Franchised Restaurant Operations vs. Corporate-Owned Operations

By Vladik Rikhter

buffalo-wild-wings

There’s a shift happening in the restaurant industry other than changing consumer preferences. It’s the rise of company-owned vs. franchised operations.

Previously, we’ve discussed the regional success of In-N-Out Burger. This is a restaurant chain that came of age with McDonald’s. When the two restaurant chains came to a fork in the road, they took separate paths. McDonald’s experienced explosive growth, while In-N-Out Burger grew slowly but steadily, eventually reaching cult-like status among foodies.

Today, In-N-Out Burger continues to grow while McDonald’s will have to close more restaurants than it opens for the first time in 40 years.

Other major chains are starting to get a clue. Chipotle, which McDonald’s has been criticized for trying to chase, has seen its revenue soar by 155% over the past five years. Panera’s saw five-year revenue growth of 77%. It should be noted that Chipotle is 100-percent company owned, while Panera is a mix of company-owned and franchised locations.

It should also be noted that during this time period, the proportion of company-owned locations has increased slightly at Panera. While this has slowed down total system sales, Panera’s revenue rose 7.2% on a 2.4% comparable-sales increase at company-owned locations. Chipotle is expanding its footprint at almost twice the right of Panera.

Then came the news that Buffalo Wild Wings spent $160 million buying out franchisees. Corporate-owned locations have been registering faster sales growth than franchisees have for seven straight quarters. The company is focused on rolling out changes that franchisees are slower at implementing, particularly “guest experience captains” and store redesigns.

Brand Experience Reigns Supreme

You may ask, what is a guest experience captain? This is a position Buffalo Wild Wings created at its 500 company-owned operations. The employee’s job is to help deliver the ultimate social experience for sports fans, from introducing new guests to product and promotional offers to managing audio/visual equipment.

Similarly, Panera has been rolling out Panera 2.0 at its corporate-owned locations. This concept is designed to help reduce customer friction at cafes through digital access and improved operational processes. It really works, too. I didn’t have to wait 20 minutes to stand on line for a tomato soup last week.

It all comes down to improving operations for a better customer experience. It’s about being the moment with your customers to respond to their needs in real time.

We’re certainly not saying that franchised operations don’t work. Many times, they work with great success.

Maybe you don’t have the resources to roll out an entirely new service system in your restaurants. Or maybe you are a franchisee wondering how you can better meet the high bar your brand has set. Considering using your existing technology to gain better insights into your business.

Topics: Franchise, Restaurants

How Much Time Should You Spend at Your Franchises?

By Jennifer Hoffman

franchise-logos

If you’re a franchise operator who feels like you’ve been burning the candle at both ends lately, you might be told to “join the club.” Maybe your fellow managers say it, but hopefully that’s not the overall attitude of the corporate team. After all, who would want to join a club where the members feel exhausted and overwhelmed on a regular basis?

A franchise manager can’t be everywhere at once as a network grows. In fact, management should become less complicated over time – not more difficult. If you feel increasingly overwhelmed and short on time, it’s time to take a step back and look at your process.

“Focus on being productive instead of being busy.”Timothy Ferriss
Author “The 4-Hour Workweek

Consider how you might simplify franchise management. Take a few minutes to answer the following questions:

  • What are your current tasks in managing your franchise?
  • What are the goals you’ve wanted to accomplish, but haven’t had time for?
  • Which of your tasks can you absolutely not delegate at the store level?
  • Which of your tasks can you possibly assign to the store level?
  • What are your current productivity tools?

You may begin to see redundancies in your schedule, as well as opportunities to delegate and refocus your energies on a new initiative.

Take advice from New York Times bestselling author Tim Ferriss, author of “The 4-Hour Workweek.” Ferriss tells his readers how to “DEAL” with a packed work schedule, or “DELA” if you have a regular job like a franchise manager.

Definition

Set clear and attainable goals for yourself, your management colleagues and your franchisees.

Elimination

Focus only on those tasks that contribute to the majority of results, and delegate the rest. It’s the 80-20 rule, where 80 percent of your results come from 20 percent of your efforts.

Liberation

Free yourself from any one geographical location.  Ferriss talks about liberation as a lifestyle change, but from a franchise manger’s perspective it’s important to not be stuck behind a desk or constantly on the road. Let your store managers be your eyes and ears in the field. This kind of freedom will greatly reduce stress.

