The International Association of Franchisees and Dealers

Does Your Franchisor Have Integrity? - Franchise Relationships

2012-02-02T17:37:35Z

Integrity is what you do when nobody is watching!

Some franchisors appear to believe that when a person asks for the franchisor's FDD they need not give it.

Why? Here is, slightly edited a franchisor's broker's answer, which appeared on a major business social network.

"Because they [franchisor] are not required to provide an FDD upon request.

Here is the excerpt from the FTC 2008 updated ruling:

"Upon reasonable request, franchisors also must furnish a disclosure document to a prospective franchisee earlier in the sales process than 14 calendar days before the franchisee signs or pays.

The failure to comply with a reasonable request for an earlier delivery is an independent violation of the Rule. This does not mean that a franchisor must tender a disclosure document to any person who asks for a copy.

Rather, it applies where the parties have taken steps to begin the sales process."

The problem is that many franchisors begin a validation process with the prospective franchisee, but believe that they haven't "taken steps to begin the sales process".

But, the way I see it, is if a candidate is on a validation call then I think it's hard to dispute that you're not knee deep in the sales process!

Some brokers will argue otherwise.

"If I took a lead to many franchisors and after the first call said to the franchisor, "the candidate would like to reasonably request an FDD at this time" most of them WOULD indeed laugh or explain their "sales process" to me where the FDD is provided after the application which comes after the webinars and other phone calls.

I can only think of a handful of times where an FDD was provided after the first call with a franchisor."

Irrespective of FTC Franchise Rule enforcement, it's not the candidate's duty to know that they are entitled to an FDD upon reasonable request, it is the duty of the franchisor to comply with the FTC Rule.

If you as a broker or the franchisor has a bona fide prospect considering a particular franchise you as the broker must communicate an FDD request to the franchisor. The franchisor must fulfill the request and track and record all FDD requests.

Even if the FTC is not watching, it is not okay for franchisors and brokers to break the rule. I recommend taking a look at The Franchise Sellers Handbook. It's a great resource and most likely will answer a lot of questions that you may have.

Remember, integrity is what you do when nobody is watching!

5 Tips on Creating Websites for Smartphones - Social Audience Marketing

2012-01-30T04:38:45Z

According to Nielsen's latest figures on smart phone purchases by US Consumers, Apple's iPhone 4S is closing the gap on Android. Overall Apple's operating system now accounts for 30% of all smartphone users as opposed to Android's 46.3%. The operating system that has been losing ground is the RIM Blackberry with only 14.9% of the market share.

This is interesting in itself but I think that the bigger news from Nielsen is, "As of Q42011, 46 percent of US mobile consumers had smartphones, and that figure is growing quickly."

Another more revealing study shows that 62% of Mobile Users 25-34 own Smartphones. With the number of people owning smartphones growing and the market pretty much split between Apple and Android there are five very important things you need to do to make your website accessible to mobile smartphones.

1. Mobile Web Page: Make sure your website is organized to display on a mobile web page. Your site should have Mobile CSS (Cascading Style Sheet) which is HTML code in your header section of your website. It should look similar to this:

(Since this is not a technical "How-To" blog so if you are not familiar with CSS and HTML don't put this code in your header and expect everything to be ok! Instead, check source code of your website, by right clicking on the page and choose "view page source".)

Check with your webmaster if

is not shown in the source code.

If you use a platform such as HubSpot (affiliate notification) then this is taken care of as a default function. Many WordPress themes now come with Mobile CSS and if yours does not there are plenty of plug-ins available. And, if you like to get under the hood and do your own coding check out Mobile CSS by Sea Breeze Computers and the The 5-Minute CSS Mobile Makeover by Perishable Press.

2. Meta Viewport Tag: This is a simple code that tells the mobile device how to orient your mobile web page. This is what makes it possible to turn your smart phone at any angle and see the page and it usually looks like this:

Again, this code should be in your Header HTML but check this function on your smart phone and make sure that it works.

3. Apple Icons: With nearly 45% of new smartphone buyers choosing iPhones this is a necessary step. This is an icon that allows iPhone and iPad users to add a quick link to your site on their device.

If you don't have an Apple Icon it is a pretty straightforward procedure.

First, design a 57x57 pixel icon for your web page or business.

Make it in the .png format.

Second, upload it to your website's file manager then add the following link to your Header HTML:

Be sure that "/filename.png" is the file name of your new Apple Icon. That is all there is to do.

4. E-Mail Optimized for Mobile Smart Phones: Along with the rise of mobile and smart phone use is the practice of reading e-mails on a mobile device. If you send e-mails as part of your business' marketing efforts or if you send e-mail newsletters, make sure that that they can be read on smart phones.

The easiest thing to do is to just send text e-mails. If you just need to have a bit of color or some images in your e-mails be sure they are optimized for mobile.

The Email.grader.com is a great tool that will show you how your e-mail looks on different devices.

Most e-mail programs like MailChimp and Constant Contact now give you the tools and options to optimize your e-mail for mobile devices.

5. QR Code Marketing: This really has nothing to do with how your website looks on a mobile phone but if you have gone through the work of optimizing your website for mobile phones you might as well encourage people to connect with your site buy using QR Codes.

If you are interested Image Media Partners provides a free and a professional QRCode Generator and Mobile Web Marketing Platform. You may also find the QR Code Checklist handy.

(Remember; if you are not familiar with HTML do not try to change the code without any help. It is best to work with an experienced web designer. The HubSpot platform is already optimized for mobile devices and as a Certified HubSpot partner we highly recommend this platform for any website whose inbound marketing goals are greater web traffic, higher conversions and mobile optimization. Let us know if you would be interested in a free inbound marketing and website analysis.)

