June 2012 Archives

When putting together a marketing plan for a franchise client, the question inevitably comes up: What branding materials should be included in the franchise ad kit?

Well, before you can even begin to determine what the pieces and parts should be, first and foremost a franchisor must provide a strong, consistent brand with documented brand standards.

One of the reasons entrepreneurs buy in to a franchise system is to gain the benefit of a brand and the immediate recognition that name provides on their storefront, building or van. If the brand does not have a well-articulated foundation of how it should look, speak and act, the consistency and value of that brand can be quickly diminished.

Once your standards are established, think about the type of business you have and what materials will help communicate your message to customers. For some it may be yard signs and window decals, for others it may be van wraps and door hangers.

But whatever the magic combination for your business, the materials must be flexible enough to allow appropriate customization for the individual units. This customization may be the format to accommodate different facility restrictions, or the message to respond to competitive issues.

So, when developing your franchise marketing materials, keep these key things in mind:

Have you established and documented how your brand looks, speaks and acts--and does everyone in the organization understand these foundational elements of the brand?

What materials will be most appropriate to communicate to customers in your business format and environment?

Where does your customer get their information from (specific media, online, social, on-premise) and what are the branded marketing materials that your franchisees could use to attract more sales through these channels?

Have you developed materials that are consistent, yet flexible enough to accommodate local marketing needs?

Just as no two franchises are exactly alike in their format, product, and offer, every franchise ad kit will be determined by the special needs of the system. The only thing that will always be constant is the need to start with a well-defined brand.

With the advent of warmer weather, company dress codes often relax. Many employees acknowledge the change of seasons with more comfortable, cooler, and cheerier summer fashions. Ideally, employee morale and the work environment become a bit more upbeat. But some staff members take the flexibility too far and push the envelope. Whether it's too much bare skin or the snapping sound of flip flops, inappropriate dress can quickly produce problems in the workplace. What can you do?

Start with a clear policy. Explain the business reasons for your dress code, e.g.: projecting a professional business image, ensuring employee safety, meeting customer expectations, providing employees with a positive work environment that limits distractions. Give specific examples about what is and what isn't acceptable. If you use the term business casual, define it and give examples of acceptable wear such as collared polo shirts and khakis. If casual dress is acceptable only on certain days of the week, such as "casual Friday," state that clearly. Provide examples of what you don't want employees to wear, e.g. cut off shorts, flip flops or spaghetti strap tops if that's the case.

Be prepared to enforce your policy consistently. Spotty enforcement can hurt morale and lead to an accusation of discrimination. That said, it's legitimate to have different standards for different groups of employees if they are based on sound business reasons. For instance, staff who have contact with customers might be required to dress more professionally than those who do not.

Know your rights and consider the legalities. Dress codes based on sound business reasons and societal norms are usually fine. Where it can get dicey is if your policy infringes upon a protected category such as a religion or when it has a disparate impact on a minority group. For example, a policy forbidding all head coverings could present a problem for a Muslim woman or a Jewish man. A policy that allows men to wear jeans in the workplace but not similarly situated women, is discriminatory. So think through the business purposes of your dress code.

Keep the lines of communication open. Listen to your employees' request. If someone has a problem, meet with that person directly to discuss their needs so the situation gets resolved quickly without escalating. If someone has a true need based on religion or some other personal necessity, be prepared to make a reasonable accommodation as long as it does not create an undue hardship or safety concern for your business.

If franchisee satisfaction is, as we believe, an important indicator of future actions, the next few years could be challenging for the franchise industry. 

Future success for most franchisors is dependent on the renewal of existing franchises and the sale of new franchises. Current franchisees play an important role in this process. In addition to royalties and other payments to the franchisor, franchisees also serve as referral agents that impact on new sales. The thoughts and intentions of current franchisees is crucial intelligence for a franchisor that can aid in building their franchise network.  Franchisors can improve their operations and growth by understanding current levels of franchisee satisfaction and its impact.

