Franchising | May 2010 | By Deborah L. Cohen

Operators Know Best

At a time when new franchisees are rare, gauging the opinions of existing franchisees is the best way for quick-serve execs to know the needs of the brand.

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Phil Friedman, chairman and CEO of McAlister’s Deli, is a firm believer in independent research of a company’s franchisees. Getting an independent read on the health of his franchise system has led to important changes in key operational areas, such as marketing and distribution.

“It gives us tangible communication and it builds the relationship,” says Friedman, who every two years contracts an outside consulting firm to survey operators’ satisfaction on a host of issues pertaining to corporate support. “We can have practical discussions using third-party information. It really makes a difference.”

During the last go-round, Ridgeland, Mississippi–based McAlister’s, which includes about 300 restaurants and 50 franchisees, learned that its operators felt the parent company was falling short on marketing support. So McAlister’s boosted its corporate marketing staff to seven from three to improve response times.

source: qsr’s 2008 franchisee satisfaction survey

The same study found that the company’s food distributor had missed scheduling deadlines due to route changes, sometimes resulting in a shortage of key ingredients for the chain’s made-to-order sandwiches. Armed with the data, the company formed a committee with several leading operators, confronted the distributor, and came away with a firm commitment to resolve the problems.

“We were able to look at where we were performing well and where we were performing weakly,” Friedman says.

At a time when the recruitment of new franchisees to the restaurant industry has sharply slowed because of the scarcity of financing, quick-serve execs are taking an even closer look at their existing systems, becoming more proactive about confronting problems—real or perceived—that may be bubbling up. Third-party research, which facilitates candid responses from participants and often lets operators vent under the protection of anonymity, is taking on greater importance.

“Franchisors are just starting to realize how valuable this is,” says Marc Plaisted, a Lakeland, Florida, franchise business consultant who runs Franchise Performance Breakthroughs and BrandChise. “Five years ago they would solve the problem by going out there and just signing on new franchisees. They can’t do that right now—their best opportunity for growth lies within their existing system.”

Besides revealing untold problems, independent research can sometimes lead to the discovery of surprising untapped system strengths, Plaisted says. In some instances, executives are unaware of the high degree of loyalty their franchisees hold for the company and its brand.

“You go to the CEO and say, ‘Look, you’re failing to leverage your most valuable asset,’” he says. “You’ve got to reward them for that and build on it.”

Plaisted, a former Dairy Queen franchisee who also held senior corporate posts at several franchise companies, says it’s a mistake to turn to independent research only after franchisee problems escalate to litigation or other crises. Regular checkups can help companies stay abreast of operator sentiment before trouble ensues.

“I’ve seen companies that are so proactive that any indication that their franchisees are unhappy with what’s going on, they really have the forethought to attack it,” he says.

Plaisted relies primarily on software-driven surveys, but often makes contact with other important constituencies in the organization, including corporate employees, would-be franchisees, and consumers. Once the data is compiled, he then helps management create a strategic plan to implement changes.

Depending on budget and need, independent research can take on a variety of forms. It ranges from simple, multiple-choice questionnaires coordinated over the Internet, to customized in-depth surveys requiring open-ended telephone interviews. Costs vary from a few thousand dollars at the low end to significantly higher fees for multitiered projects. Timeframes start at a few weeks and sometimes run as long as several months. And statistically valid results can sometimes be gathered from as few as 20 percent of a system’s operators.

What is clear is that there’s room for significant improvement across the restaurant industry, says Eric Stites, whose Portsmouth, New Hampshire, firm, Franchise Business Review, conducts an annual franchise satisfaction survey that is often compared to the J.D. Power and Associates consumer rankings in the automotive industry.

The fast food sector tends to rank about 8 percent lower in franchisee satisfaction than the overall benchmark for all franchise businesses, Stites says. There is particular weakness in four distinct areas: ongoing training and support, effective advertising and marketing, flexibility in experimenting with new ideas, and communication and support among fellow franchisees in a network.

“What I can tell you is that now it’s more important than ever,” says Stites, whose firm conducts the survey free of charge but is frequently retained for follow-up analysis and consulting. “We’ve seen companies make huge leaps in satisfaction just by going through the process.”

Third-party franchise-system research can go well beyond merely characterizing the franchisor’s relationships with existing operators, says Philip St. Jacques, partner with the Newark, New Jersey–based consultancy GMLV/St. Jacques, which conducts both franchise and consumer research focused on the goal of improving marketing. The data can provide critical clues to boost franchisee recruitment by obtaining an unbiased indication of how operators in other companies perceive the brand.

“Once we bring that information to the C-suite level, we can have a real pragmatic dialogue,” he says. “We’ll take them through the report and then come up with next steps.”

In order for research to be successful, it has to be a top-down activity, beginning with buy-in from senior management, Stites says. He says franchisees often call the corporate office with questions or to ensure management sanctioned the process.

“Because of the sensitivity of the data, the CEO needs to be in the loop and the whole management team needs to understand what’s going on,” he says. “We spend a lot of time with the CEO and management educating them about the results, really digging in.”

Slicing the data by geography, market size, and a wide range of other variables can reveal a host of disparities. Comparing the results of franchisees with more tenure against those newer to a system, for example, can uncover inequities in treatment by the parent company, he says.

“The perception of franchise satisfaction that management has—good or bad—is probably not accurate because they’re not getting the broad participation that we get,” Stites says.