What Franchisors Need to Know How to Achieve Social Goals - Tools and Resources

2012-01-30T03:31:09Z

I’ve had the privilege of being a consultant to a variety of companies on strategy to enhance their perceived value. Among these have been a number of franchise companies, including Burger King, automobile dealers and hotel operators. In the QSR and Hospitality industries, in particular, I believe that three social issues are likely to dominate over the next five years: sustainability, safety of the food supply chain, and medical care issues associated with high fat diets. Companies recognize that these issues are growing, but many do not know what to do about them. Good social responsibility efforts can meet the business objectives of the company, while at the same time building support and coalitions and staving off potential regulations. At the same time, ill conceived corporate social responsibility (CSR) programs can waste money or, in some cases, can actually backfire on the company.

Fortunately, a new book called Leveraging Corporate Responsibility: The Stakeholder Route to Maximizing Business and Social Value by Bhattacharya, Sen and Korschun, examines what has worked and failed. It shines new light on CSR and documents what I have been saying to clients about CSR for years, namely that it can be money well spent, or that it can be a waste of investment. The book offers guidance to managers making CSR decisions. Bottom line, companies should get involved in social issues that are consistent with their business strategy and are important to stakeholders. The more important the issues are to stakeholders, the more imperative it is to act since the ability to address social issues appropriately and in a timely manner can make the difference between a license to operate the business as planned or increased regulation.

The authors already have experienced consternation and "push back" from those who advocate CSR in any and all circumstances. Many of these critics are from the communication industry, a major group that has long advocated CSR. To hear communicators talk, one would think that any CSR program would be a good thing and would be welcomed by stakeholders and the larger society. It seems reasonable to assume that companies seeking to "do good" would be looked at more positively, but the authors have found that this is not always the case.

The authors examined routes to CSR value: the "direct route" and "indirect or stakeholder route". In the direct route, the company finds programs that lead to cost savings or increased revenues. For example, companies can invest in sustainability and have a favorable bottom line impact. This is the position supported by "shared values" advocates (I blogged about this in September 2011). Shared values suggests that companies seek to maximize their own self interest so the best way to get a company to engage in CSR is to find an area that both maximizes their value and also contributes to the good of society.

The "stakeholder or indirect route" is the more traditional route advocated by the communications profession. This involves the company finding some way to contribute to society. Stakeholders then judge the program. The expectation, of course, is that stakeholders will praise the company for "doing good". This does not always occur. As a result, there are a lot of companies that have wasted a lot of money. For example, sustainability is a smart business concept. It saves money for the company. The end result is good for society as well, since it reduces waste. But, instead of looking at the business need, companies have been urged to “declare themselves green” simply because they have changed from white to brown napkins or have replaced paper towels with hand dryers in the washrooms. Such actions are greeted with cynicism by customers who see it as an example of “green washing”.

(One of the authors of the book, Daniel Korschun, is a colleague of mine at the LeBow College of Business at Drexel University and a Fellow of the Center for Corporate Reputation Management that I lead)

We talk regularly about reputation management in general and CSR in particular. My view has always been that CSR success is based on two primary variables: 1) that the CSR activity is consistent with the strategy of the company; and 2) that it is meaningful to the stakeholder for whom it is intended. The authors support my view, but offer a far more refined basis for the success or lack of success of CSR programs. The findings can be summarized by three themes: Understanding, Usefulness and Unity.

Understanding: Stakeholders filter the CSR program against their understanding of the company and their expectations of the firm. If the CSR programs do not make sense to the stakeholder, i.e., the program is from a company with an already poor reputation, the reaction is likely to be suspicion rather than praise. The initiative in this case can create a negative ROI. A company with a poor reputation should begin correcting its problems and avoid trying to jump-start their reputation with a large-scale CSR program. Food safety is such an issue. President Obama actually challenged the food industry during his State of the Union address to grow and process food safely without regulation. When a president makes such statements, it indicates that a substantial portion of the public has perceived that foods are less safe than they are expected to be or used to be. The very next line of the speech was about safe drilling for oil. Putting these two issues so close together indicates a perception problem that needs to be addressed very mindfully and carefully.

Usefulness: Companies and their stakeholders should be expected to act in their own self interest. Both can be expected to first ask "what's in it for me/us". While a CSR program may benefit society at large, the program is likely to be more successful if stakeholders perceive a benefit to themselves. For example, I have publicly applauded McDonald’s for offering apples with their kids meals. It was a strategic move by the company and met the needs (usefulness) of parents who wanted to get their children away from fried foods. It was a small step, but it also will lead others to follow and broaden the nutritional offerings.

Unity: When Understanding and Usefulness are in play for stakeholders, they interpret that the CSR efforts align the company's values with their own. This, the researchers found, is a "powerful predictor" of CSR success. The concept of unity is similar to relevance. That is, the belief that the organization is "like me" or is important to my life. It is more important than differentiation in a highly complex, competitive marketplace.

When one looks at CSR in this light, one sees a route to decision-making that is more logical and systematic than currently available. All potential CSR programs can be judged against the "3Us", and the program can better be aligned with the company's business strategy and the interests of stakeholders.

QSR and Hospitality executives should take head. There are many consulting firms who urge them to take action, any action, that will curry favor with the public. For example, one well known research study by a major PR firm urges companies do take on any CSR program, referencing its research that finds that the vast majority of people would rather do business with a company that is socially responsible. What a revelation! They likely also want to be friends with people who love their mothers. The issue is not what people say, but rather what they do. Businesses should be focused on their own behaviors and the behaviors of their customers and other stakeholders, not what they are their customers say they will do.

This is a book well worth reading. While it may disappoint some who want companies to do any and all social activities possible, it serves as a guide for executive decision-making. This book should be a welcome read for those who want more research, science and rigor in communication advice. It demonstrates that businesses need to assure that their actions are in line with their communications, that they link their execution to their strategy, and that they understand the interests and expectations of their customers, regulators, investors, and other stakeholders.

This has been a guest post by Elliot S. Schreiber, Ph.D., is a professor of marketing at the LeBow College of Business, Drexel University, Philadelphia, and also leads a consulting firm the helps companies align strategy and execution, as well as identifying and managing risks. Elliot has a blog about Brand and Reputation, click here to read.