Automation

Ferriss talks about generating automated sources of income. However, this principle can also be applied to store operations. Automate your processes to save time and be more effective.

Coincidentally, Ferriss is a critic of technology and advocates hiring personal assistants from developing countries to free up even more time. However, unless you’re a solopreneur like he is, this may be rather difficult. If you need to stay connected, make sure mobile technology works for you and eliminates redundancies.

For instance, a series of emails to a store manager regarding a retail report might look like this:

  1. Did you get the store audit form?
  2. OK, here is the store audit form. Please see attachment.
  3. Did you complete the store audit form yet?
  4. I received the store audit form, and this is what I need you to do.

With the right mobile tools, these tasks can be consolidated onto one platform that identifies incomplete tasks and tracks progress.

So, how much time should you spend at your franchise? You’ll never have a four-hour workweek in retail, but you don’t have to have a 14-hour day, either. It’s a personal question and responses may vary. Before attempting to answer, though, take that important step back to look at your processes at the store level.

Topics: Business Operations, Franchise

To Franchise or Not to Franchise Your Retail Business?

By Brian Harris

subway Franchise

You may be a retailer facing the question of whether or not to franchise your business, or expand franchised operations. Either way, you should be congratulated for getting to this point. Your current store or network is in top shape, and you’ve proven there is a market with customers to support your growing business.

Still, deciding whether or not to franchise can be a difficult decision with serious financial repercussions. Looking back on recent years, you’ll recall the proliferation of frozen yogurt and cupcake shops. You’ll also recall that many of these shops closed due to market saturation. Let’s face it. People don’t eat frozen yogurt and cupcakes every day of the week.

Allow us to sprinkle in some additional information that can help you decide whether or not to franchise:

Belief in Your Product or Service. If you have a feeling it’s a niche market that will reach saturation, you might not want to franchise. If you are the business owner – or a potential franchisee -- you may choose to wait and then reassess the market.

Territory and Market

Has the market been defined? It is growing or in decline? Perhaps your product or service appeals to a certain age group, so you’ll want to check the demographics of your potential franchised locations. Of course, location and foot traffic is crucial to your franchise.

Understanding the FDD

Like most momentous occasions in life, there’s paperwork involved in franchising a business. One of the most important documents is the Franchise Disclosure Document or FDD, which the Federal Trade Commission requires franchisors to provide to candidates at least 14 days prior to sale.

Training & Support

Franchising is not only a financial commitment, but also a time and resources investment. As you grow the number of locations, your staff will grow exponentially. Suddenly there are a lot of things happening beyond the periphery of your watchful eye. Are you ready to onboard new retail employees? Do you have the means to evaluate employee performance? These are areas you must consider before making the commitment to franchise.

Operational Processes

Without paperless processes, you’ll be hairless in no time. All the challenges of running your business just multiplied with a new location. Can you quickly notify a vendor when there’s an out-of-stock? Can you assign a member of your maintenance staff from a central platform, without an email chain and a game of telephone? What about property inspections and safety audits? The list gets long rather quickly, but these are all things you’ll want to document in order to improve retail operations.

Ability to Share Data

When you find potential franchisees, they’ll want to know your company’s earning capability. They might even ask if you can share your most recent sales report. Don’t wait a week to generate paperwork. Impress future franchisees with your ability to retrieve real-time data on a mobile platform. Show them how issues are reported to management and prioritized in real time.

Remember: Using real-time exception notifications is also a support issue.

A lot of great businesses start with a dream, but it’s the ones with seamless operations and superior communication that thrive.

Topics: Business Operations, Franchise

Top 3 Franchised Restaurants Trends for 2015

By Naomi Balagot

mooyah-burger

America is the great melting pot of cuisines. Across the country, the food is getting more flavorful and the number of franchises is growing.

Did you know? The International Franchise Association expects to see 1.6-percent growth this year in the number of U.S. franchise establishments. Source: International Franchise Association

People have to eat, and they’re choosing to do so in style. Here are three of the top franchised restaurants trends for 2015.

1. Premium Fast Casual Restaurant Chains

Why have a regular cheeseburger when you can order a cheeseburger with fried onion strings and sautéed mushrooms? Fast-casual chains have premium offerings with a level of customization that makes it difficult for fast-food competitors to compete.

