Franchise Articles

This newsletter will present an ongoing series of highlights from the 2015 Annual Franchise Development Report (AFDR). The report is based on responses from 139 franchisors representing 36,313 units (32,693 franchised and 3,620 company-owned). This week: How multi-unit franchisees find new brands.

It's no secret that for most franchisors, experienced multi-unit operators are the gold standard. Their track record of success, along with their solid organization and infrastructure, makes them a safe bet - and a good one. Where these savvy operators go to look for new brands to expand their portfolio should be of utmost importance to expansion-minded franchisors seeking to connect.

Nearly two-thirds (62%) said they attend trade shows to find new opportunities...

Prospective franchisees have lots of questions: How do I purchase a unit? Can I buy more than one? What will my territory be? How much does it cost? What are the royalty payments? How much training and ongoing support should I expect?
These are questions franchisors are accustomed to addressing and that regulatory documents confirm, but they are not the most important questions on the minds of prospects: How much can I reasonably expect to make? What is the likelihood I may lose my investment?
Franchisors find lots of reasons to justify not answering these two questions. That won't go on much longer. The market is rapidly requiring changes that will force franchisors to confront these questions. I offer three recent trends that clearly demonstrate a new level of transparency is moving to the forefront of the franchise business model...

"Insight is a new configuration of knowledge that breaks the existing pattern of thinking in an unexpected way." This definition of insight comes from Luke Williams, professor of marketing and innovation at the NYU Stern School of Business. In short, insights drive intelligent marketing decisions that, when executed well, drive growth. Williams spoke at the Franchise Consumer Marketing Conference in Atlanta in June.
There it was also my pleasure to host part of a wide-ranging panel discussion on marketing strategy, planning, execution, results, and measurement. Executives contributed their insights obtained in diverse industries from child education to senior services. Retailers, personal service providers, and restaurant operators all shared surprising lessons...

Charlie Morrison wasn't looking for a new opportunity. He was already at the helm of Pizza Inn and was the driving force behind the brand's innovative Pie Five concept. But in June 2012, he couldn't turn down the opportunity to take the reins at Dallas-based Wingstop, which he says offered him the chance to run a larger, growing company in an expanding market space.
Wingstop now has more than 650 restaurants worldwide and signed commitments for more than 500 more, the most in the brand's history. In 2013, the company notched its 10th consecutive year of same-store sales increases (9.9 percent), and domestic AUV rose to $974,000.
"In fact, over the past 2 years, our same-store sales have grown 23.6 percent," says Morrison. "That is almost unheard of in the fast-casual segment and certainly for chains our size, and we expect the strong momentum to carry forward this year...

Franchise relations are in the midst of powerful, fundamental change. Driven by the maturity of franchising, the rise of large multi-unit operators, the after-effects of the recession, and, most recently, external regulatory and political threats to the franchise model itself, franchisors and franchisees are working together more than ever before--and looking for ways to do it better.
In our conversations with multi-unit franchisees and franchisors, we found three overriding themes: collaboration, communication, and having a structure in place to facilitate them. Here's how some are working together for mutual gain.

Collaboration
In his 35 years in franchising as a franchisee of Great American Cookies, Doc Cohen has seen the brand trade hands from its founders to a private equity firm, sold to its chief competitor, and then sold twice more to private equity firms...

Franchisees around the country are breathing a collective sigh of relief as the post-recession rebound officially sets in. For many who weathered the economic downturn, earnings have increased, profits are up (thanks to strategic management decisions), and potential purchasers are again lining up to enter the market with finances in hand. And for others, fair market value for the business has reached a point where it may make financial sense to sell, particularly for those who held on to see a better day.
But before you make plans to sell the franchise, whether now or in the next few years, there are a few simple steps that you should take to prepare and avoid unwanted surprises. After all, preparation enhances the value of your business; surprises cost money and time...

Jeff Tews and Susan Rather first met on a Multiple Sclerosis charity cycling ride. They immediately hit it off. Marriage came next and the couple had only been married for about a year when they entered a new venture as franchisees in the home care field. Together they own five BrightStar Care locations through their Madison, Wisc.-based company, which consistently performs at the top of the brand's franchise chain.
"We knew we had great communication, but we sure didn't want to mess anything up," says Rather. "We went in with eyes wide open. The advice we got from other couples was to clearly define who is going to do what. Over the years, we have melded that a bit."
Tews, after 33 years in the banking and telecom industries, was seeking a change of pace from the corporate world...

