Dave Hood , President, iFranchise Group
◦ 27 consultants across four functional specialties ◦ 500+ years of experience in franchising ◦ 98 of top 200 franchisors
Harold Kestenbaum, Harold L. Kestenbaum, PC ◦ ◦ ◦ ◦
Named one of the top 100 franchise attorneys in America 30+ years in franchise law Former board member of publicly traded franchisor Noted author: “So You Want to Franchise Your Business”
A lot to cover, so please hold questions Will email copies of this presentation, so you do not need to write notes A little about you?
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Many people think franchises have lower level of quality – just the opposite is true The Quality Trade-Off ◦ ◦ ◦ ◦
More difficult to control Higher Caliber More highly motivated Longer term
Studies show franchisees outperform corporate operations
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The Four Pillars Of Quality Control
Franchisee Selection Documentation & Training – the Tools
Support
Legal Documents and Compliance
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Franchisee Selection
◦ Cost of walking away from a check ◦ Higher costs of marketing
Documentation & Training
◦ First class tools, Intranet, video, etc. ◦ More staff required for more training
Support
◦ Cost of Staffing ◦ Frequency of visits (travel costs, etc.)
Legal Documents and Compliance
◦ Enforcement actions ◦ Costs of losing a franchisee (even an underperformer)
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Franchisee Selection
Maintaining quality control starts with the franchise selection process Philosophy of granting franchises vs. selling franchises Need to find like-minded franchisees who are a good fit with your system Franchisees need to “buy into” your operating system Look for franchisees who want to work within a system rather than change the system Use of personality profiling
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Intelligence
Capitalization
Biggest reason for failure
Can cause franchisees to cut corners
Work Ethic
“Job Specific” requirements Personality
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Experience in leading a team Tendency toward being an entrepreneur Honesty and ethics Philosophy and cultural fit Nature (Confrontational or adaptive) Compatibility (you are “married” for the next 20 years)
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1)
Intelligence
2)
Capitalization
◦ Biggest Reason for failure ◦ Can Cause Franchisees to cut corners
3)
Work Ethic
4)
“Job Specific” requirements
5)
Personality
◦ ◦ ◦ ◦ ◦ ◦
© 2015 iFranchise Group. All Rights Reserved.
Experience in leading a team Tendency toward being an entrepreneur Honesty and ethics Philosophy and cultural fit Nature (Confrontational or adaptive) Compatibility (you are “married” for the next 20 years)
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If you select the wrong franchisees, they will often:
Under perform in terms of revenues and profitability
Have high staff turnover in their franchise business
Remain a single-unit owner in your system
Not engage with you or other franchisees in your system, or contribute to your system’s development Validate poorly with franchise candidates that contact them Require much more time and attention from your staff Be a negative influence on other franchisees, and your staff
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Be proactive rather than reactive in generating leads
Develop and then follow a well defined sales process
Focus more effort on understanding the candidate’s qualifications and goals, and place less focus on closing the sale
Consider incorporating a work experience into your sales process
Have multiple people in your organization assess the candidate
Speak with the candidate’s professional references, not only their personal references Don’t be afraid to reject candidates
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Cash Flow Modeling for Growth Conservative Growth $ Only incremental cost is franchise marketing and that can be a variable cost after a start-up allocation
The Golden Rule: Grow No Faster Than Your Ability To Support Your Franchisees
Second Hire
Royalty & Gross Margin Revenues Leverage Existing Staff and Minimal Advertising
First Hire
Loss
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Tools to Improve Franchisee Performance
Key here is “best practices”
Serves many functions ◦ Sales Tool ◦ Training Guide ◦ Reference Tool ◦ Liability reduction ◦ Enforce system standards for Quality Control ◦ Extension of the legal documents
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Determining what to document ◦ ◦ ◦ ◦
Scope of the manual Standards to be enforced Procedures to be required Procedures to be recommended
Manual development process ◦ Gathering pertinent information ◦ Determining best practices ◦ The drafting and review process
Use of Subject Matter Experts
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Discussions with Key Stakeholders
Review existing material, forms, & documentation
Develop preliminary outline
Determine gaps in current documentation
Assign responsibility for content creation
Identify Subject Matter Experts for gaps
Interview Subject Matter Experts
Onsite observation of units & documentation
Resolve Best Practices Conflicts
Draft material to cover all identified gaps