Franchisees have had an exceptionally difficult year - possibly the worst of their working lives.  National Franchisee Survey respondents report that few are meeting their financial goals, seeing increased revenues/profits or would consider recommending their current franchise to a prospective franchisee.  The vast majority do not expect to be with their current franchise in five years time.  Yet a majority consider their operation to be superior to that of the competition. 

The following table shows three leading indicators that are incorporated into our National Franchisee Survey,  from 2010:

Franchise Facts.gif

What we see is troubling. By a wide margin, surveyed franchisees report that they would not provide a positive referral to a prospective franchisee. They also report that they would not have invested in their current franchise had they known what they now know. Since overall numbers can hide crucial differences such as those between newer and older franchisees, we also look at these indicators based on years in operation. We find similar results regardless of how long a franchisee has owned the business. This suggests that current concerns have existed for an extended period of time.

When asked about future plans, only 16% of respondents anticipate doing the same thing in five years. While only 14% anticipate retirement, 70% anticipate either owning a different business or being an employee for another business. 

Should these patterns persist, many franchises will encounter significant challenges in the coming years. At the very least, a very large number of new franchisees will be needed to maintain the current infrastructure and revenues of the existing franchise networks. These new franchisees will be harder to find if current franchisees are not prepared to provide positive referrals. Some franchisors may choose to ignore these trends and could very well see a decline in their franchise network.

More enlightened franchisors will look inward to determine if the patterns we have identified are reflected within their network. Should these patterns be confirmed and reversed, short term benefits would likely include a reduction in costly internal litigation. Longer term trends would include a larger and growing franchise network plus a growing dominance within their respective industries.

 

Last year, there was a discussion in the Franchise Executives group on LinkedIn with the posted question, “Who is using outside franchise sales groups [brokers]?”

Below are some interesting responses from group members that are not franchise consultants or brokers:

An experienced franchise executive stated: “Why wouldn’t you develop your own small sales group? Using a service that sells multiple franchises diminishes your quality control to some degree. I have been a part of 2 franchisors for 25 years and neither has ever used any of these groups and we have had lots of success. What are you trying to achieve by using these”groups”? Lower cost of acquisition, less hassle, expecting more leads, more foot soliders?”

The president of a national franchise concept wrote: “We do not work with an outside group. In talking with our prospects it seems important to them to know that our development staff are part of the company and experts on the concept they are selling. We even have a dedicated sales team for each concept. My advice is to talk with some of your new franchisees to see if it would have made a difference in their decision making process.”

A franchise attorney posted his response: “…if you use an outside broker in the true “sales” role, they can lose credibility if they appear detached and not knowledgeable about what they’re selling (often happens when your brand is only one of many in the broker’s portfolio). That should factor into your due diligence process when you’re looking at outside brokers. But when the relationship stays between the franchisee and the sales person, the prospect’s going to be let down when that sale is done and the sales person is on to the next prospect.

Besides, I always wanted my sales person’s relationship with the prospect to taper off once the sale was done – the franchisee’s relationship should be with someone on the development then someone on the operations team. Two points – first, I always caution my clients to use brokers more as “matchmakers” rather than “salesmen.” What should really “sell” the franchise is not the sales person (internal or external) or the broker, but the confidence that the prospect has in the brand and in the ability of the management team; and, second, if my clients use outside sales people, I always make sure the outside sales team attend the same training I give my client’s internal team and do so at the same time.

That way the outside sales folks get entrenched into the company’s culture, they know what to expect from management, they see how to use management to “sell” the franchise, and they know what management expects of them.”

A Vice President of a national franchise concept went on to write: “For a variety of reasons I’m personally a big believer in building sales teams from within the company. But then again I’ve had the luxury of working for established franchisors and had resources to either develop salespeople from within the company, or rely on referrals to hire from outside and train them to become franchise salespeople.

Both methods take time – generally about 12 months for a franchise salesperson to really “hit their stride”.