While Pinterest's ad strategy is taking shape, analysts remain on the fence about the pin-based social network, and its near-term marketing potential.

"Many marketers just can't seem to find success on Pinterest," Forrester analyst Nate Elliott writes in a new report. "Barely one-half of top brands maintain branded Pinterest boards - and those that do are unsure what to post, collect few followers, and see little user interaction."

Coca-Cola, for example, has fewer than 5,000 Pinterest followers, while its last 50 pins have been repinned an average of just 11 times each.

After eight months in beta, Pinterest officially launched its Promoted Pins program, at the beginning of the year.

Yet the new program doesn't give marketers enough web-based targeting criteria, according to Elliott...

Local Search Marketing Tips for Franchisees
Search marketing poses particular challenges for franchise businesses, who need to find ways to differentiate themselves from other franchisees online, as well as from the national brand, which can swamp their listings in local search rankings. Creative use of search engine marketing makes all the difference, but the best approach involves collaboration and coordination between all local franchise owners, and good support from the national brand. Rachel Lindteigen, senior director, SEO for PM Digital, writes on Search Engine Land, "Several years ago, I worked in the marketing department of a children's franchise organization, and we ran into several challenges. All of our franchise owners were essentially targeting the keyword have a presence there (58% of U...

What do you look for in a salesperson, and what are the critical elements to building a great sales and development team?


Larry Flaherty
Director of Franchise Development
Pet Supplies Plus

If you ask five different franchise development professionals this question you'll get six different answers. When recruiting salespeople, I look first and foremost to their integrity. I want a team I can trust to do the right thing, make the right decision, and not simply make a sale. I expect our sales team to look at each candidate and anticipate how they may or may not fit within our pet-centric culture. I look to them to provide me with their honest recommendation based on their observations. Next, I look for someone who has all-around sales qualities, such as a strong sense of urgency, and assertive personality, and who looks for solutions, not problems...

"How do you identify your ideal customers, and how do you target them effectively with your marketing initiatives?"


Melissa Conner
Marketing & Operations
Kidcam Camps

Kidcam Camps has 17 company-owned and franchised summer camp locations for children ages 3-13. Although we plan for our summer business year-round, we heavily market to our prospective customers for only about 5 months. Each location is treated a little differently, but there are a few initiatives we have found effective regardless of location.
Even though our business is all children, it's the parents making the decisions, and we know our customers choose us primarily on location. How close are we to their home or work? We look at a lot of reports in our off-season telling us where our campers attend school, where they live, and how they found out about us...

In the restaurant world, if you survive 3 years, you have essentially beaten the odds. Before rebranding to Old Chicago Pizza & Taproom in 2013, Old Chicago Pizza & Pasta had a successful 37-year history that served three generations of guests. The neighborhood restaurant, founded by a few buddies in Boulder, Colo. steadily grew to 96 restaurants in 22 states.
The brand made a lot of loyal friends along the way, but though longtime pizza lovers enjoyed the familiar comfort of the traditional beer and pizza combo, the American food scene was quickly evolving. Diners were becoming more knowledgeable about food and drink, and they were hungry for more upscale options with an emphasis on artistry and a passion for all things craft.
In November 2010, Old Chicago evolved into part of CraftWorks Restaurants & Breweries, the nation's largest brewery restaurant...

When evaluating a brand, experienced operators have two big advantages over first-time prospects. First, they know what questions to ask. Second, most of the time they know what a good answer looks like.
The first advantage really isn't all that much of an advantage. Common sense leads prospects to ask many of the most relevant questions. In addition to how much they will be asked to invest and how much can be made from that investment, some of the more frequently asked questions include: the franchisor's financial position, the experience of the franchisor's management team, the amount of training and support, brand marketing efforts, and the performance of units and franchisees.
The second advantage is usually considered the big one...

