System Change is the Key to Success in Today s Economy: How to get Real Franchisee Buy-In to New Initiatives

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2 System Change is the Key to Success in Today s Economy: How to get Real Franchisee Buy-In to New Initiatives Speaker: Steve Greenbaum Aziz Hashim Moderator: Brian Schnell

3 OBJECTIVES Discuss Strategic Best Practices to get Franchisee Buy-In Identify the Difference Makers on What Works and What Does Not Focus on Unit Level Economics and Effective Communication Underscore the Important Roles that Franchisor and Franchisee Leadership Play in Meaningful Change

4 HOW DO FRANCHISORS VIEW FRANCHISING As a franchisor, how is your system designed? What is your culture? On a scale of 1-10, how would you rank your system on the following: A strategic and interdependent relationship founded on trust where a key objective is to fulfill the goals of both the franchisor and franchisees How would your franchisees rank you and your system?

5 WHAT HAPPENS IF NO SYSTEM CHANGE OR CHANGE IS INEFFECTIVE Franchisees struggle or are unhappy? Revenue Suffers (Both the Franchisees and the Franchisor) Poor Validation Low Morale Franchisee Disputes Franchisor s Credibility Suffers

6 WHAT ARE THE EARLY SIGNS OF TROUBLE Breakdowns: Franchisees assert they don t have the resources or understand why their franchisor requires them to do something When a franchisee fails, many franchisors will proclaim the franchisee failed to follow the system or make change or simply ran out of money The highly successful franchisors will ask why and what did they do or not do to create the environment that led to the franchisee not following the system/adapting to change

7 SYSTEM CHANGE IS THE DIFFERENCE MAKER

8 UNDERSTAND THE DYNAMICS OF THE CHANGING MARKETPLACE Consumer demands are constantly changing (especially in this economy). How can franchisors and franchisees develop best practices that enable them to proactively stay at or near the front-end of change rather than be at or near the reactionary tail end?

9 CUSTOMER-CENTRIC CHANGE WORKS The key is to attract and retain loyal and frequent-user customers One tool is the effective use of the Net Promoter Score (or something similar) Don t lose sight of the importance of unit level economics

10 LEADERSHIP MATTERS

11 How do the Franchisor CEO and Senior Management Establish the Foundation of Change?

12 LEADERSHIP THAT BUILDS TRUST Lead By Example Set the Corporate Culture Fairness and Accountability Are You Open and Transparent? Trust and Respect Active Listening Do You Care? Take Action Keep Commitments Does Your Word Mean Something? Can You Present the Business Case for Changes?

13 THE ROLE OF THE FAC/ FRANCHISEE LEADERSHIP Key Strategic Stakeholders in change Understand the dynamics of the marketplace at the local level Early adapters and influencers with other franchisees and employees

14 HIGHLY SUCCESFUL FRANCHISORS EMPOWER FRANCHISEES Empowerment What does it mean? Give franchisees tools and resources that will make them more successful and more effective in growing their businesses Create a culture of working hand-in-hand without giving up authority to make decisions as the franchisor and owner of the brand

15 The Domino s Story

16 WHAT DOES NOT WORK? Demanding that Franchisees make the designated change because the Franchisor has the right to change the system under the Franchise Agreement

17 THE ROLE OF THE FRANCHISE AGREEMENT Disciplining and Removing Bad Apples Not necessarily the Sore Thumb It s typically the Free Rider

18 EXAMPLES OF FRANCHISEE FREE-RIDING Not maintaining quality Introducing unapproved product Refusing to advertise Diverting their attention to other ventures Not giving back to the system Leaving the system and then competing

19 TOOLS FOR CONTROLLING FREE RIDING Build trust and integrity Create incentives with change Monitor compliance with System Standards Create and enforce a strong Franchise Agreement

20 What actions can franchisors and franchisees take immediately to make a difference regarding change?

21 LET S MAKE A DIFFERENCE NOW System-wide Communications on 2012 Objectives and Beyond Franchisee Surveys / Customer Surveys Field Visits All Parties Commit to Straight Talk about Critical Issues: Unit level economics Customer service Branding/Devotion to the Brand System evolution/change