Edit all material into common style & “voice”
Revise first draft of Operations Manual based on client input
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Faster growth requires formal training programs ◦ For your staff ◦ For franchisees
Focus on training the trainer (your franchisee) ◦ Franchisee will train their staff ◦ Should have tools to do so
Video pushes QC to lowest level of organization On-line training decreases costs, increases quality, and can decrease liability ◦ Customized by employee ◦ Document what is reviewed and test scores ◦ Lowers on-site training time and costs for both the franchisor and the franchisee
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Franchisee intranet platform
Third-party quality assurance programs
Mystery shop programs
Franchisee advisory councils
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Best in Class Ongoing Support
Training 15%
Compliance 15%
IMPORTANT ROLES: • • • • •
Brand Ambassador Trainer and Coach Operations Expertise Marketing Support Financial & KPI Analysis
70% Business planning and sharing of best practices
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Pre-opening support ◦ Real Estate ◦ Facility design ◦ Construction ◦ Operations training ◦ Marketing planning ◦ Vendor set-up
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• Ongoing support Ongoing support • Brand development ◦ Brand development • Local marketing support
• Field businesssupport support ◦ Local marketing • Ongoing training ◦ Field business support • Best practice sharing ◦ Ongoing training • Vendor management ◦ Best practice sharing ◦ Vendor management
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Qualifications for the field support position
Compensation structure
Where should reps be located?
Ratio of reps to units
Frequency of visits
Routing efficiency
Agendas for each visit
Business planning tools
Tracking all communications
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Frequency of visits
Clustering of units
Type of franchise
Speed of growth
◦ ◦ ◦ ◦
◦ ◦ ◦ ◦
Complexity of business Need for quality control Type of business (restaurant vs. retail) Need for on-site monitoring (can you monitor KPIs remotely – sales franchise?)
Individual franchises Area development Conversion Area representative/Sub-franchise
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Legal Issues In Managing Quality Control
Be sure your contract and FDD have the necessary levels of control
Document should allow you the flexibility to make changes as the system matures
Develop and monitor a system for monitoring contract compliance
Develop and monitor a system for determining financial qualification
Train your franchise sales force on quality standards for franchisee selection
Notice to cure and default process used when appropriate
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Install a system for tracking and documenting that each franchisee is maintaining proper insurance coverage
Install a system for tracking and documenting that your franchisees are maintaining any required licenses for their businesses
Install a system for documenting appropriate franchise background checks, financial diligence, and representations
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A good Operations Manual can help you avoid litigation
A bad Operations Manual can be a franchisor’s worst nightmare
Operations Manuals must provide you with adequate brand control but should not be too prescriptive – a fine line
Must avoid creating an inadvertent “agency” relationship
Must avoid potential areas of negligence or take great care when prescribing actions
Should cross-reference regulations and not cite them
Should be updated annually and reviewed by professionals and attorney
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Operational Support Limiting your liability:
Having a standard compliance checklist for field support that does not leave room for interpretation
Make sure your support people document everything and that you keep a detailed file on each franchisee including all correspondence, contacts, FA, FDD, etc.
Supplement field support visits with Secret Shopper Programs
Document all client calls using Contact Management Software
Train your staff on a regular basis on appropriate franchisee communication and interaction, as well as best practices communications techniques – especially emails!
Develop a Field Support Manual for identifying problems and maintaining best practices
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1)
Hiring support staff that is under-qualified
2)
Giving insufficient training and direction to support staff
3)
Failure to convey detailed (and current) standards to franchisees
4)
Failue by franchisor to measure the results of its support efforts
5)
Looking the other way on minor infractions or playing “favorites”
6)
7)
8)
9)
10)
Trying to be a “nice guy” and a friend to the franchisee instead of viewing your role as the “keeper of brand standards” Failure to give the franchisee’s “tough love” when they fail to live up to those standards Failure to enforce the same quality standards relative to your own companyowned operaitons Unwillingness to look for alternatives to help “move” a failing franchisee or a poor operator Lack of willingness to terminate if all else fails
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