Is Your Franchisee Association Board Dysfunctional? - Tools and Resources

2012-01-30T03:25:21Z

Attorneys and consultants who work with associations see their share of troubled boards of directors. In fact, I believe that troubled boards outnumber focused efficient boards by a substantial margin. Notwithstanding their problems, most boards seem to get by, although they could be better.

However, when a board of directors has more than its share of troubles and struggles, it can become dysfunctional.

This article will point out ten key indicators of a dysfunctional board. While every association has a different way of working, the presence of more than a few of these signs is cause for concern.

Key indicators are:

1. Power Struggles - power struggles shift the board's focus from the business of the board to individuals or sub-groups gaining/maintaining "control." A board that is controlled by an individual or sub-group is inherently dysfunctional. So, whether right or wrong about the issues, controlling the board is harmful, while use of vision, influence, knowledge and ideas
is completely appropriate and desirable.

2. Vote-Counting Prior to Meeting - counting and collecting vote commitments prior to a meeting is always inappropriate. It generally results in conflict, distrust, and weak decisions, because decisions are made prior to full discussion and analysis.

3. Lack of Civility and Respect - a board that tolerates hostility, aggressiveness, or disrespect among board members, weakens itself and wastes time and leadership input. A weak board finds it difficult to stop abuse, personal agendas, and other disruptive acts. It may have difficulty recruiting quality members.

4. Board Micro-management - whether you are micro-managed or not, you already know what I mean.

5. Preoccupation with Bylaws and Parliamentary Procedure - while bylaws must be adhered to, and on occasion may require clarification or interpretation, disputes about bylaws or parliamentary procedures usually indicates more serious problems beneath the surface. See "Power Struggles" above.

6. Focus of Negative Attention on the Executive - when one or a minority of directors is openly critical of an executive, a great deal of resources tend to be devoted to that issue. Distrust and struggles are likely to occur, along with frequently unfounded accusations against the executive. Many times, if not most, the problem is with the board itself, not just the executive.

7. Last Minute Proposals - if important or controversial items of business are handled via lastminute (read: sneaky) proposals when there is no true emergency, the board is probably being manipulated. Likewise, a board that is swayed by last minute proposals, and shallow or slick presentations without full analysis and discussion, is not doing its job.

8. Overly Powerful Executive - sometimes executives amass so much "control" over the association that board members feel no need to do their job, or are reluctant or too intimidated to openly question what is happening.

9. Directors as "Representatives" - when directors act as representatives of their constituents rather than in the best interests of the whole, difficulties will abound. Some directors go so far as to criticize the decisions of the board to their constituents -- a particularly disloyal and disruptive act.

10. Rump Sessions - while discussing problems and ideas outside of a meeting is fine, unofficial group discussions outside of official meetings nearly always exclude at least some key stakeholders, and therefore undermine communication and trust.

These are the ten warning signs that I have observed in my practice. Are there others that you could share? Please let me know.

This has been a guest post by Mark Alcorn. Mark Alcorn is a Sacramento-based lawyer and management consultant and founded Alcorn Associates in 1997. Mark holds a Juris Doctorate from the McGeorge School of Law, University of the Pacific, and a Master of Business Administration from California State University at Sacramento. Alcorn Associates focuses on meeting the legal and management consulting needs of non-profit organization executives and their boards. Mark can be reached at (916) 444-5959, or via e-mail at mark@alcornlaw.com.

How to Get More out of LinkedIn - 3 Expert Tips - Social Audience Marketing

2012-01-26T03:24:32Z

Our own Victoria Ipri was interviewed by Business Insider as an expert on How to Get More out of Linkedin, the business social media network.

"I think we're going to see in 2012 people engaging in the platform the way it's supposed to be. The power isn't the profile, it's the people," Ipri said.

"I think there's so much emphasis on creating a dynamic profile that people forget LinkedIn is about outreach. It's about sharing information, viewpoints and becoming a thought leader in your own community."

Victoria and I spoke after she appeared in the Business Insider, and we chatted about her recent LinkedIn seminar that she presented at the exclusive What's Next Conference in Washington D.C.

Victoria was surprised at the growth in interest from the business community in learning how to use LinkedIn. Her seminar was filled to capacity, and more.

Many know that they "should be on" LinkedIn because everyone else they know has a profile, but they don't know what to do after that, Victoria noted.

But, she says that the secret to get more of LinkedIn is straightforward.

1. Present yourself as a problem solver - what are type of problems you can solve that other people need help with. Don't make your profile a simple resume, highlight the types of probles you can solve.

2. Look for other problem solvers to help you.

3. Finally, pick up the phone and call that someone - now that you know what they can do for you, or what you can do for them.
Marketing and sales haven't changed with the introduction of social media, says Ipri. (A thought I agree with.)

What LinkedIn does it makes a cold call just a bit warmer because you know something about who you are phoning, and they know something about why you are phoning. Nothing harder or easier than that. Of course it is not a secret that you sales are built on relationships, but LinkedIn gives you the ability to search for the problem solver you need.

There are a couple of tricks in using the platform, and I want to pass one along. Belonging to LinkedIn groups is important, and you can use keywords to search for a group. I am going to use the keyword "negotiation" for this example.

When you sign into LinkedIn, up in the right hand corner, there is a search button:

Click on the little triangle, beside "People", and you will get a drop down menu.

We are going to select "Groups", right at the bottom and then type in "Negotiation" to search for groups of people talking about Negotiation.

See how, when I type, LinkedIn shows me some relevant information.

Finally, let's look at the groups in LinkedIn about negotiation.

Wow, there are almost 300 groups. I belong to one of the top 5 groups. But, there are many more worth my looking into if I was searching for a specific area. Let's narrow it down to "negotiation training".

Now, I am down to a manageable 30 groups, and in the top 5 is another IAFD key partner, Mediation Works Inc.

Very quickly, I am able find like minded problem solvers, join the group and find out more.

Victoria stresses that joining up to 50 groups is a good strategy if you are in a heavy network building phase. Once your network is growing satisfactorily, being effective in this many groups is impossible. She suggests choosing 8-10 groups and really making your mark in those. As well, a monthly or quarterly pruning of groups can bring fresh blood to your marketing efforts. Good luck and do get Victoria's book. Your copy is free when you join the group, Link InSanity.

