MANAGING A GROWING FRANCHISE SYSTEM

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2 MANAGING A GROWING FRANCHISE SYSTEM Moderator: Joshua Greenbaum, PostNet Panelists: Steven Greenbaum, PostNet Shelly Sun, BrightStar Tariq Farid, Edible Arrangements

3 POSTNET Steve Greenbaum, CEO/Co-founder PostNet International Franchise Corporation

4 INSTITUTING CHANGE What is the difference between change and innovation? Innovation means meeting new needs or adding value in new ways whereas change means the process of becoming something different. Your Neighborhood Business Center

5 INSTITUTING CHANGE What are key drivers for change? Technology - enabling customers to get things done better, faster and smarter than before. Changes in Consumer Needs Over-saturation of an Industry in the Absence of Differentiation Flat or Declining Sales Your Neighborhood Business Center

6 INSTITUTING CHANGE The PostNet Story Developed over 400 independent Pack and Ship Centers Franchising Since July 1993 (700 locations worldwide) Consumer Needs Changed/Technology Drove Innovation Evolution Wasn t the Answer Your Neighborhood Business Center

7 INSTITUTING CHANGE From B2C B2B Strong B2B Component in Thriving Centers Consumer Research Indicated Benefit/Need Market Conditions Small Business Ownership Is On the Rise Your Neighborhood Business Center

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9 INSTITUTING CHANGE How We re Doing It Leadership Sets the Vision Franchisee Inclusion at All levels Committed Positioning Differential Implementation Your Neighborhood Business Center

10 INSTITUTING CHANGE If you do not change direction, you may end up where you are heading. - Lao Tzu Change before you have to. - Jack Welch The World is changing very fast. Big will not beat small anymore. It will be the fast beating the slow. - Rupert Murdock Your Neighborhood Business Center

11 BRIGHTSTAR Shelly Sun, CEO/Co-Founder BrightStar Franchising, LLC

12 WHAT ARE THE KEY DRIVERS AND HOW TO RECOGNIZE THEM Problem: We did monthly best practices calls and the poor performers were the talkers and no one knew they shouldn t follow them. Solution: Create an open culture where franchisees know how each other is performing so the successful franchisees are listened to and the others are not Establish performance culture to ready the organization for future change. Learn from performers and use case studies of their successes to build others results. How We Did It: 2006/2007 System Best Practices Calls (ineffective) 2008 Support from FAC and then full franchisee communication in advance that all franchisee revenue results will be public (allowed optout) 2008 FULL system communication of revenue, ongoing discussions with franchisees on what else should be openly communicated 2009 Added Gross Margin 2010/2011 Expanded to top referrals, top National Accounts, Customer and employee counts, pricing 2012 STARs System pilot and phase 1 full system launch including overhead labor, NPS 2013 STARs expanded to include EBITDA

13 HOW THEY ARE SUCCESSFULLY LEADING THEIR ORGANIZATIONS THROUGH CHANGE Problem: No one likes change Solution: Communicate early and often Establish performance culture to ready the organization for future change What we have learned and how we improve in leading change: 2011 Full system implementation of Applicant Tracking Software (ATS) 2012 Full system roll-out of proprietary back-office technology (ABS2); Best Practices: Task forces to optimize post-implementation including corporate and franchisees; communicate progress frequently Voting on features/enhancements in intranet environment to engage franchisees and do what we say we will

14 THE DIFFERENCE BETWEEN CHANGE AND INNOVATION AND HOW TO INSPIRE PARTICIPATION IN BOTH Problem: Setting the right expectations on change that will occur while creating creativity for future innovation Solution: Annual strategic planning process; SWOT from franchisees is a key input to next 3 years of enhancements (encourages innovation) Communicate progress on prior SWOT inputs and future 3 year priorities (aligned to franchisee and market inputs) in opening address at Annual Convention (95% attendance) What we have learned to encourage innovation (within brand boundaries) and manage change: Open communication is key Communication Vehicles: Weekly Newsletters Monthly Best Practices Calls (East and West calls) with Franchisee guest host(s) Quarterly Town Hall Calls Semi-Annual Conventions Branch Leadership Conference in Spring for Franchisees teams Annual Conference in fall for franchisees Bi-Annually - Independent third party surveys Annual 2-day strategic planning summits with CEO (10 franchisees per session) Encourage pilots of innovation where results are shared. Learning and enhancements occur and then programs rolled out in 30 location pilot and then system-wide, as appropriate