Example: The options we listed above are from Mooyah Burger, a fast-growing, fast-casual restaurant chain that will open locations in six U.S. markets this year. While healthy is still a trend, the recent success of burgers-and-fries chains like Shake Shack is proof that restaurants don’t need to serve chai lattes and salads with bleu cheese crumbles to be considered “premium.”

uncle-maddio-s-pizza-joint

2. Ethnic, Fresh and Flavorful Cuisines

An amazing thing happened this week when Chipotle told shareholders that sales jumped more than 16 percent in 2014. Analysts basically said, “We thought you’d do better!” In response, CEO Steve Ells cited the number of chains that are now copying Chipotle’s flair for big flavor, fresh ingredients and customization.

Example: While Mexican quick-service restaurants are increasingly popular, Italian food is becoming increasingly customizable. Take, for instance, Uncle Maddio’s Pizza Joint, which allows customers to build their own pizzas from scratch. The chain has plans to add 200 franchisees in the next year.

us-taco-co

3. Quick Service Restaurants Copying Style of Fast Casual Restaurant Chains

It’s not just about upscaling food choices, like putting guacamole on a McDonald’s burger. It’s about changing the décor and atmosphere to create a different customer experience. We’ll see more and more chains following this trend in 2015.

Example: “Edgy, Dark and Scary. The decor is a combination of black, silver and red with videos and paint job with flames to make it look like you are in hell.” No, it’s not a rock concert description. It’s a Yelp description of Burger King’s Whopper Bar in Midtown West.

When Burger King introduced its Whopper Bar concept in 2009, the intention was to take the competition right to fast-casual chains. Some locations even offered beer.  However, the chain experienced execution problems, as evidenced when its flagship location in Times Square was shut down for health code violations twice in one month.

Perhaps Taco Bell will have more success with its high-end concept, U.S. Taco Co., which debuted in Huntington Beach, Calif., in August.

The Secret Sauce

The fact remains that people like to eat at franchised restaurants because they trust the brand. The most successful franchises know who they are and never lose sight of franchising fundamentals. They know that regularly inspecting franchised locations and maintaining a consistent brand message is key to success.

Do you aspire to be the next Chipotle or Shake Shack? Conduct internal audits, hold your employees to a high standard of customer service and use the right tools that will improve your operations.

Restaurant Audit Form Example

Topics: Franchise, Restaurants

The Biggest Difficulty in Managing Multiple Store Locations Is...

By Brian Harris

map-locations

You’ve heard the phrase “fake it till you make it.” It’s the idea that in order to be successful, you must exude confidence, even if things are falling apart behind the scenes. It’s like putting up a sign that says “please pardon our appearance” while you renovate. Your customers don’t see the mess and your retail operation marches onward.

Unfortunately, “faking it” doesn’t work when communicating with your employees. If they know you’re not engaged in their activities, they become disenfranchised. Bad morale eventually hurts customer service, and when customer service falters, so does your brand.

Communication is the biggest difficulty in managing multiple store locations.

Fact: If you’re struggling to manage your retail network or franchise, you have a communication problem.

  • Vendors didn’t send the right products or promotions? Communication problem.
  • Employees not cleaning up in the store? Communication problem.
  • Store planogram is a disaster? Communication problem.

You get the idea.

Don’t take the approach that says, “What am I paying these people for?” It’s too easy to pass the blame onto your managers without asking what you could be doing better.

Maybe you’ve recently expanded to more locations, or maybe your company is scaling back growth due to stagnant sales. William J. McEwen, author of “Married to the Brand,” writes, “The company must recognize that its stores aren’t merely distribution centers; they are in fact brand centers. And they are crucial to delivering on the company’s brand promise, whether the total number of stores is expanding or contracting.”

Regardless of your current situation, how can you improve store operations?

Communicate Spontaneously

Think of your organization like it’s your family. Imagine if you only talked to your spouse or called a parent during a scheduled timeslot. What would that do to your relationships? It would undoubtedly cause negativity and tension.

Remove barriers to communication

Encourage employees to report problems in real time. Document issues digitally, and keep everyone in your organization engaged.

Let’s look at those communication problems again, this time with real-time solutions:

  • Vendors didn’t send the right products or promotions? Scan a barcode or take a photo with GPS and time stamp. Notify vendor of the problem in real time.
  • Employees not cleaning up in store? Document the issue. Take photos as visual evidence. If a store is a “repeat offender,” have managers address individual problems as needed.
  • Store planogram is a disaster? Upload latest version of planogram and share with staff. If there’s a problem with SKU or promotion placement, take a photo. Share and comment to resolve.

