dying. And in today’s competitive franchise environment, the latter is not an option for any franchise organization. Franchisee validation can heavily influence your development success, whether you’re an emerging franchisor or a large established one. Conversely, a franchisor may employ alternative temporary strategies if they are not receiving positive validations from their franchisees. In any case, and with the proper relationship, getting franchisees to validate should be a willful act of genuine satisfaction with the franchisor and the brand they invested in. Most candidates weigh franchisee validation as heavier and more valuable than the home office pitch and presentation. In my experience, a franchisor’s preparation and intent to create positive validations has been the key to getting them. To earn honest and frequent validations, a franchisor must be properly aligned with its franchisees, must hear and resolve challenges that franchisees face, and have a constant focus on improving unit financial performance. The benefits of franchisee validation to the franchisor and the system go well beyond the validation itself. Even if franchisee feedback is less than favorable for the franchisor, the act of encouraging conversations between candidates and franchisees exemplifies an openness and transparency between the franchisor

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and candidate at the onset of the process. Important constructive criticism will most likely be fleshed out in the process, and the franchisor then has the opportunity to rectify issues it may not have been aware of. With proper support and home office collaboration, a franchisor’s worst critic can change their tune and become the system’s best validator. The purest lead conversion will come by way of franchisee validation. Strong validations also will instill more confidence in new franchisees during the early stages of opening and will set positive expectations from day one. The most valuable validations are not solicited or incentivized by franchisors—they are earned and deserved. Cameron Cummins Vice President Franchise Development Marco’s Pizza One of the first things we tell our potential franchisees is that we do not sell a franchise. Rather, we present a business opportunity and let prospects see if our opportunity and our culture are a match for them. The word “sales” does not appear anywhere in our Marco’s vocabulary for the simple fact that we are not selling a franchise. We view franchisee validation not as a sales process, but as an exploration process. The key to franchise development is that it’s all about the validation. Prospects need to fully understand what they are deciding to get into. They should be investigating and doing their own research on the business model, the franchisor/ franchisee relationship, and specific roles and responsibilities. This is too important

a decision to be “sold” to someone. Both sides have to do their own research to be comfortable that this partnership is the right fit, one in which both parties are going to prosper together. The natural first step is to go to the franchisor for top-line information, but the vital information comes from those actually living out the role that prospects are interested in signing up for. The linchpin of deciding whether or not the role of a franchisee is the right fit is best answered at the franchisee level. Prospects expect corporate representatives to speak positively about the brand. What they need to be doing is speaking with the people they will be working with side-by-side and borrowing cheese from. This way they get the answers they need. Franchisee validation becomes extremely important as a franchise development tool because it is a peer-to-peer discussion with the field team that is executing business on a day-to-day basis. It is our job to facilitate this learning process. First, we ensure that they understand the FDD, have them fill out the application, and then move on to the next step, which is making sure they speak with someone outside the corporate office. During our discovery days we encourage prospects to speak with as many franchisees as possible—single-unit, multiunit, new, veterans, etc.— and we work with them, based on their criteria, to identify and connect them with various owners and guide them with the hardhitting business questions they should be asking. Prospects are encouraged to learn from their own explorations so that when they do have meetings with stakeholders they can articulate what it is they are getting into and why. This education better prepares them for future success in growing their business. n