Victoria Ipri is a respected LinkedIn evangelist and the author of eBook "LinkedIn for the Clueless," Ipri established her reputation as a LinkedIn expert by getting out there, sharing valuable information with others and getting to know people, which she says is the "secret" to how people really conduct business, since we want to do business with those we know, like and trust.

3 Tips for Negotiating Reduced CAM Costs - Suppliers and Consultants

2012-01-25T20:51:06Z

While there are many business factors and legal points to consider when negotiating a commercial lease, in today''s uncertain economy, the "bottom line cost" of the lease often tops the list of concerns for a commercial tenant.

You are probably aware that most commercial landlords pass the cost of all repairs and maintenance of the premises and the common areas to their tenants.

Tenants often find, however, that their CAM charges are more expensive than anticipated. While there are many factors that need to be evaluated and provisions that need to be negotiated in a commercial lease, as you head into negotiations, we invite you to arm yourself with these three tips for keeping your CAM charges in line with your expectations.

1. Landlord's Work. When you negotiate your lease, you may designate certain things for which you, the tenant, will be responsible and certain other things for which the landlord will be responsible. For example, you may agree that the roof is the landlord''s responsibility. Be careful!

Just because you designate that the roof is the landlord''s responsibility does not mean that the cost of the landlord''s roof repairs and maintenance are not going to be passed back to you in CAM charges.

Careful analysis of the entire lease and the addition and subtraction of specific language in multiple provisions are necessary to ensure that you won''t be bearing the burden of these costs.

In the example of the roof, you would want to specify that the landlord, at its sole cost and expense, will repair and maintain the roof in good condition and replace the roof as needed. You would also want to carefully review all provisions that discuss common area maintenance charges and/or additional rent and ensure that these provisions specifically exclude any costs related to the roof.

Additionally, you would want to carefully review any provisions regarding charge backs for damage caused by you to ensure that the landlord''s ability to blame you for damage to the roof (like from your HVAC contractor) are limited and that the landlord must engage in some form of dispute resolution before charging you for a repair.

Finally, you will want to make sure you have distinguished CAM charges from capital improvements and expenditures which the Landlord may be required to make.

2. Management Fees. Many commercial leases include a management fee of some percentage (usually 3-5%) that the tenant agrees to pay for property management. When objections are raised to this fee in negotiations, the landlord often explains that the fee is necessary to pay for the salaries and overhead of those folks who manage the property.

Watch Out! You will want to make sure you are comfortable with how the percentage is calculated and that the landlord isn''t double dipping.

The landlord will likely want the management fee to be a percentage of gross payments, gross receipts or gross revenues. If you agreed to a management fee of 4% of gross revenues, your base rent just went up by 4%, your insurance just went up by 4%, your real estate taxes just went up by 4%, and all your maintenance and repair costs just went up by 4%.

You may also find that you are actually paying an extra 4% on top of the property manager''s salaries and overhead because the language defining CAM allows the landlord to charge you for salaries, utilities and office space, in addition to the management fee.

Careful analysis and drafting of the language defining additional rent and common area maintenance costs are necessary to ensure that the management fee is fair and reasonable and doesn''t result in an unnecessary payment by you.

3. Caps. If you agree to pay ""all costs and expenses paid or incurred by the landlord at its election in connection with the premises"" what incentive does the landlord have to keep costs to a minimum, particularly if as discussed above, the landlord's percentage management fee increases with increased CAM costs?

You might consider requiring the landlord to produce and attach as an exhibit a specific, categorized budget for CAM for the first year. You might also establish an approval process for any expenses that cause either the entire budget or any category to exceed a specified cap or you might negotiate an absolute cap and provide that the landlord will bear any and all costs that exceed the cap.

Another possibility is to consider agreeing on a flat fee for CAM, rather than a reimbursement. This would give the landlord the benefit of any savings but would provide you with a firm budget.

This has been a post by Mary Clapp. Ms. Clapp is admitted to practice in the states of Florida and Missouri and before the Middle District of Florida, the Western District of Missouri, and the Eleventh Circuit Court of Appeals.

Ms. Clapp focuses her practice on business representation including franchise law, employment law, contracts, commercial leasing, trademark law and commercial litigation.

Before founding Clapp Business Law, LLC, Ms. Clapp served as General Counsel for Incredible Pizza Franchise Group, LLC, an international franchisor of 50's themed family entertainment centers. Prior to joining Incredible Pizza, Ms. Clapp practiced law in Tampa, Florida.

How Much Does a Franchisee Really Make? - Suppliers and Consultants

2012-01-18T22:42:06Z

"He uses statistics as a drunken man uses lamp-posts... for support rather than illumination." - Andrew Lang (1844-1912)

To me, one of the more frustrating franchise statistics repeatedly quoted is average income. Inevitably, this statistic always suggests that the typical franchisee earns $100,000+ per year. To cite one example, the USA Franchisee Statistics page on www.franchiseseek.com states that "In 2000 .... over 30% of franchisees earn over $149,000 per year." I recently read a press release citing a similar figure for 2009.

Such a high figure falls into the "too good to be true" category. In a country where the average income is under $50,000 a year and an unemployment rate in range of 10% to 20% range, this figure just doesn't pass the smell test. If we are in a recession, as I believe we are, is it possible that franchised business operations are a safe haven offering a guaranteed substantial income during difficult economic times? Or any economic times?

FranchiseFacts explores this issue in detail as part of its National Franchisee Survey.

Our survey asks respondents to report if their business was profitable and, if profitable, their profitability over the most recent calendar year (2009). Our preliminary findings are that only 3% of respondents earned more than $100,000 over the past calendar year and only 15% claimed to earn in excess of $50,000 a year.

This is quite a contrast to the $149,000 figure cited above. Being in the early days of the survey, which will run for most of the calendar year, it is difficult to determine if these percentages will remain consistent. At the other extreme, 61% of respondents state that their business is not profitable.

