Building a franchise with multiple units centered around a service? That obviously relies on person-to-person interaction.
And serving “guests” in a restaurant for brunch, lunch or dinner? That’s all about making the experience of being served on par with the excellent food your guests came for. They’ll stay and return, however, for the quality of service and detail in care.
Think you’re just pouring coffee and suggesting an upsell in the form of a pastry? Think about your commitment to getting your customer’s drink just right or offering samples to those dining in.
What about retail? That’s clearly transactional.
Well, on closer inspection, it’s completely people-oriented: customers depend on expertise and knowledge of in-store associates to guide them through the process of making a purchase.
So, think about this for a second: you’re not selling software, you’re not peddling a product and you’re not just installing units. In a franchise, you’re always serving – in one way or another.
And that’s why understanding the difference between a company brand versus a franchise brand is so important. It’s not just a term or a name – the difference between a company brand and franchise brand is based on people: either your customers or your franchisees.
Let’s get it out of the way: your company brand and franchise brand are closely linked, not in terms of perception, but in terms of operations.
Your company brand is consumer-facing. It’s that winning combination of logos, fonts, catchphrases, branding and style elements, expressed competitive edge and positioning, as well as stated mission, values and culture.
Your franchise brand, however, is inward-looking. It is what the franchise has come to be known for, internally, for those looking to buy into the franchise, i.e. potential franchisees.
So the first orienting question that will be asked is:
Is it a “great” franchise brand to buy?
Translation:
Can I make real money and will I be supported in this pursuit?
It’s a tad like dog-whistle politics: it’s only heard by those to whom it’s relevant. Your customers could care less what you do internally – except that, according to this study by Gallup, getting employees to act on brand-promise is the way to ensuring recurring profits from well-served customers.
In this case, the franchise brand is relevant to new franchisees, the ones who hope or aspire to buy the rights to a location – or five.
When it comes to attracting new franchisees who are also the right ones for the business and brand, you have a big incentive to articulate and create an entire ecosystem of communications, on-boarding, training, on-going location checks and a flexible, reliable knowledge-base internally.
Hey, we’re of the belief that compliance is a two-way street. If you want to bring in franchisees who will contribute to a pretty bankable success, and consistent profit, it’s about more than the vetting process.
It’s also about building a culture around operations that tells prospective franchisees what the company stands for, what will and won’t be accepted and what tools and modes of support (from field managers at the inception of a location to comprehensive on-boarding and on-going training and support) are available to them at all times.
In other words, if they give their 110% into the running success of the company brand (i.e. keeping up the reputation of the consumer-facing image and service), will you contribute 110% in kind to ensure that your franchisees have the tools and training necessary to execute for you?
Is having a shiny consumer-facing brand with all the bells and whistles going to cover up poor operations internally?
Don’t even dare to delude yourself about that because the numbers speak for themselves, even if these best practices sound like no-basis-in-reality preaching (hint: they’re not). Internal franchise issues will always eventually out and end up trickling down to customer experience.
Somehow (and completely unsurprisingly) a “great place to work” always translates to “a great brand to buy from”.
Understand, then, that the difference between company brand and franchisee brand is not so much a divide as it is a consequence: in reviewing the consumer-facing brand, you inevitably come across who you are.
And part of who you are is how you operate.
And part of how you operate all the myriad organizational and operational practices that go on behind-the-scenes. You see where we’re going with this, right?
For a franchise brand, “behind-the-scenes” always means franchisees and their in-store employees.
Organizational values that are expressed in customer service and relations obviously reflect internal culture. So if you can bring a stringent vetting process focused on “inviting” franchisees rather than “hiring”, streamline your internal operations in alignment with supporting franchisees, as you would support customers on a purchase
If you’re trying to turn it around – streamline internal operations and build a culture that attract the best franchisees as implicit brand ambassadors, to boost the consumer-facing brand’s profits – you’re in luck.
Doing it wrong: The Second Cup case
Let’s start with real reviews from real customers expressing all-too-real problems with this proudly-Canadian coffee brand whose profits have been declining steadily and who, in 2014, saw a 6.9% decrease in the first quarter alone.
The story of Second Cup’s decline is not a tale of woe about encroaching competitors like McDonald’s and Starbucks.
Rather, it’s a warning song of what happens when the following issues collided, making for the perfect storm when mixed with an experience held together by what one reviewer calls “old Christmas ribbon and stir sticks”.
Consistency – but only in the lack of organizational support
The only thing Second Cup seemed to be doing consistently was inconsistency. What was going on in the background translated into these customer experiences.
“Franchisees were offered very little support from the head office. When looking for guidance on operational issues, the franchisee owner had to call customer support which was i) very hard to reach due to long call wait times and ii) to resolve any given problem the franchisee owner had to approach 10 different people until he/she got hold of the right person who could offer help. To avoid this cumbersome process, franchisee owners often avoided getting help from the head office and used their best judgment to resolve issues.”