GROWING YOUR SYSTEM

Salessmarts Silo Busting

Integrating franchise development

BY JIM BENDER

et’s face it. Most of us do not work at large franchise companies with multiple layers of franchise development management. Many of us work for smaller companies that do not have a formal training program or scheduled updates for franchise development personnel. Frequently, the franchise development staff is isolated from marketing, operations, training, product development, and distribution. This leaves them with little to no idea of what is really going on outside their department, in your markets, or among franchise owners. After all, it’s franchise development’s job to just sell: as many as humanly possible. Sales people don’t need to know what’s going on elsewhere. It will just slow them down. Most times this situation is simply the result of how the franchise company evolved from two or three employees to 20 or more. Today’s challenge is that many executives have yet to realize that isolation of the franchise development staff is a critical weakness to the sales function. Mark it down on your SWOT analysis of the franchise development department: Isolation from mainstream information decreases productivity. Surveys prove that we are all fairly competent at explaining the programs that make up our franchise offering. We can execute a clear and comprehensive program review webinar talking about market, product or service, differentiation, support, training, and real estate. We can work our way through the FDD review pointing out the fees and investment and the powerful results disclosed in Item 19. We are competent at the rational stuff. Unfortunately, these conversations explain the franchise offering, they do not sell the opportunity. Most sales personnel realize these presentations answer only the obvious questions and explain the steps to becoming a franchise owner. Sales professionals know a sale has not yet been made. Seasoned sales professionals know sales are actually made during the upcoming, informal, yet infor-

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mative follow-up conversations. Strong sales performers know the “in-between” calls matter most. They seal the relationship, create confidence in the franchisor, and help candidates see themselves as the business owner. These “in-between” conversations about how well your system works are the real closing tools. They connect the candidate’s goals to the strengths of your system and brand. When the connection is made, the candidate begins to “lean forward” and you can hear it and feel it over the phone. Then, to no one’s surprise, we are attending discovery day and you are sending franchise agreements. So what do strong-performing franchise development professionals talk about “in between”? (Remember, all the rational facts and figures are already on the table.) Mostly they tell stories about the very departments that many senior executives want to keep them isolated from. The development team must be well-versed in the facts and trends, and must be expert in communicating the “in-between’” message to remain in compliance. Here’s what they need to know. • Marketing—What a wonderful job you are doing at targeting customer, media, and message. How productive your new marketing and promotional campaigns across the network are. Also, show samples of all types of marketing programs available for use in your local store, including all digital communication techniques. • Operations—Who are the star performers in your network and what do they do locally to maintain that status? Talk about real examples of a day in the life of a franchisee. Discuss examples of creative salesmanship demonstrated by a franchisee. • Product—Review R&D and new products and services being developed to move your brand forward. Clearly outline how you outperform the competition, and the investments you make to maintain that position. • Support—Review powerful stories about new office launches and turnarounds

resulting from the knowledge base and coaching possessed by your staff (no undisclosed numbers, of course). Many times, “in-between” conversations become educational when they address the following: real estate selection, lease negotiations, tenant improvements and the evaluation of multiple sites; available cash and net worth requirements, financing options, and financial planning; employee recruitment, retention, and management; and accounting, payroll, tax filing, forming corporations, and more. What to do? Include your franchise development personnel in weekly management updates and review of every department. When something good happens, make sure franchise development is the second department to know. The development staff needs to know when marketing programs skyrocket, when PR occurs anywhere, when an outstanding sales performance occurs, and all new strategies that are successfully implemented. An old saying states that franchise development needs to know as much about the company as the CEO. Many CEOs support this belief. They know that franchise development is the brand’s faceFranchisees to Seeking Portfolio the world of candidates and the recruiter Expansion of their next great customer. When you consider the many and different disciplines your development staff needs to master, you may change your mind about the qualifications the development staff must possess, the formal training program you require they attend, and the training updates you regularly provide. You may also consider outsourcing the entire process to franchise development professionals who previously held those corporate-level positions and have the experience to command the varied topics that effectively grow your brand. Happy Selling, Jim Jim Bender is the president and owner of Franchise System Builders. He has been in the franchise industry for 37 years and has provided clients with sales outsourcing and concept packaging services since 2002. Contact him at jtbender@franchisesystembuilders.com or 248-647-1989.