To be clear, none of this is suggestive of problems in the franchise industry. The economy has ended an overheated phase where too many people paid far too much for businesses. They financed their businesses rather than starting slow and building through natural growth. Overly optimistic revenue projections were used to justify high operational expenses. These businesses, and their owners, now are saddled with financial obligations that cannot be paid out of current revenues. Consolidations and closures are inevitable.

Be Your Own Boss - The Myth - Franchise Relationships

2012-01-18T22:33:04Z

Imagine this television commercial: a bunch of teenage kids in a house, eating junk food, playing video games with rap music blasting. The narrator says: "Hey kids: tired of listening to your parents? Why not do whatever YOU want to do? Join the Army!"

Ludicrous, right? (Imagine the kids' surprise when their hair gets buzzed off, they're issued identical uniforms and that whole "reveille thing" is explained for the first time.) No one in their right mind would advertise so foolishly, would they?

That would be like recruiting a franchisee, one who must faithfully comply with a system of rigid rules and guidelines, with ads that say:

"Entrepreneurs Wanted!"

"Imagine the freedom! Imagine the opportunity!"

"Promote yourself to President!"

I call it the BYOB! (Be your own boss!) marketing myth. Warning signs include phrases like: "Own your own business!" "Be your own boss!" "Achieve financial freedom!" "Fire your boss!" "Take control of your life!" or similar variations.

Marketing the BYOB! myth is one of the most dangerous mistakes franchisors make. And it's the cause of much of the conflict in franchisor/franchisee relations.

Many franchisors attract prospects with the promise of freeing them from oppression and giving them the chance to gain control. There's only one problem: Franchise systems are built on adherence, not independence. Franchisors want implementers, not rebels. They often recruit individuals who are yearning to break free from their harness, but as soon as the contract is signed the franchisor expects them to docilely slip into their harness.

Requiring conformity, adherence to an established system and a shared identity is not necessarily a bad thing. That's what gives franchising its power. So why do franchisors work so hard to attract the wrong people and set the wrong expectations?

The mything link

Why, you may ask, do we sell the opportunity to join a conformist system via a dream of individualism? Why have we, as an industry, perpetuated the link between BYOB! and franchise ownership?

First, because it's an easy sell. It makes ad copy pop. The dream of being freed from day-to-day tyranny is a powerful one. Telling one's boss to take this job and shove it is the real American Dream. It's Easy Rider. It's Thelma & Louise. It's One Flew Over the Cuckoo's Nest. Unfortunately, it often delivers the same outcome.

Second, too few franchisors have actually given much thought to their franchise marketing message. They tend to just say what everyone else says: B.Y.O.B.! Many commission marketing research and branding platforms at the consumer level; more need to create a thoughtful strategy and platform for their franchise brand.

The third reason for the prevalence of the myth is the influence of commissioned franchise salespeople and brokers who are compensated for short term sales, not long-term franchisee performance or satisfaction. By the time the franchisees start storming the castle, the commissions are spent and the salespeople are long gone.

Another reason for this myth is that many founders are themselves entrepreneurs who are guided by what would motivate them. But the fact is that few founders could survive very long as franchisees of their own systems. Those who are looking primarily for implementers should not seek entrepreneurs. One franchisor per system is enough (and, according to some, one too many).

A "Never-ending Battle of Wills."

Army recruiters say Be all that you can be. They don't say "Be your own boss," or "Do what you want." They appeal to the individual's self-interest: Communicating what the prospect will gain by trading in their freedom for the benefit of being part of something greater than oneself, of being disciplined and following directions. In Army recruiting, there is a regard for the brand, the team, even the rules themselves and the benefits they provide.

Franchisors must realize that the importance of avoiding the BYOB! myth goes beyond effective recruitment and setting realistic expectations. Its importance goes directly to establishing and preserving the trust that is critical to their success. As Peter Birkeland states at the end of his book "Franchising Dreams," establishing high levels of trust with franchisees is the most critical problem for franchisors. "For those who cannot achieve that," states Birkeland, "The problem of control is a never-ending battle of wills."

Prospective franchisees must do their homework and understand the true nature of the relationship they are entering. There are no do-overs in franchising. Once they sign that big fat agreement they are giving up their autonomy, and are expected to be team players even when they disagree. If they don't want to end up posting on UnhappyFranchisee.com, they'd better make sure the system they are joining provides benefits that outweigh the costs, and is run by people they trust.

The following as been a guest post by Sean Kelly. Sean Kelly is a leading expert in marketing and brand development for franchise companies with 20 years and hundreds of client engagements to his credit. As V.P., Marketing for an international franchise consulting firm, Sean helped launch and grow more than 200 franchise companies, including some of the most successful names in franchising today.

Pepsi Pays Millions for Improper Criminal Background Checks - Suppliers and Consultants

2012-01-18T22:05:43Z

Pepsi Beverages (Pepsi), formerly known as Pepsi Bottling Group, has agreed to pay $3.13 million and provide job offers and training to resolve a charge of race discrimination filed in the Minneapolis Area Office of the U.S. Equal Employment Opportunity Commission (EEOC). The monetary settlement will primarily be divided among black applicants for positions at Pepsi, with a portion of the sum being allocated for the administration of the claims process. Based on the investigation, the EEOC found reasonable cause to believe that the criminal background check policy formerly used by Pepsi discriminated against African Americans in violation of Title VII of the Civil Rights Act of 1964.

The EEOC's investigation revealed that more than 300 African Americans were adversely affected when Pepsi applied a criminal background check policy that disproportionately excluded black applicants from permanent employment. Under Pepsi's former policy, job applicants who had been arrested pending prosecution were not hired for a permanent job even if they had never been convicted of any offense.

Pepsi's former policy also denied employment to applicants from employment who had been arrested or convicted of certain minor offenses. The use of arrest and conviction records to deny employment can be illegal under Title VII of the Civil Rights Act of 1964, when it is not relevant for the job, because it can limit the employment opportunities of applicants or workers based on their race or ethnicity.