Many franchisors don’t want to wait that long, or can’t wait that long, or don’t know how to train franchise salespeople. In those situations it may make sense to bring on outside franchise sales groups.”

So, that’s what franchise professionals were saying a year or so ago… but what about today? Please, let us know your thoughts!

 

 

Being forced to buy imaginary products is just one of the nonsensical results of government policy affecting franchisors and franchisees.

A South Park episode captured the sanctimonious aspect of environmentalism, but even they could not have imagined some actual government mandates now burdening petroleum franchisees.

The admirable desire to address the negative impact of fossil fuels led to issuance of federal renewable fuel standards (RFS), under which "obligated parties" (including petroleum franchisor-producers) have a "renewable volume obligation" (RVO). One obligation is for a percentage of product to be cellulistic biofuels.

Since there is no commercial production of cellulosic biofuels, the companies have to "buy" the product from the Environmental Protection Agency. Of course, the EPA doesn't make fuel, and so the companies are paying for a nonexistent product--at a cost last year of $6.8M in 2011, with RFS mandated annual increases in of 100% in 2012 and 2013. Nobody knows how much (if any) cellulosic fuel will be produced and so the final cost to "buyers" is unknown.

A more logical mandate is far more threatening to franchisees: the RFS effectively push the production of corn-based ethanol fuels, but the 10% ethanol (E10) market is saturated and the slowing economy has reduced the demand for energy (including ethanol).

This saturation is dubbed "hitting the ethanol blend wall" and the obvious solution (increasing the ethanol percentage or going to alternatives such as biodiesel) is expensive and risky for franchisors and franchisees.

Many of the alternatives require the retail franchisee to install new (or retrofitted) gas pumps, at a cost averaging in excess of $250K per station.

In addition, franchisees who have sought to retrofit pumps discovered that Underwriter Laboratories will not certify the pumps, resulting in legal liability, insurance coverage issues, and violations of municipality fire codes.

A speaker at the recent ABA Petroleum Marketing Attorney's Meeting expressed frustration at being caught in the middle.

Chemical Engineer Scott Jensen noted that "the cellulostic fuel industry is at a crawl. They need to be sprinting to meet [RFS] requirements."

Jensen turned to the existing E85 fuel and began with the observation that E85 can only be used in "flex-fuel" vehicles which only account for 6% of domestic vehicles on the road.

Drawing on the experience with E85, Jensen said that consumers quickly figured out that E85 gives 25% less energy and hence is more costly than E10 despite the lower (subsidized) price of E85.

Biodiesel fuel

 

photo/pws

Federal officials and environmentalists are pushing for a rise in regular gasoline ethanol content from 10% (E10) to 15% (E15), but this is going to be very expensive and fraught with liability issues.

The difficulty to start with is that only 2001+ model vehicles can use E15, and that is only half the vehicles on the road today.

E15 misfueling is expected to be a significant problem. The EPA has approved an E15 sticker which looks like a warning label and therefore expected to engender consumer resistance to E15.

Also an issue is whether vehicle warranties will be honored once the owner uses E15 fuel; and franchisors are expected to prohibit franchisees from selling E15 unless this issue is resolved.

Biodiesel is highly-touted since it can be made from sources ranging from restaurant grease to canola oil. Proponents of biodiesel gloss over the obvious problem: the nature (and hence quality) of the end-product is highly dependent on both the source material and the expertise of the blender.

Jensen analyzed the experience of Minnesota, where school buses famously stopped dead in the winter as the fuel coagulated in the engine.

Jensen also noted that some independent marketers "splash blend" the fuel.

This means that  they put petroleum diesel into the delivery tanker, then dumped in the biodiesel feedstock, and relied on the mixture sloshing together in the tanker as it drove to the retail gas station!

Jensen concluded by observing that while the goals are worthy and the legislators and regulators mean well, the current RFS standards are a "wish list" that are imposing significant costs on petroleum refiners and retail dealers, which negatively impact not only the petroleum industry but the US economy.

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This page is an archive of entries from June 2012 listed from newest to oldest.

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