Sample Planogram Implementation Form

See also
How to Simplify Franchise Management
Why Regularly Inspecting Your Franchise is Important

Topics: Retail, Franchise

How to Simplify Franchise Management

By Brian Harris

highway-exit-sign-food

Franchise management should come down to the basics: maintaining a clean, safe and orderly environment for your customers.

Are you familiar with the term “baseline”? A baseline may be a single project or a set of projects that can be used as a base of comparison, and it’s a term that’s commonly used when talking about configuration management.

However, baseline audits are also used in IT service management, as well as health and safety programs. They can also be used in retail. Managers can compare the results of future audits to the baseline audit on record to measure improvements or declines in performance.

Conducting a Baseline Audit

Here are three questions with answers your company should know:

  1. To what basic standards do you hold your operations?
  2. What are the optimal conditions in your store or customer service area that will maximize your revenue potential?
  3. How do you achieve and maintain these conditions throughout your entire operation?

In franchise management, this last question may be the most difficult if you operate many locations across a large footprint. This is why knowing the results of a baseline audit – the point of reference – is key to franchise management.

Getting Back to Basics

Previously, we’ve discussed the importance of regularly inspecting your franchise and conducting a standard retail audit. The five-step approach we outlined can apply not only to retail, but also to other service industry outlets.

Conducting a baseline audit follows the same steps, just with an emphasis on three additional elements:

1. Safety requirements

Staff safety training should be top among your franchise management priorities. It’s especially important if you are operating a kitchen, pool or another space where chemicals, heat and/or electricity are present.

2. General cleanliness

Cleanliness and sanitation should always come first, and usually coincide with aesthetic appearance.

3. Staff guidelines to ensure staff can maintain Nos. 1 and 2.

A baseline audit will ensure that employees are up to date on the latest safety and environmental standards, as well as any rules and regulations mandated by the state or federal government.

Use a Flexible Platform

Franchise management can be tedious when you have to follow a long paper trail in order to identify and fix a problem.

Lock in without feeling “locked in.”

Use a mobile solution that’s fully customizable and brings problems, like retail exceptions, to the forefront. The right platform will allow you to experiment while being consistent in data collection.

Keep your employees “in the know.”

Your organization will improve communication when executives and managers work together on the same platform. Better communication leads to more actionable plans that will have a positive impact on your bottom line.

Sample Retail Inspection Form

Restaurant Audit Form Example

Topics: Retail, Franchise

Why Regularly Inspecting Your Franchise is Important

By Brian Harris

franchise-inspection
Photo by Sarah Nichols, via Flickr

Q: Why are regular inspections of your franchised locations important?

A: It’s how a brand maintains consistency.

Simply put, consistency is crucial to franchised operations. After all, being a recognizable brand is only part of your goal as a retailer. The other part is building respect and gaining trust -- the hallmarks of customer loyalty.

Of course, physical appearance is key to consistency. When you conduct an inspection, typical questions may include:

  • Is the store clean and organized according to your planogram?
  • Are products in stock and promotions accurately placed?
  • Are employees abiding by dress rules and maintaining a neat appearance?
  • Does the location have curb appeal?

These are all things visitors expect when they shop at your store. A return customer may be visiting one of your stores 50 miles or 500 miles from home. This customer will expect the same quality shopping experience, and you must meet his/her expectations.

However, consistency is more than meeting customer expectations. It’s also about attracting new franchisees to your business.

7-Eleven, the largest retailer in the convenience store industry, addresses this topic on its franchising blog: “We also provide our advice and expertise on how to create the 7-Eleven brand experience for our franchisees. With our guidance, franchise owners are more likely to find success as we help maximize the store’s profitability.”

Brand guidelines help businesses strengthen their individual identity and make a lasting impression, according to 7-Eleven.

5 Questions to Consider When Growing or Establishing a Franchise

  1. Are your brand guidelines clear?
  2. While inspecting a location, can you easily conduct a retail sales audit?
  3. Do you have a way to measure planogram compliance and analyze data collected from your stores?
  4. Can your managers report exceptions in real time?
  5. Most importantly, will you know when there’s a problem at one of your franchised locations before you receive a weekly sales report?

Make sure your inspections include data collection and a means of analyzing this information in real time. Encourage employee participation and create actionable plans based on results.

Maximize your process, and you’ll see the difference in your bottom line.

Sample Retail Inspection Form

Restaurant Audit Form Example

Topics: Business Operations, Franchise