By: Roger Honet - re:group
A successful franchise works because of its symbiotic relationship between franchisor and franchisee. The model thrives when idea sharing becomes a two-way street
Sometimes, franchisees come up with brilliant, brand-destiny changing ideas. Pete Harmon, the first Kentucky Fried Chicken franchisee, introduced the iconic KFC bucket. A Pittsburgh-area McDonald’s franchisee came up with the idea for the Big Mac. In a behind-the-scenes example, Greg Brewer, a franchisee with our in-home care client, Right at Home, developed a program called Right Transitions that netted over $1 million in healthcare savings by cutting hospital re-admissions. Right at Home successfully rolled it out nationally to its hundreds of franchisees.
But sometimes, franchisees completely miss the mark. I once had a franchisee tell me that advertising doesn’t work. When I asked him how he came to this conclusion, he said he ran a cable TV test and saw absolutely no results. When asked how long the campaign ran, he said, “Saturday at 3:40 p.m.” (The campaign ran for 30 seconds!)
To paraphrase Forrest Gump, franchisees are like a box of chocolates. You never know what you’re going to get. While franchisors and franchisees work hard to ensure an organizational and cultural fit before signing the agreement, this inherent uncertainty leads franchisors to focus franchise development efforts on proven multi-unit operators to have a better chance at nurturing a successful franchise. This trend is playing out throughout the franchise industry with total unit growth among the 100 largest franchisees at 6.1%, doubling that of all franchising at 2.9%.
The bottom line is, great operators are great operators no matter which or how many systems they’re in. Franchisors that leverage the strength of these successful operators grow bigger and faster than those that don’t. That’s because great ideas can come from anywhere. The secret is not coming up with the idea, but instead recognizing the good idea.
Franchisees succeed when they leverage the strength of the franchisor’s system; franchisors succeed when they leverage their franchisees’ ideas as well. Encouraging the development and sharing of these ideas should be a formal part of a franchisor’s system. Considerations include:
This list is good. However, some larger franchise concepts have put very strict controls in place to both encourage and manage “skunkworks.” A good idea that provides a competitive edge is a valuable asset.
Franchisors have to protect the brand and not allow franchisees to implement programs that are out of compliance with standards. It is better for them to encourage and know about these new ideas than to be surprised when one turns up at a store. For example, Domino’s Pizza’s “Gut Bomb” was a good product with an awful name.
When ideas are identified for development, they often go behind a wall of secrecy to protect them from competitive espionage and market speculation. Domino’s Pizza had a reporting system on new product development with code names and a red, yellow and green status report. Openness and transparency are not without risks.
A successful franchise works because of its symbiotic relationship between franchisor and franchisee. The model thrives when idea sharing becomes a two-way street. If you’re not sure if that’s true, just ask KFC how many hundreds of millions of buckets of chicken they’ve sold. Or McDonald’s how many billions of Big Macs they’ve sold. Or Right at Home how many lives they have improved with Right Transitions.
Or you can just ask any franchisor whether they encourage franchisees to develop and share ideas. If the answer is yes, that franchise is most likely a success.