"The EEOC has long standing guidance and policy statements on the use of arrest and conviction records in employment," said EEOC Chair Jacqueline A. Berrien. "I commend Pepsi's willingness to re-examine its policy and modify it to ensure that unwarranted roadblocks to employment are removed."

During the course of the EEOC's investigation, Pepsi adopted a new criminal background check policy. In addition to the monetary relief, Pepsi will offer employment opportunities to victims of the former criminal background check policy who still want jobs at Pepsi and are qualified for the jobs for which they apply. The company will supply the EEOC with regular reports on its hiring practices under its new criminal background check policy. Pepsi will conduct Title VII training for its hiring personnel and all of its managers.

"When employers contemplate instituting a background check policy, the EEOC recommends that they take into consideration the nature and gravity of the offense, the time that has passed since the conviction and/or completion of the sentence, and the nature of the job sought in order to be sure that the exclusion is important for the particular position. Such exclusions can create an adverse impact based on race in violation of Title VII," said Julie Schmid, Acting Director of the EEOC's Minneapolis Area Office. "We hope that employers with unnecessarily broad criminal background check policies take note of this agreement and reassess their policies to ensure compliance with Title VII."

"We obtained significant financial relief for a large number of victims of discrimination, got them job opportunities that they were previously denied, and eradicated an unlawful barrier for future applicants," said EEOC Chicago District Director John Rowe. "We are pleased that Pepsi chose to work with us to reach this conciliation agreement and that through our joint efforts, we have been able to bring about real change at Pepsi without resorting to litigation."

The EEOC enforces federal laws against employment discrimination. The EEOC issued its first written policy guidance regarding the use of arrest and conviction records in employment in the 1980s. The Commission also considered this issue in 2008 and held a meeting on the use of arrest and conviction records in employment last summer. The EEOC is a member of the federal interagency Reentry Council, a Cabinet-level interagency group convened to examine all aspects of reentry of individuals with criminal records.

The Minneapolis Area Office is part of the EEOC's Chicago District. The Chicago District is responsible for investigating charges of discrimination in Minnesota, Illinois, Wisconsin, Iowa and North and South Dakota. Further information is available at www.eeoc.gov.

Language Engineering: The Right Words for Customer Service - Suppliers and Consultants

2012-01-15T18:11:07Z

Language underlies almost all other components of the customer experience. Yet, your company has probably given more thought to the language it uses in marketing campaigns than to the words employees use when having conversations face-to-face with customers.

That's a mistake, because customers don't generally get their make-or-break impressions of your company from high-minded branding exercises. They get them primarily from day-to-day conversations with you. And those are the impressions they spread to others.

If you haven't given much thought to selecting your company language--what your staff, signage, emails, voicemails, and web-based autoresponders should say, and should never say, to customers--it's time to do it now.

No brand is complete until a brand-appropriate style of speaking with customers is in place at all levels of the enterprise.

Which is why, whether I'm consulting with a law firm on building a client service initiative, speaking to a hospitality audience on building guest loyalty, or assisting a hospital in improving customer service for its patients, one of the first pieces of work I suggest we do together is focus on achieving a consistent style of service speech.

Develop a language lexicon.

A distinctive and consistent companywide style of service speech won't happen on its own. You'll need social engineering: that is, systematic training of employees.

Imagine, for example, that you've selected ten promising salespeople for your new high-end jewelry boutique.

You've provided them with uniforms and stylish haircuts and encouraged them to become your own brand's versions of a Mr. or Ms. Cartier, starting on opening day.

But they'll still speak with customers much the way they speak in their own homes: that is, until you've trained them in a different language style.

Happily, ''engineering'' a company-wide style of speech can be a positive, collaborative experience. If you approach this correctly, you won't need to put a gag on anybody or twist any arms.

Once everybody in an organization understands the reasons for language guidelines, it becomes a challenge, not a hindrance. The improved customer reactions and collaborative pride of mission are rewarding. As a consequence, it can be a relatively easy sell companywide.

What should be in your language lexicon?

Here, for example, are some good/bad language choices:

Bad: ''You owe . . .''
Good: ''Our records show a balance of . . .''

Bad: ''You need to . . .'' (This makes some customers think: ''I don't
need to do jack, buddy--I'm your customer!'')
Good: ''We find it usually works best when . . .''

Bad: ''Please hold.''
Good: ''May I briefly place you on hold?'' (and then actually listen
to the caller's answer)

The specifics of the lexicon you develop will vary depending on industry, clientele, and location. A cheerful ''No worries!'' sounds fine coming from the clerk at a Bose audio store in Portland (an informal business in an informal town) but bizarre if spoken by the concierge at the Four Seasons in Milan.

An alternative approach:

If this ''Say This While Avoiding That'' approach strikes you as too prescriptive
(or too much work), if you don't want to develop scripted phrases and specific
word choices for your employees, at least consider developing a brief ''Negative Lexicon.'' A Negative Lexicon is just a list of crucial language Thou Shalt Nots.

The Negative Lexicon is the Danny Meyer approach, the one used by that great New York restaurateur and master of hospitality. Meyer feels uncomfortable giving his staff a list of what to say, but he doesn't hesitate to specifically ban phrases that grate on his ears (''Are we still working on the lamb?'').

A Negative Lexicon can be kept short, sweet, and easy to learn. Of course, new problematic words and phrases are sure to crop up as time moves on.

Ideally, you'll update your Negative Lexicon as frequently as Wired magazine updates its ''Jargon Watch'' column.

P.S. For more on language engineering, learn about the Five Words You Can Never Say To A Customer

This has been a guest post by, Micah Solomon - customer service consultant, keynote speaker, customer loyalty speaker, and #1 bestselling author of “Exceptional Service, Exceptional Profit: The Secrets of Building a Five-Star Customer Service Organization.”

Visit Micah at http://www.micahsolomon.com.

Or, click here for your own free chapter of Micah Solomon’s #1 customer service bestseller, Exceptional Service, Exceptional Profit: The Secrets of Building a Five-Star Customer Service Organization, co-written with Leonardo Inghilleri.

