Zeroing in on what makes franchise leaders tick
Since 1653, when Izaak Walton published The Compleat Angler, "compleat" has come to mean many things beyond what Walton described as "a Discourse on Fish and Fishing." The dictionary tells us it means classic or quintessential. But compleat also implies mastery far beyond the basics, conjuring up words like visionary, leader, even master.
Franchise UPDATE took this notion, applied it to franchising, and went angling for the "compleat CEO." We found five willing to offer their perspective on the question. Each has forged a unique path to success, and their stories offer inspiration and insight to anyone seeking to become a more successful franchisor.
More than 350 years ago, Walton addressed his reader thusly: "I think all that love this game [angling] may here learn something that may be worth their money."
For you, dear reader, who loves the game of franchising, we hope that you may here learn something worth your money - or at least your time. Read on.
The Compleat Communicator
Jerry Egner, CEO of Cypress, Calif.-based Closets by Design, has been a CEO at both "regular" and franchise companies. Beyond the obvious differences in being a leader within the two business models, he also sees many similarities.
"As a franchisor, you can't just call a meeting in your office when someone's not performing to your expectations," says Egner, who took Closets by Design into franchising in 1998 after running it "the old way" since 1990. "These are independent business people who got into it because they wanted out of Corporate America."
In either environment, he says, communication is key.
Acknowledging that he hasn't always done the best job of that in the past, Egner says his philosophy now is to "embrace" communication.
"I learned that I needed to communicate with franchisees the same as with other employees. I needed to be sure they knew my vision and expectations of them - and also that I was willing to listen to them and to accept their expectations of us as well," he says.
Ahh, the power of listening. "I respect our franchisees as professional business people, and I listen to what they have to say and try to understand their concerns," says Egner.
"Another important thing is empathy, and understanding their world and what they deal with on a daily basis," he says. "We're all in the closet business, and we're in the franchising business. But there are a lot of moving parts in the business, and it's not as easy as one might think."
A prime example of the importance of communication and understanding (or lack thereof) came recently when Egner and his staff changed the contracts for the 25-year-old closet organization and storage remodeling company. "We needed a [new] contract that was going to protect the system and also all the franchisees. There was no hidden agenda, but we did a poor job of understanding why the need for the new contract wasn't obvious to them," he says.
Franchisor and franchisees sat down together and "traded seats," in an attempt to solve the problem. "I learned that some of the language we'd used was bound to raise questions. They also understood that we had to have [new] provisions in place," he says. "We were able to communicate and come up with clearer language that still fit our needs but also answered some of their concerns," Egner says.
"We have to contractually set performance practices and let them know they are there, but at the same time, franchisees won't respect us if we don't respect them. It's a tough balance - one we deal with every day."
Five years ago, just a couple of years into franchising, Egner took an unusual position. "We needed our existing franchisees to have confidence that we were leading them in the right direction," he says.
"Often, when you start out, you're focused on the excitement of selling franchises. And that's not difficult. But what happens is that you're a young franchisor with many young franchisees. I'm not sure my infrastructure communicated what we would live by. In order for the system to grow, we needed the successes. We needed to show prospective franchisees that our system was strong," he says.
So he pulled all the company's ads, hired more internal staff, and created a stronger infrastructure to help support the 27 existing franchisees. During that period, Egner says, he realized that some franchisees were unable or unwilling to follow the model. "We believe in those cases that it's in everyone's best interest for them to move on and let us give the location to someone who can and is willing to follow the model," he says.
"We promoted a higher level of expectation among our franchisees. We tightened things up," he says. The company didn't change the number of franchisees, although some changes occurred when a couple transferred to another location, or another opened a new territory. As a result, he says, "We had some new strong franchisees coming in, a better training program and support system, and a stronger model overall."
As a result, Closets by Design "grew without growing," with revenues increasing from $22 million five years ago to $65 million in 2006. Now, Egner, a more seasoned franchisor, is ready to re-launch its franchise offerings, while still remaining fairly conservative in growth numbers: he's looking for six new locations in 2007 and 12 more in 2008.
Today, Egner and his team encourage franchisees to communicate their ideas. If they have new ideas that might improve operations, he says, "They know we will listen and digest it. We've already improved a few things in our vendor relationships because of open communications between franchisees and franchisor." He points to one of the most famous examples of a successful franchisee idea: the Egg McMuffin.