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Market trends

Getting It Right Online

Giving franchisees the information they want BY DARRELL JOHNSON

“I

f it’s on the Internet, it must be true.” While we chuckle at that, franchisors also know the dark side of the Internet: that there is so much more misinformation than information out there. While it is easy to disregard misinformation for what it is, it is hard to do so when you are protecting the integrity and image of a brand. I’ll describe what I see going on and, by way of example, show a way to take control of online information. First, let’s understand the problem in the context of current events. On the consumer level we use search tools to quickly determine who provides a local product or service. Then we take it further by checking any number of third-party sources for ratings on the quality of the product or service. Is it any wonder the same approach is rapidly being adopted by prospective franchisees, whether considering how much they can make, the likelihood of success with a given brand, franchisor performance relative to franchisees, or the ease of obtaining financing? After all, it’s not just franchisees researching a brand; lenders are, too. This raises two important issues: 1) information accuracy, and 2) information security. While franchisor websites are actively used as a reference tool, prospective franchisees use the behavior patterns formed from their consumer experiences and seek third-party validation. Where do they go? Any number of websites purport to have reliable information on franchising, often from people with an ax to grind. As we all know, there is no independent go-to source for such information that is accurate, objective, and reliable. However, there are plenty of places to get biased information, often under the guise of being reliable. Part of the problem is that we have many websites that don’t rely on infor-

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mation at all; rather they serve as a rumor or gossip center. While sometimes making interesting reading, their foundation is built on opinion formed around minimal or distorted facts. The problem is exacerbated by having a standard regulatory document (the FDD) that is used by many third-party assessors and prospective franchisees in ways it wasn’t designed to be used. We have spent 25 years evaluating FDDs, gathering additional franchise information, and evaluating all of it. I continue to be surprised at how often someone will take information from an FDD and misinterpret it or use it out of context for whatever point they are trying to make. Creating a solution The solution to the information accuracy issue begins with having commonly accepted definitions for specific terms: success, failure, and area developer are examples. Next comes a consistent way of measuring them. Continuity rate evolved from the need to measure year-over-year stability across brands. The other component of information accuracy is trusting the source of such information. Many websites and a rising number of franchise “experts” are producing information about brands. Are they accurate? Does the expert have a bias? Most do, and we need to find ways of helping prospective franchisees understand this so their reliance on such sources doesn’t lead them to the wrong conclusions. Next comes information security. Here the issue is using information that is not in the public domain for specialized purposes. The whole purpose of the FTC Rule is to help protect prospective franchisees from misinformation. An FDD is provided to a franchisee prospect in a prescribed manner, yet it fails to provide prospects with the infor-

mation they really are seeking, starting with the financial results of a franchised unit. Financial information in Item 19 disclosures isn’t mandatory. When used, the rules are mostly about what franchisors cannot disclose, and that’s likely to get worse. The state regulators are considering changes that would prevent franchisors from using company unit information—even when no franchise unit information is available. I think the foundation of a solution is being demonstrated by the Franchise Registry, whose purpose is to help franchisees get funding, which it does by making underwriting information that lenders seek available to them. It does this through four main services: SBA affiliation services, franchise brand information of interest to lenders seeking brands with specific characteristics, Bank Credit Reports, and FUND Reports. Some of the information provided by franchisors is confidential, addressing topics outside the constraints of FDD rules. Some of the information is proprietary from FRANdata. All of it is designed for lenders to help them make better franchise credit decisions. And all of it is secured behind a password-protected website that only lenders can access. Importantly, the site provides real-time information back to franchisors about lending activity with their brand while creating a way for lenders to have direct communications with brands. What can we learn from this example? All the information accessed on the Franchise Registry is standardized, defined, and consistent, with a clear line of communication available between franchisor and lender. Further, all the information is accepted by both parties as being accurately and objectively produced by a trusted third party. For prospective franchisees, the key difference is that the Franchise Registry does not give them access to the information. How can franchisors solve a prospective franchisee’s needs while working within regulatory limitations? Standardizing terminology and using a trusted thirdparty validator would be a good start. 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.