How to Survey with Social Media - Suppliers and Consultants

2012-01-13T15:57:01Z

QSRs and hotels have embraced the notion of customer feedback. We’re inundated by surveys, comment cards, and “tell us how we did” prompts.

The interesting thing is that all of these methods of gathering feedback produce structured data that can be (unintentionally or not) manipulated by the business. For example;

“Please tell us how good your food was” – Manipulative because it positions the food as being “good”

“What other restaurants would you compare us to? Please choose” – The comparison restaurants may or may not be similar in concept or food and beverage offerings. The business is forcing the survey respondent to limit their answer to a pre-selected set of answers. This type of question (multiple choice) is inherently manipulative for a survey response.

“Rate your experience” – This question limits what a respondent can discuss. They may have 20 great details they wish to share, but the one negative detail will cloud their overall perception and therefore skew their score. This is the fundamental problem with the “stars” rating system used by so many review sites.

By limiting the methods of response, cleverly wording questions, or simply using different types of questions, a business can “force” the responses of their customers. Not all of this type of manipulation is bad however. A business may have a known problem area they wish to address and can use a survey to ask specific questions about it. They may wish to use the information to measure or track their employee performance and use quantitative scales to do so. These are tried and tested uses of surveys that can help a business optimize their operations.

Approaches like these are valuable tools, but the one key element they struggle with is the ability to uncover what’s actually on their customer’s minds. You may be asking about your service when your customers are really more interested in telling you about your food and beverages. In order to best understand what a customer really wants you to know, we need to open up our options of receiving and understanding feedback.

Think about it from this example. Which of the two methods of feedback is more valuable? Consider that they are both commenting about the same topic, “service”, and that it is the same customer providing both methods of feedback.

A traditional survey response rating “service” as a 1 out of a possible 10 points.

A Facebook comment from that same customer that says “The service was fine, but the waiter spilled a water glass on my shoe! At least they apologized about it, but c’mon!”

The Facebook comment explains why the customer was unhappy with thee service, but it also informs you the service the customer received appeared to be okay. These types of nuances simply cannot be ascertained from a traditional survey question and can be a critical to your evaluation of a disgruntled customer.

Over the past month alone, we have gathered and analyzed over a million customer comments posted on sites like Facebook, Yelp, TripAdvisor, and Twitter for our clients. An amazing amount of feedback that continues to see double digit growth month over month. These are unprompted, top-of-mind comments directly from customers who ate at your restaurant, stayed at your hotel, or shopped at your store. Just gathering and reading this feedback alone is valuable, but we take it one step further and analyze it down to individual insights that can be used to optimize your operations.

While traditional surveys have been the benchmark for guest satisfaction for many years, the smart businesses are starting to realize that using unprompted customer feedback gathered from Social Media sources can be at least, if not more valuable to their business.

Mobile Marketing 101 - Suppliers and Consultants

2012-01-12T03:52:24Z

I have been following this company for a couple of years now. Everytime I see them they are getting better at what they do. Not only can they provide fully integrated mobile solutions and text messaging campaigns, but they have alligned themselves with a data company that will allow them to be able to marketing programs that hone in our YOUR specific target audience.

By being able to create customized Mobile URLs that speak to differentiated market segments and advertising to them differently we can gain you greater market share. They can also provide you with all the back end analytics that you need to make sure the program is a success.

Restaurant Operational Tips - For QSR and Hotels - Suppliers and Consultants

2012-01-12T03:47:46Z

We had the opportunity to travel through the US IN November and December and got into a lot of restaurants. We saw good things, and good people, but also some operational issues that have the result of leaving dollars on the table—revenue enhancement and expense related. We have seen these issues often enough throughout 2010 and 2011 to mention the commonalities.

None of this is brain surgery; we’ve all been talking and working on these issues forever. But execution challenges exist, and easily amounts to that magical point of same store sales gain or multiple pennies/share earnings. Where appropriate, we’ve ascribed this to an operator or restaurant segment sub-set.

Revenue related

Lack of suggestive upselling or actual down selling (QSR): it is a rare occasion where we are upsold in QSR and fast casual settings. In some situations, the sale is actually downsold, e.g., “will that be the sandwich?” even by store management. My hope in 2012 is that every customer can be upsold once, face to face. In QSR situations, there must be a comeback situation for hourly staff for where the answer is “no combo”. What’s the next default?

Overkill with POS displays (QSR): via a QSR survey recently, we counted the range of the number of printed in store visual communications pointed at the customer. The high was 87 distinctive signs (Carl’) and the low seven (Pizza Hut, with almost all price merchandizing and only two specific product related displays). Some drive thru windows and chutes were a veritable forest of signs. Assuming 45 seconds at the drive thru chute and panel, how much can be seen? Two many displays seem to be counterproductive and split the product mix.

Dessert size, portions and price prohibitive (Casual dining): We confess that we have a taste for chocolate, and often have been staggered by the size, calories and price ($6-8) for a post meal dessert item at the casual diners. To our memory, both Chili’s and PF Chang’s (PFCB) are working with smaller bite sized “tastes”, but have not reported on menu mix hit rates for these items. That might be illustrative for the industry.

Expense related

Staffing standards (casual dining) in general we see way too heavy staffing from 1100a to 1200 noon, and from 500-600P, especially in the Darden concepts (DRI) and at Chili’s (EAT), but understaffed after 900p (DINE-Applebee’s), especially among wait staff. Perfecting matching labor hours, customers and restaurant needs will never be possible, and hourly employees do want hours, of course. Since the average check should go up in later hours, perhaps both labor hour and sales/man-hour standards and calculations are required.

Closely related to this point is new unit opening labor staffing (both QSR and Casual Dining): when a new unit opens, we are justifiably proud of it and want the opening to go flawlessly and get new employees trained. But our observation is that the necessary staffing up period goes on too long after opening, making it then unrealistic for both guests and employees, for when the eventual, sharp ramp back to standard staffing levels occur. We suggest that the ramp up and ramp down be more graduated and less “sharp”.