Egner says he has made a conscious choice to be a better communicator, and it's paying off. "We hit challenges head-on immediately. We don't let rumors or questions of intent manifest - we're not afraid of being held accountable. We live by our credibility and our ethics and we'll continue to preserve that."
Egner feels strongly about what he has learned as CEO at a franchise company. "As a franchisor, I've learned to show the respect that franchisees demand from me. I always had respect for employees but I'm not sure I demonstrated it or showed it every time I had the opportunity. In franchising, if you don't have empathy, and you can't communicate your vision and how the system gets to where it needs to go, you won't be successful. If I had known this earlier, I would have managed my employees better."
The Compleat Diplomat
Barbara Moran, director and president of Moran Industries, Inc., oversees five franchise brands with 239 locations in the automotive aftermarket industry, including Mr. Transmission and Multistate Transmission. In 1999, she took the reins of the company her father had founded in 1956, when he opened his first repair facility.
In this historically male-dominated industry, Moran knew the extensive knowledge she'd garnered from years of working at her father's side would not be enough for many of the company's franchisees and suppliers. She'd have to show them she could run the company as well.
One of the first things Moran did after settling in as president (and shaking things up at the home office in the process) was go on the road for face-to-face visits with the franchisees. It was as much a listening tour as an effort to communicate the company's goals and objectives.
"Our relationship with franchisees is one of respect, admiration, and forward movement," says Moran. "I've instilled in our team that we will do business by having relationships with our franchisees." In seeking to bring franchisees on board with her vision (as well as her leadership), Moran had two unique advantages.
"I grew up in the business and worked with my father, Dennis, for 20 years," she says. "And I was a franchisee at one point. So I understood that there were different methods used to try to get people to follow the franchise system. Some methods were 'old school' and - in my opinion as a franchisee - did not work. These methods made me defensive and put me in a position where I'd push back."
Instead, she says, "You have to be willing to listen, and you can't shut out what the franchisee has to say. After all, they're in the field and they know what is happening. Their goals are to be successful, and our goal is to have them be successful, because then we all are successful," says Moran.
The road trip also was an opportunity for franchisees and franchisor to get to know one another and agree to move ahead together - or not. "Running a franchise company is a situation where you need compliance. That means different things for each system, but basically, franchisees need to believe in the system and buy into it. If they don't, the franchisor needs to recognize that and put together an exit strategy," she says.
Another smart move early on: staffing the operations department only with people who had operated their own automotive facility. "Our franchisees are more willing to listen, because they know we've all done it. We're not just a business school grad coming in and telling them how to operate," she says. "This was one of the first things we committed to changing, and our franchisees are very happy with that. We've strengthened our technology to the degree they wanted and needed as well."
Big picture? "We know the ins and outs of what motivates franchisees and what frustrates them, and we try to focus on those issues and work with them on those issues," Moran says.
When it comes to communicating her intentions and her goals, for Moran it's more about persuasion and participation than coercion and authority. "You need to involve your home office team and your franchise team," she says. "You do more by committee because you want buy-in."
In her experience, Moran says, it's possible to teach a working committee why everything "can't be laid on the back of the franchisor," and to get them to understand the company's real objectives.
And, for optimal effectiveness, although it may be more difficult, "You want committee members who will bring not just problems, but solutions, to the table and who will be open about the good, the bad, and the ugly."
Effective persuasion requires a deft touch. "One of the most important aspects of the art of persuasion is to ask smart questions and lead them to the answer that all of you know needs to occur," she says. "If you present it as, 'We're having this committee, but we make the final decisions and you are here just for show,' it won't work."
And if there is disagreement, there also is room for compromise. "You can take the contract and push based on that, but if you're doing that, you're not trying to develop relationships. You become known as someone who carries a big stick, and your relationships with franchisees will suffer," she says. "It's better to try to find middle ground that everyone can understand."
"When you're CEO of a solely owned company, you can address issues of an under-performing store by revamping what's happening there, retraining, and replacing if need be," says Moran. "When you're a franchisor, you can't go stir the pot like that. You don't have the right to do it."
In the end, it's essential to choose the right franchisees for the company. "If you choose franchisees who believe in and love the system, you're bringing something good and positive to the system," she says.