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GROWING YOUR SYSTEM

International Managing International Leads There’s more to it than you think BY WILLIAM EDWARDS, MICHELLE McCLURG, WILLIAM GABBARD, AND SHANNA ALDRIDGE

t is the dream of many franchisors to take their concept into other countries. As in the U.S. and Canada, the lifeblood for expansion is generating leads from various sources, processing them, and signing a franchise agreement. And that is where the similarities between processing leads in the U.S. and abroad end. As seen in the accompanying chart, getting an international lead from a broker, an Internet lead site, or your franchise website is only the start of a long and potentially expensive process and journey to signing a licensee agreement in another country, involving many, many steps. The authors of this article, with a combined 80-plus years of taking U.S. franchise brands global, aim to help you fully understand the difference between getting, processing, and signing U.S. and international franchise leads. The first major difference is the terms you will offer the international franchisee. These are not set as they are in the U.S. with the FDD. Internationally, you can change the fees and royalties depending on the country, even the potential franchisee. You can and will have to negotiate. Of course, it’s best if you are consistent in your terms, as international franchisees talk, just as U.S. franchisees do! Second, the level and difficulty of due diligence on an international franchisee candidate is significantly higher than at home. Numerous U.S. laws and regulations control the information you must acquire about an international candidate before you sign them. Here are two to be aware of: 1) the Foreign Corrupt Practices Act— you must know who you are dealing with, who owns their company, and where their money comes from; and 2) the Specially Designated Nationals List—a list of the “bad guys” and companies the U.S. Treasury Department has identified and that you do not want to do any business with. Third, the resources required to prop-

Franchiseupdate I S S U E I V, 2 0 1 5

erly evaluate and sign an international licensee, along with the resulting legal, staff, and travel costs before you receive a fee are significantly higher than in granting a franchise at home. Although CRM systems are becoming common and companies like FranConnect operate in several countries, the culture in most countries does not lend itself to candidates going online for most of the interaction you will have during the qualification process. Someone will have to send emails and take long-distance phone calls to get the information you need, and to establish the relationship required to do business abroad. Calls take time, cost money, and sometimes require you to get up in the middle of the night because of time zone differences. In almost all other countries business is done based on developed relationships (not transactional). And emails often go to spam, so a call is essential. Does the candidate speak English? Not only is this critical in the qualification and signing stage, it is essential once the new international franchisee comes to training and starts operations. Otherwise, how will they fully communicate with your staff—and how will you fully transfer your franchise business systems to them? You will need to apply for new trademarks in other countries. Your U.S. trademark does not cover you. Before you market in any other country, you will want to apply for a trademark to cover your top 15 to 20 countries at the start. Your brand is everything. Protect it. Invest the money to secure your brand in key countries and regions, such as the European Union. There are cost-effective ways to do this. And you will find out if there are problems with your brand in a country. For example, who initially owned the Burger King trademarks in Australia, a “first world” country? Not the U.S. franchisor. So they trade there

under the Hungry Jack’s mark. International leads often copy U.S. concepts. So you will want to get a confidentiality agreement in place before you provide the details of your brand. Please do not skip this step!! And finally, the time needed to properly identify, evaluate, and sign an international franchisee can be up to three years from the time you first find the candidate. What you can do • Create a profile. As a first step, spend some time determining the ideal international licensee profile for your franchise. This profile may differ from what you look for in the U.S., but some of the questions will be the same. What kind of experience will you require in the industry or in franchising? What about character? Education? Reputation? Financial assets? Knowledge of the culture and the local community? Some of the characteristics in your profile may be requirements, while others may be viewed simply as advantages or pluses. • License type. Decide on what type of international franchise you will offer. Will you allow sub-franchising (a master franchise)? Or will you require that the international franchisee build-own-operate all your units in their country (often called an area licensee)? This very major— and early—decision determines what size company you seek. To build-own-operate multiple units in country requires lots of investment money. This decision also determines how much money you will receive from the franchisee: if they are a master franchisee you will spilt the unit fees and royalties; if they are an area licensee, you will charge the same unit royalties you charge at home. • Be selective. Focus on the countries you feel most comfortable with and where (as a result of market research) you see a good chance of sufficient development that will yield lots of units and royalties over time. Do an ROI analysis. How many units can the country hold? Over what period of time? What revenues will these units have for your franchise? What will be the resulting royalties over time? • Competition. Be sure you know the potential competitors in a country ahead of negotiations with a potential candidate. Be sure your concept is different from what is already being offered in the country. Otherwise you will have a hard time finding a potential franchisee willing