Out of whack air conditioning: (electricity/air conditioning: QSR and casual dining) with Starbucks and the coffee houses as a strategic exception (colder=intent to consume hot beverages goes up), we see cooling temperatures way out of whack, particularly after sundown, when it does cool off. This could take CAPEX to fix if not separate units for the FOH/BOH.

Too much product pre-cooking (QSR): The goal is hot food hot and cold food cold. With the growth of big burgers, more complex menus and 24 hour breakfast operations, the back of house is more challenging. Product is warmest when first cooked, and has a finite holding time in bins. Jack in the Box (JACK) does a nice job of delivering hot product, but am noticing more cooler burgers at McDonalds (MCD) the last year.

How to Negotiate Your Franchise Agreement - Franchise Relationships

2012-01-12T03:21:42Z

Recently, I was asked: "If you could negotiate any terms up front, what would be the key ones?" Here is my general approach:

First, review the FDD and determine if they are using franchise brokers to sell. If so, you can knock off about 11-20k from the franchise price by asking for the broker's rebate.

Now, you have a budget and money. Use it to hire a professional franchise attorney who will negotiate the terms in the agreement that make sense for your situation. (And yes, franchisors will offer addendums or side agreements - the California has a database is full of such side deals. If you accept at face value that franchisors "won't do x", then franchising is going to be a one sided deal for you.)

Any terms that go directly to the franchisor's business model, such as royalty rate and advertising spend are not on the table, except if you are going to be an area developer.

1. Get rid of the personal liability condition - it is a millstone which will force you to continue funding a mistake. The franchisor is not guaranteeing anything, why should you? Never sign an agreement with an unlimited personal guarantee.

2. Enumerate exactly the oral/written representations you are relying upon when signing the contract and carve out an exemption from the too general integration clause.

3. You probably want a discussion about the choice of laws/forum selection clause.

4. On item 7/8 in the FDD, you want written representations which clarify some of your concerns. Specific to your individual situation.

5. Get rid of the cross default clause, and the obey all laws clause. These clauses transfer too much bargaining power, via threats, to the franchisor. They are also completely unnecessary.

6. Get rid of the right of first refusal, which will drive down the value of selling.

7. Carefully review the liquidated damages clause, if there is one.

8. Avoid any franchises which limit your use of social media for local marketing; these franchisors are already signalling that they are going to waste your money.

Those are the general areas, and there may be more important specific clauses of concern to you depending on your own business model. It is impossible to give good guidance on the territory issue, for example, with seeing the exact clause and knowing of your own local marketing ideas.

You have the maximum bargaining power at the beginning of the relationship - just before you say "yes".

If you don't have professional training in negotiation, hire an attorney who does have specialized skill in this area. Expect to pay between 7-10k to get an agreement which protects your rights.

Do not waste your time trying to talk with other franchisees, if there is an independent franchisee trade association. Talk with them directly about how the franchise agreement has changed, for better or worse.

What additions would you make?

Is The Conference Model Broken? - Tools and Resources

2011-12-29T16:50:21Z

Six weeks, five countries, four conferences and a pile of travel expense receipts that desperately needs to be sorted. That has been the reality here at Loyalty Truth as we have been on the go while making the most of the final business push of the year before the holiday season settles in and thoughts turn to 2012.

In the middle of the activity, I received a call from a conference organizer seeking my participation in an event being planned for 2012. As many of these conversations go, I initially felt complemented when hearing "You've been identified as a thought leader and someone we'd like to have as a key part of our event".

But as the dialogue wore on, I realized that I was being pitched sponsorship rather than be recognized for thought leadership.

The questions I was asked were intended to help me rationalize writing that big check for sponsorship and included:
Why do you attend conferences?
What's the value of the exposure if you present, exhibit, or sponsor?
What is the value of just one project that results from contacts made at the event?

You can see where it was all headed. Yes, we attend industry events to learn, but probably the networking is most valued. I fully understand the model and realize that sponsorship dollars fund the event as well as generate a bottom line for organizers.

My revelation was that the conference business is increasingly becoming a game of haves and have-nots. Sponsoring organizations shell out significant dollars to sponsor events and key speaking slots on the agenda are allocated to them as part of the package. That is reasonable considering the investment made.

Suppliers, agencies, and consultants are another matter. I am fascinated by the message that suppliers or vendors are "bad" and can't be trusted to present without pitching their wares. Some ground rules are clear, that no presentation should be a sales pitch, veiled or otherwise. Adhering to this rule improves the content of the conference material and raises overall value for delegates. Anyone crossing the line too much or too often should not be invited back as there's plenty of time for selling during the networking and break times.

On the other hand, there are some highly informed people working in the supplier community that can be of great interest to a delegate group. For example, find the people who are talking about subjects on gamification, location based marketing, mobile payments and NFC, social media measurement, or coalition loyalty. Through their focus and passion for their areas of speciality, they can bring great value to an event.

There are some things in life you can complain about and then there are the ones that we can actually hope to change. I am hoping that the conference business will shift ever so slightly. For example, I would like to see that at least one speaking spot in a morning and afternoon of a typical conference event be allocated based on merit, not money. That means that out of approximately 16 speakers, 4 would be invited based on their material, not just the size of their supporting organization.

This 25% concession would probably not impact the overall sponsorship fees received by organizers. They might even be able to increase revenues through higher registrations or a higher price point.

There's a very good chance that the model will not change, mostly because it does not have to. Only a Wall Street style boycott would bring that level of change and, since most of us go to conferences for the networking, I don't expect we'll see much of an uprising.

At the same time, conference organizers should be on alert. Some brands are shifting attention to proprietary events, where stakeholders are brought together in high quality environments and an open exchange of valuable information takes place. As dollars in travel and marketing budgets stay tight, watch for these high quality privately organized events to become even more attractive.

Maybe that will create the impetus for the general conference industry to alter their approach to the business. We'll see.

This has been a guest post by Bill Hanifan. With over 20 years experience across the marketing and financial service industries, Bill has created a suite of innovative and measurable marketing strategies used to assist clients achieve their business objectives, increase profitability and create a sustainable competitive market advantage.