"I was raised in a different environment - one that is truly entrepreneurial - and I am a risk taker. I'm constantly looking at new and creative ways to improve the system," she says.
A single mother of two active teenagers, Moran also works with many women's groups to show them it's worth taking chances. "We don't have to stay behind the line - it's a responsibility issue. Women," she says, "have made a significant difference in franchising in the last several years." Thanks to Moran and other like her, they're already making more.
The Compleat Listener
Gordon Keil, CEO of Pump It Up (inflatable party centers), says he's been "accused" of having an anecdote for every occasion. "I've found that honest-to-goodness anecdotes with real examples can really make the point," he says. One of his favorites relates his skills and accomplishments as an Eagle Scout to his success at heading franchise companies.
"I am an Eagle Scout, and am proud of the fact that both my older brothers and I are. Whether I'm interviewing somebody or thinking about how I can be a better CEO, my mind constantly goes to the traits required to be an Eagle Scout," says Keil (rhymes with smile).
The Scout Law: A Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, reverent.
"It's unbelievable how well that applies to being a successful franchisor," he says. "I don't know how reverent I am, but if you're a good Scout, everything does take care of itself."
Keil, former CEO of Huntington Learning Centers, would likely add one more trait to the list for a franchise company CEO: good listener. "An important skill to have is the ability to pull people together and to truly listen. That means parking our egos at the door and figuring out what makes sense for everybody's benefit," he says.
At Huntington, Keil formed a marketing advisory council and a FAC and went out of his way to make them effective. "They became incredibly helpful at building the brand," he says. At Pump It Up, which had attempted to form councils in the past, Keil focused on identifying people with the right experience for the marketing task force, such as a former marketing executive from a large oil company.
Pump It Up currently has a strategic task force, which will evolve into a FAC. This group includes a former Hershey Company exec who is strong at involving people and planning agendas. "We also have an IT task force made up of people who have special skills that I don't have," he says.
This type of involvement of franchisees in decision-making shows the kind of respect he says is necessary for a brand to succeed. "I've actually always felt that way, even before I went into franchising," he says. And now that he's in franchising, Keil says he's learned that listening to franchisees is essential.
And while he prizes franchisee input, in his quest to do what's right for all the franchisees and for the brand, Keil says he must keep mavericks under control, even if they are well meaning. "My experience is that more than 80 percent in the system have good intentions and want to do the right thing for the brand and the customer. But a few get carried away. If someone wants to do something wacky that in our judgment affects the brand in a negative way, that's not allowable," he says. "We need to remind them that we're all in the same boat, and that our livelihoods depend on the success of the brand."
The tone of these discussions is both persuasive and collegial, says Keil. "I believe that the best place for a franchise agreement is in the bottom right-hand drawer of the desk, where it collects dust. If you need it front and center in the middle of your desk, where you're constantly flipping its pages, you have the wrong idea."
Keil, who took Pump It Up from $3 million in revenues in 2003 to $55 million in revenues in 2006 (with 152 units operating and 75 more in development), says the compleat CEO of a successful franchise must "sincerely care about not only building up revenues but also on building up franchisees."
Further, that person should be a "real psychologist, able to understand people who have invested their life's savings and put their entire lives in your hands," Keil says. It's important to understand that some emotion may be involved if things don't go as planned, and to be able to empathize with them.
And of course it's critical to know and understand the type of person suited for your specific brand, he says. Both Huntington and Pump It Up are child-centered concepts. "For these businesses involving children and their parents, the reputation you build for being a loving person who cares about children and their education and their safety is just as important as the brand and system you represent," he says.
Providing solid support to your franchisees is another critical component of the compleat CEO. "You may have franchisees who are bright and have good experience, but they're in the trenches, and if you're not providing them with everything they need to increase revenue and improve profits, they'll try to figure out what they need to do on their own. That's why you need a process. We did that at Huntington and we're doing it at Pump It Up.
Keil says he admires people in business who are "direct, tough, and driven." But he also is well aware that different skills (and sometimes different leaders) are necessary when franchise companies pass through the entrepreneurial phase into professional management.
"The entrepreneurial stages are tough and require incredible human beings who have the energy, tenacity, and smarts to visualize a whole new concept and make it work. The kinds of skills needed to transition into professional management are different. One is not more important or impressive than the other."