to pay an up-front fee! A good way to do this analysis is to visit the major business city in a country in advance. • Tax factor. Look at the tax implications of signing an international franchise agreement. Withholding taxes before you can bring fees and royalties home can be as high as 30 percent of what you are due from the franchisee. This is in addition to your home-country taxes. • Franchise agreement. You will need a separate international franchise agreement. This is an investment that can be used in multiple countries. Have this prepared in advance of starting negotiation with a candidate. You should be able to use the same agreement with only local changes to ensure the agreement is enforceable in the country. • Development cost. Estimate the up-front cost of finding, evaluating, negotiating with, and signing a candidate in a given country. There will be communi-

cation, staff time, trademark registration costs, legal agreement costs, travel, training, and other costs in the first couple of years your new licensee operates in a country. And there will probably be few units producing royalties at first. What is the cost for this process from the time you get the lead until they are opening and operating enough units to produce a good royalty stream? It can be US$250,000, so keep this in mind when you set your initial fees. Conclusion Good news on international lead sources: there are many established sources. One of the very best (and least expensive) is to add an international landing page to your company website with a link for international candidates to contact you. There also are numerous international franchise expos. Be forewarned that these are often focused on single-unit franchisee candidates, not area licensees or master franchisees. The

IFA and U.S. Commercial Services have two to three franchise trade missions to countries each year, which generate large numbers of leads. The U.S. Commercial Service offers “Gold Key” services to individual franchises in some countries to help you find candidates. And numerous international websites market U.S. franchise brands seeking leads. The purpose of this article is not to scare the U.S. franchisor from going global, but rather that it’s good to do so with your eyes wide open—and to understand why an international lead requires more work than a domestic one. n William Edwards is CEO, Michelle McClurg is COO, William Gabbard is senior vice president, and Shanna Aldridge is director at Edwards Global Services, Inc. Contact Edwards at 949-375-1896, bedwards@egs-intl.com, or read his blog at edwardsglobal.com/blog.

Processing a U.S. franchise lead vs. processing an international license lead United States

International

Candidate type

Individual

Company with a proven track record of business success, available management team, and strong financial capability

License type

Single or multiple unit

Multi-unit area license or country master license

Investment

US$100,000 to $1 million

US$500,000 to $15 million

Time to closure

3 to 9 months

6 months to 3 years

Manpower required

One U.S. broker person

U.S. franchisor person, international consultant, third-party information provider

Legal

Disclosure to a U.S. FDD

40 countries have different regulations and disclosures

Patriot Act & U.S. Treasury

Minimal

Extensive due diligence required by U.S. law; local on-theground experts are required

Information required

Credit and criminal check, financial records

Detailed company documentation based on detailed incountry research plus company financials and detailed ownership

Business plan

Basic, usually using a template

Extensive multi-unit or entire country development

Real estate

Single location, using third-party sources

Multi-location in-market research and in-country analysis

Initial fee payment

Paid by single franchisee at time of signing

Often requires local government approval for hard currency payment; can take 6 months

Franchisor liability

Minimal, if standard FDD process followed

Franchiseupdate I S S U E I V, 2 0 1 5

GROWING YOUR SYSTEM

It’s closing time Franchising’s Best Sellers Grow faster like the sales masters

BY STEVE OLSON

t’s been two years since I re-entered franchise sales consulting full-time, and here’s the good news! Seasoned recruitment executives are capitalizing on the resurgence of qualified franchise buyers. These “Franchise Sales Masters” continue to capture quality candidates during this higher-growth period. These top performers are artisans of franchise development, applying a welldefined sales process, while establishing credibility, confidence, and trust with their buyers. If interested, a free research report is available revealing the “DNA” of these recruiting pros (see below). The unfortunate news Too many good brands are losing qualified franchise candidates, specifically because their sales people don’t carry the characteristics, traits, selling skills, and values needed to bring new franchisees aboard. Consequently, too many companies experience difficulties hiring the right sales person, and are not providing key ongoing training that will help them excel at their craft. I still remember the salesman who complained to me, “What an idiot! I can’t believe my prospect went with our competition.” In quizzing him about the lost candidate, the troubled rep was clueless about the buyer’s motivations, concerns, and goals in owning a business. So, was it the buyer or the sales rep who was the idiot? Success tips for selling more Franchise sales pros gain the edge by moving directly into their prospect’s world. They probe, read, adapt, and outsell their competition by fully understanding and responding to how their candidates think and behave. Here are insights that may help increase your recruiting success. 1. Buyers expect responsiveness. Today franchise follow-up remains in crisis mode. According to Franchise Update’s annual surveys, late or no call-backs to email requests are the norm rather than