David Gronewoller is president of GC Partners, a Winston-Salem-based company that operates 12 Golden Corral locations in North Carolina, South Carolina, and Florida. You might consider him an employees' employer. With more than 20 years of franchise experience, he believes "more in the man than the method" in overseeing his family-style restaurants. This people-centered formula for success has spilled over into the neighborhoods his restaurants serve.
Gronewoller's commitment to the community is far-reaching: in 2013, his restaurants served and delivered 1.1 million fresh meals to senior citizens in five counties. It's also personal: when his mother was battling pancreatic cancer under home hospice care, Meals on Wheels delivered food to the family's Colorado home...

Energy management systems (EMS) are great in theory but often prove problematic in practice for many multi-unit franchise owners. The reasons tend to vary but a common theme centers on the administration of the intelligent thermostats, the pre-conceived cost of installation and complexity to ascertain, analyze, and effectively apply the data.
All of these are valid points against EMS for entrepreneurial multi-unit franchisees who operate in environments with razor thin margins and who may have limited internal resources. These owners simply don't have the bandwidth or dedicated staff to effectively administer, monitor, and analyze the fire hose of data associated with energy management systems.
As a result, multi-unit operators often discard the notion of embracing energy management systems and the significant financial benefits and operational efficiencies they provide...

Editor's note: Marc Kiekenapp passed away prematurely in December at the age of 62. This column, from 2012, along with the accompanying "In Memoriam" piece, are our attempt to thank Marc for his many contributions to franchising over the past three decades, and to keep his memory fresh and alive in our minds and hearts.

Most franchise systems would like to attract quality multi-unit franchisees and enjoy the benefits of having fewer franchisees operating more units and reap the efficiencies gained in support, marketing, and training. Here are some tips for deciding if a multi-unit program is right for your concept.

Most franchise systems organically grow a single-unit owner into their first multi-unit owner without having proper systems or training in place for multi-unit operators...

The Franchise Update Media team joins us in sharing with the franchise community our sadness at the untimely passing of Marc Kiekenapp, our longtime columnist and friend.

Over the past 20 years, we, along with so many others in the franchising community, have had numerous occasions to do business with Marc and have always respected and appreciated his expertise, knowledge, and willingness to help. That relationship turned into a friendship we will always cherish, and miss. Marc had a solid reputation, and an honesty and dedication to everything he did both personally and professionally. We appreciate his best practices column, "Sales Smarts," which he contributed to the pages of Franchise Update magazine for the past six years...

Two franchise business owners urged Congress to address regulatory overreach by the National Labor Relations Board (NLRB) to expand the definition of what constitutes a joint employer during a hearing February 5 before the Senate Health, Education, Labor and Pensions (HELP) committee. The franchise business owners testified that recent actions by the NLRB would significantly undermine their ability to operate and sustain their businesses - potentially forcing them to close down. 
At issue is the recent NLRB recommendation to upend the decades-long, well-established joint employer definition. Should the NLRB expand the definition of joint employer to include a franchisee's national brand, it would destroy the franchise model - leading to industry consolidation and, ultimately, to store closures and a loss of jobs, economic activity and entrepreneurial investment...

Don Smith was the first - and is currently the largest - Valvoline Instant Oil Change franchisee in the country. He is CEO and co-founder of Boston area-based Henley Enterprises, which operates 197 Valvoline Instant Oil Change locations coast-to-coast, with 20 more of the quick lube stores in the pipeline.
In 2012, he orchestrated the purchase and successful rebranding of 72 EZ Lube oil change service centers in Southern California, the largest single acquisition in industry history. The deal, which included many distressed properties and just as many naysayers (including within Valvoline) was a "big piece to bite off," says Smith.
"We went in a little bit blind, but we knew we could do it," he says. "It definitely confirmed that the model that Valvoline has put together--and we have influenced that model--can work virtually anywhere in the United States...

Note: Part 1 appeared in December's FCMR.

Why is it so important for the marketing department to have a "personal touch" when it comes to helping the brand connect with franchise prospects? We are bringing in a record number of prospective franchise partners each month for discovery days to learn more about the brand. Many of these individuals are coming from other segments of the industry, including casual dining, QSR, and family dining. By the time we are sitting down with them, they have visited us in multiple markets, have seen the brand in the media and in our advertising, and begun to see our many points of differentiation. From our innovative, made-to-order menu offerings to our segment-leading catering business, it's important to all of us that those first impressions are reflective of the commitment we have to protecting and evolving the brand...