That philosophy is about to be put to the test: In late March, the company announced it had sold a controlling interest to Palo Alto-based private investor Tregaron Capital. Keil, approaching his one-year anniversary as interim CEO, was retained as CEO and president to run day-to-day operations.
The Compleat Visionary
Amy Nichols earned her B.A. in psychology from the University of Maryland-College Park and leveraged that knowledge and her outgoing personality into five successful years with Verizon and Bell Atlantic. "Technology was big in our area and things were still new and exciting. I thought I'd find within the large company a niche for myself," she says.
Starting out in sales support, Nichols admired the "nice clothes and nice cars" of the salespeople and decided she wanted to be in sales. "I liked closing deals and getting people excited about it," she says. It wasn't long before Nichols became one of the "flashy" salespeople. She was successful and eventually recruited by a large company to sell web hosting.
But the downside of working in a big organization was starting to frustrate her. "I found that if I had a unique and innovative idea, it was nearly impossible to get accomplished unless it had direct - and obvious - bottom-line effect," she says.
Nichols began to spend more time imagining what she'd most like to do in life. "As a kid, I was always working with animals. I worked in a pet store for four years. I loved it because it was helping people and I had access to the puppies. I even got a commission for selling pets - and it wasn't bad money for a 16-year-old! It was the combination of working with pets and the satisfaction of selling that made me passionate," she says.
Six years ago, Nichols told her fiancÃ© she wanted to sell her house in Northern Virginia and use the funds to start a business. "It was a risk, especially when I told him I wanted to open a doggie day care business." That was several years ago and the concept was still pretty new, she says. "A lot of people told me I was crazy to leave a 'good job' like I had. I may have been a little naÃ¯ve, but to me, there was no such thing as failure. I just said, 'I will somehow make this work.'"
Nichols also was inspired by her affection for her Boston terrier, Griffin, who was 4 years old when she started her business. (Later, her family adopted Bodhi, a 70-pound collie mix, from a shelter.)
While she was working in technology sales, she'd noticed that Griffin was happy and active but a little "crazy because he'd been bored all day." A walk (or even two) wasn't enough to settle him down. Her desire for him to be "socialized and entertained and happy all day" further motivated Nichols to create her full-service dog day care center, spa, and boutique.
She opened the first location in 2002 (named Happy Tails Dog Spa). In 2004, the second full year of business, revenues hit $1 million. A wedding and a baby soon followed. When their son was 4 months old, Nichols decided to take her fledgling company into the franchise arena.
Gotta love 'em
"I decided that the traditional hierarchy model for business was not my thing," says Nichols, remembering her frustration working at large firms. "Being flexible goes a long way toward making us successful. I didn't enjoy working with people who were immovable in attitude, and that's not the person I'm going to be."
But there are limits. "We don't do everything by committee. I have reserved the right to keep the business moving forward, and there are core principles I never stray from."
For example, Nichols has one hard-and-fast requirement for potential franchise owners: "They have to love dogs - love 'em, not like 'em - because they can end up cleaning the playroom or picking up after the dogs or pitching in with a bath," she says. "I love nothing more than a day in the playroom."
Her flexibility also helps the young organization continually improve. "We're a pretty swift-moving company. If we identify something wrong, we get to it right away," she says. And from an operational standpoint, franchisees have a lot to offer. For example, an owner who once worked at AOL contributed some valuable ideas about the web site - especially important at Dogtopia, which uses web cams that allow owners to check on their pets any time. Others franchisees have shared their expertise on animal behavior.
The franchise model also appealed to Nichols for another important reason: "You can't pay someone enough to care the way an owner will care," she says, whether about the dogs, the customers, or the facility. "You can't replace that pride of ownership. This made more sense than trying to manage all the managers and keep them motivated and keep the buildings clean."
The initial franchise offering came in April 2005. With eight sold, so far, she's received a huge vote of confidence in the form of investor Gary Findley, former president of Curves International. His current firm, the Findley Group, provides sales and marketing support, as well as invaluable advice.
Because Nichols and the franchisees are committed to giving back, she has created the nonprofit K-9 Support, Inc., to support working dogs, such as military dogs, rescue dogs, and Seeing Eye dogs. Annual K-9 Support Dog Wash events raise funds to send care packages to K-9 handlers and their working dogs in Iraq and Afghanistan. In 2006, Dogtopia sent more than two tons of packages to units in Iraq, Afghanistan, and Kuwait.