– HBS.org
Variance within in-store operations
One of the fastest ways to lose customers is to have variance in physical customer journey’s. In fact, we’ve found that brand revenue always takes a negative hit when it comes to in-store variations, especially as these affect customer experience.
Of course, the flip side to this is pretty positive: as one of the first culprits, it’s easy to spot and address, even if “fixing” it takes a bit of time. In other words, you have the opportunity for incredible upside if you take the time to really make store operations and experience consistent.
A hiring system without a training system
One of the best things about Starbucks is also its brand promise: your drink, done your way. It’s become an industry standard, especially at higher-end coffee brands, where value-based pricing is embedded into the culture.
Unfortunately for Second Cup baristas, hiring and training employees is – surprise, surprise – also left to the discretion of the franchisee.
Seeing a pattern here? Yes: it all trickles down from that initial lack of internal communication and organizational support.
Because there was no consistent and HQ-vetted and approved hiring system in place, there was a distinct gap in knowledge and know-how for front-of-line workers. They could not rely on a comprehensive knowledge base to refer back to.
There was a distinct variance between baristas at the same location as well as baristas across locations. And this does not even begin to touch upon the knowledge and adequacy of franchisees themselves.
Your drink, done your way became, “partially your drink, maybe done your way…but not at all locations and not by all baristas”.
Having an adequate and responsive hiring system in place is also part and parcel of a greater on-boarding and training experience. In fact, this study by Hireology concludes that a lower turnover rate in new hires as a result of a systematic approach to hiring and training results in cost savings of $400,000 a year.
The Revival
In February of 2014, Second Cup hired Ms. Alix Box, a senior executive at the luxury retailer Holt Renfrew and a former vice-president of operations at Starbucks Canada to be its new CEO and bring some direction and vision to these specific issues.
Ms. Box’s appointment saw at least some response: share prices went from $5 to $5.50 purely based on renewed hope.
Her proposed solution (one of many such bold restructuring moves in the works) was to update the look and feel of the store, upgrading fixtures to gold, working with white interiors and ivory and silver machines and light wood tabletops.
The new restaurant format has not been embraced by all locations yet and the few downtown locations in Toronto and Montreal that have retrofitted their interiors remain like a lone unicorn in on the plain, making the whole effort feel more like “concept” store than any real bid towards committed restructuring from the ground up.
In other words, they’ll need more than just a cosmetic face-lift. To conquer market share once more (which is very doable), they’ll need a groundswell of change.1
Doing It Right: Cultivating Franchisees with Culver’s
There are franchise brands that are doing it right and it comes from the alignment between internal operations and the consumer-facing brand.
At Culver’s, a fast-food restaurant with locations across the American “heartland”, the failure rate of franchisees is astounding: 1.7%.
“Each potential franchisee, he said, spends a 60-hour work week at one of the family-owned restaurants, seeing how Culver’s operates and being scrutinized in turn…. Based on what happens during this ‘discovery week’, Culver said he turns down nearly half of candidates who would otherwise qualify financially”
– From the Milwaukee-Wisconsin Journal Sentinel (emphasis added).
Says Marko Grünhagen, a Professor of Entrepreneurship at Eastern Illinois University, “The evidence is very clearly in that direction . . . that the higher the upfront investment is, the lower the failure rate.”
For Craig Culver, it’s not simply the rhetoric of conservatism that serves him well. It’s the fact that, with such scrutiny for the alignment in brand values with potential franchisees, only the best and most committed end up showing up.
1 as of May 12, 2017, the company announced yet another management change by appointing interim CEO Garry MacDonald”
https://www.google.com/url?q=http://www.secondcup.com/press-room/article?id%3D135233&sa=D&ust=1494849429693000&usg=AFQjCNH_YwRLMPDCUQ3-UKYK1cwGb4uvfQ
With reporting from:
Canadian Business, “Interview: Second Cup CEO Alix Box on reinventing an outdated brand”
http://www.canadianbusiness.com/leadership/interview-second-cup-ceo-alix-box-on-reinventing-an-outdated-brand/
The Globe & Mail, “Second Cup: Cheap for a reason”
http://www.theglobeandmail.com/globe-investor/investment-ideas/without-dividend-second-cup-is-second-rate/article20774581/
The Telegraph UK, “Who wants to be a McMillionaire? Meet Britain’s hidden army of successful fast food owners”
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11993677/Who-wants-to-be-a-McMillionaire-Meet-Britains-hidden-army-of-successful-fast-food-owners.html
# Great value brand, Culvers, Franchise branding, company branding, internal communications,