Franchiseupdate I S S U E I V, 2 0 1 5

the exception; too many respondents are immediately thrown into voicemail jail; and inquiring prospects, if lucky, receive correspondence several days later or not at all. It’s the “first to the door” sales pros who are winning the development race. If you don’t now, mystery shop your sales team as a best practice.

Franchise sales pros probe, read, adapt, and outsell their competition by fully understanding and responding to how their candidates think and behave. 2. Buyers don’t know how to buy a franchise. Most of your prospects haven’t purchased a franchise before, so how would they know how to go about it? You’re the expert, not them. It’s your role to take control of the investigation process through your leadership. If you don’t, they will! If you fail to define the steps and timeline of your buying process early on, they’ll create their own, which in most cases leads to confusion, uncertainty, and lost deals. 3. Buyers are seeking a relationship. Franchising is people-driven, not product-driven! Buyers smell productpushers 10 miles away, which is why many sales people fail at selling franchises. You’ll outperform competitors by focusing on the prospects, their families, aspirations, and the health and wealth of their futures. Earn their credibility, confidence, and trust and you’re in the driver’s seat. 4. Buyers are highly impressionable and fragile. Every word you utter to a prospect is recorded in their memory bank. What you say and do will greatly influence their investigation. Minor er-

rors have major impact, e.g., when your investment costs don’t match your brochure estimates; when you misspell their name on your follow-up correspondence; when you ask the same question twice; or when you’re 15 minutes late picking them up at the airport. 5. Buyers want ownership information. It’s not about what your business does, it’s about what your business can do for them. “How will your franchise help me achieve my business and personal goals? What are the benefits of your industry? What are the unique advantages of your franchise system? What training do you provide? Can my family be involved?” Prospects don’t contact you to continually hear about the custom, curved counters in your stores, special white sauce on your noodle dishes, or torque ratios of your service equipment. They are interested in the ownership opportunities, benefits, and lifestyle rewards your franchise offers. These matter more. 6. Buyers share what they think—if you ask. Often sales reps feel they are intruding by asking too many questions about their candidate. This is a major mistake. Prospects want you to show interest in them. Ask many questions about how they feel, their family’s level of support, what else they are looking at and why, what their business strengths and shortcomings are, and what they want and don’t want in a business. These telling answers provide powerful direction on how to respond to their needs and interests. Focus the attention on them, not you. 7. Buyers’ actions reveal their intentions. It’s not what prospects say, it’s what they do! When a candidate breaks an appointment without explanation or stops returning calls, it means they aren’t interested any longer. Yet some franchise sales reps continue to chase these individuals. Don’t waste your valuable time. Move ’em up, or move ’em out! For a free copy of the research summary of 41 recruitment pros conducted by Olson & Associates and Zoracle Profiles, email stevenolson49@gmail.com. n Steve Olson is a 30-year franchise development veteran and author of the #1 Amazon best-seller, Grow to Greatness: How to Build a World-Class Franchise System Faster, available at www.growtogreatness.net. He can be reached at OlsonandAssociates.com.

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THOUSANDS OF QUALIFIED PROSPECTS

WHY EXHIBIT AT THE FRANCHISE EXPO SOUTH? 48% have liquid capital of $100,000+ to invest in a franchise

$25K - $49K

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11%

$50K $99K

6.5%

7.5%

$500K $1 Million

20.5%

8.5%

$10K $24K

Under $10K

11.5%

$100K $499K