Nichols, whose second baby is due this year, is certain she's made the right career decision. "When you're in sales, you have a high base salary and the potential to make well over six figures. But after I reached my financial goals, I said, 'Do I want to talk about routers and hubs and web hosting all day? It was exciting because it was new, but it wasn't something I was passionate about. Now I get to talk all day about something I really care about."
With all the pieces in place and some experience under her belt, he future looks bright for Nichols. "Now we're ready to grow and to find the right people for the system. And that's not just the next person who shows up with a check," she says. "We don't expect people to be the same or even to have the same skill set." But they do have to love dogs.
The Compleat Learner
Frank Easterbrook, CEO of Juice It Up!, spent most of his career as a senior executive with M&M/Mars and Nestle, and as CEO and owner of Horizon Surgical Devices, a company that held three U.S. patents for a medical implant device. When he sold Horizon in 1997, he decided to retire, leave North Carolina, and return to California. Retirement didn't last long.
Easterbrook became aware of Juice It Up! in the late 1990s while overseeing the post-acquisition transition of his medical device company. What began as a small investment in Juice It Up! led to his joining its board in 1999 and taking the reins two years later. When he assumed sole ownership of the financially strapped smoothie and juice bar franchise chain in 2001, he faced an entirely new kind of challenge.
At the time, says Easterbrook, he didn't know much about franchising. "I didn't really have an opinion, except that I always felt that companies should own their own stores. McDonald's had bought back franchises when it had the chance, and so had other successful companies. Owning stores was a sign of a successful company to me," he says.
Today, Easterbrook says he believes the key to success is having successful franchisees. And, he says, "The key to making a franchisee successful is to be willing to train, train, train, and follow up with excellent marketing and advertising programs."
On the way to growing the 125-store juice bar chain, he's also learned volumes about dealing with franchisees: "In a large firm, whether privately owned or publicly traded, people recognize the line of authority. In franchising, there is no line of authority; they're owners and we respect that."
Then there's that all-important sense of ownership: "In the franchise business, commitment to the success of the store is built in, whereas that commitment is something they aspire to develop in a corporate entity," he says.
In his current CEO role, Easterbrook adheres to a more collegial, less authoritarian management style than he has in the past. But he doesn't go along with the notion of moving decision-making to the lowest practical level. "In franchising, that would allow franchisees to change the look of the store, our recipes, and other things that are hallmarks of the company. We can't do that," he says.
Nevertheless, listening is a big part of what Easterbrook does these days. Because, just as in his past corporate settings, associates often are the ones with "better ideas than the guy sitting at the top," he says. "The more we listen, the better the outcome. I am more of a cheerleader these days than a boss. I'm not telling people how to do things or what to do. I just encourage them and let them know they are making the right decisions."
And he says, "I'll always listen to young people; they have different outlooks and experiences than I do. I love this young staff and sitting back and watching them do their thing."
The veteran business leader says he follows five principles in operating Juice It Up!:
- quality of service, product, and people;
- responsibility and accountability for what goes right and wrong;
- mutuality, which means the success of one person can't be at the expense of another;
- efficiency, including minimizing waste and excess labor and maximizing organizational strengths; and
- freedom, "because people who have the freedom to do things and to make decisions within pre-agreed-upon parameters are happy and successful people," he's found.
And the results are paying off. When Easterbrook joined Juice It Up!, he found many of the same problems plaguing other young companies. "There was not a system of checks and balances. Juice It Up! grew too fast and there simply wasn't time to develop the proper infrastructure. Everyone was pulling in a different direction and the management team was having difficulty moving fast enough to do the things they needed to do," he says.
A few years later, the company is praised for the infrastructure and business acumen that has the brand positioned for its best year ever. Easterbrook says Juice It Up! is targeting 500 locations by 2010, primarily in warmer-temperature states.
"To be successful in any business, you have to have a good way of measuring yourself. Numbers are important," he says. "It's important that the employees of a company know how their business is doing and that they're working toward improving the performance of the company," he says.
"If you walk into our offices now, you'll see our sales charts up on the wall. If you ask somebody what we have to average this month on a daily basis to hit our sales target, they'll tell you the number. People are engaged in what they need to know."
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