15 OPERATIONAL STRATEGIES FROM FRANCHISE SALES TO SUPPORT TO MAXIMIZE EFFECTIVENESS Best practices to maximize results across key areas Culture important to all: 1. Build compensation programs that align success for franchisees and franchisor with the earning potential for corporate staff 2. Build high performance open book culture everyone knows each other s goals and results (franchisees of one another and corporate staff of one another) 3. 2 of 4 quarterly corporate goals shared with other departments to align organization around critical few initiatives Franchise Sales: 1. Select the right Franchisees align compensation around franchisees results rather than just signing 2. Strong involvement of operations during selection process and facilitate strong hand-off 3. Resales can be as valuable, or arguably more valuable, to a system than new sales Operations/Field Support: 1. Identify early warning indicators so all hands on deck when a franchisee falling short ensure early enough that options exist to triage 2. Ensure field support has accountability for volume, margin and profitability in their region 3. Prioritize key markets and get all hands on deck across the organization to focus on critical outcomes (Involve marketing, executive team, clinical team, national accounts team, etc. to grow targeted markets)

16 EDIBLE ARRANGMENTS Tariq Farid, President/CEO Edible Arrangements International, Inc.

17 WHAT ARE THE KEY DRIVERS AND HOW TO RECOGNIZE THEM The need for change can come from various sources, including internal, franchisee, customer, economy, etc Problem: We experienced inconsistency with product delivery and training at the franchisee level most franchisees spend less time training or do not have training systems. Solution: To create a consistent guest experience across all franchises, we collaborated with franchisees to gather their feedback on ways to improve. The result was the creation of a system-wide technological tool, nxstep, used to deliver training materials to all franchisees and employees. The tool contains training videos and messages about how to uniformly create each of our products. Challenges: Upon roll-out, we received push back from many franchisees even though the idea was bred from them. We overcame the challenges by having a small group of franchisees test it in advance, gain their buy-in, and then stick with it. Since full implementation we have had few issues and have also received positive feedback. Some who hated the idea, now can t live without it. Important: 1. Must be an opportunity for all. 2. Sell it internally and externally. 3. Validate response 1. Flags not feelings 2. Tracking of feedback 4. Reinforce benefits and positives after everyone gets comfortable. 5. Lead! Stay firm on your initial objectives.

18 LEADING THROUGH ORGANIZATIONAL CHANGE 1. Create a plan on how change happens and will be communicated. 2. Buy in from corporate staff, especially Field avoid I know 3. Know the push back, project and track it. 4. Get on the road when needed, spend time face to face! 5. Truly understand franchisees challenges. 6. Celebrate the successes, communicate the shortcomings. Change = the disturbance of the current comfort zone Problems: Extended Store Hours and Sunday Certified Happiness New Software Online Payment processing and push Fresh Program Solution: Prior to implementing any of the initiatives, we completely vetted and got comfortable with staff. Small group of franchisees were loud with objections. We tracked each objection, franchisees and responded accordingly. (Buy-in and validation by team resulted in long term success even when I wanted to change) Owners day to answer questions face to face in regional areas. Not everyone was satisfied but clearly saw the commitment and direction.

19 INNOVATION Innovation = Anything that adds value; the introduction of a new opportunity Problem: In the early days, the owners were in the field working with and communicating with franchisees. As the business evolved and new stores came on, it became more of a challenge to communicate one on one with franchisees. It was realized a new way of communicating was necessary to ensure the success of the business and franchisees. Solution: We implemented several different communication methods to ensure we were effectively reaching all franchisees. 1. Real time communication with owners 2. Grapevine / EA Weekly 3. nxstep 4. inac 5. Fruit Summit 4 per year! Important: 1. Listen more 2. Make it easy for franchisees to give ideas and feedback. (Mobile) 3. Present for validation, be the innovator - inac! 4. See opportunity in everything, Culture! 5. Realist from Zee s point of view. Corp Syndrome! 6. Give franchisees feedback priority over corporate staff. 7. Must be a WOW!

20 OPERATIONAL STRATEGIES Setting Expectations recognizing the problem and instituting realistic solutions while maintaining transparency to avoid an us versus them mentality Clearly communicate goals with everyone including store staff, manage success. Technology advancements for the purpose of affecting change, innovation and collaboration between franchisor and franchisee. Maintain internal committees to vet and test changes and innovations and the responses to them. Dashboard change and feedback. Quick response team, i.e. Fruit Summit and INAC Have realistic expectations. Not just trying to convince yourself or others that it will work, but having hard data showing it will work Timing set a realistic timeline, ensuring testing and buy in prior to launch to reduce unnecessary costs of back pedaling Knowing and accepting when it won t work and why. Know the issues Show willingness to Learn from mistakes it goes both ways. Important: 1. Manage according to your size and age. 100 vs Adapt not Adopt! We are no McD 3. Jimmy John s way go fix it! 4. Buy-in of corporate team. 5. Create excitement Feedback to teach Change to show collaboration Launch like a product or service to customer

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