The Big Risks of Franchising Too Fast
Once upon a time, there was a little hot dog stand on the West Coast. It was a cute and very fun place, with no attitude and a penchant for friendliness. The food was good, not great; the service was fast; and the place sparkled from top to bottom. But the most important thing was the value. You got a whole lot of good food for a very good price and people flocked there. And the little stand loved kids. If kids spilled, that was OK, because that was why mops were created.
One day, someone said to the owner that he should open more of the little stands so more people could get his good food. So he did. Then he opened more and more, and one day he had so many that he did an IPO.
You know what happened? Sure, he got rich, but more importantly, he started to spend all his time watching his stock price and not very much time worrying about what his customers wanted, or what his employees needed, or how his suppliers profited. He also forgot about the existence of his franchisees, and his hot dogs suffered.
So people found other hot dog stands to go to and his stock price went down, and he got nasty, and the whole thing went poof. He forgot what was important and his brand weakened, and eventually he was back to that one little stand. But it was too late.
Why is it that some brands weaken and go away? Well, there are some problems that can bring an entire brand down, and if you see them in your own organization, beware. You don’t want to be the next Burger Chef or Schlitz.
The above example is obviously the most important of all the potential problems that a quick-serve brand should avoid, but let’s look at some others.
Brand image comes to mind as the next most important. Who are we and who do we want to be? It seems that everyone wants to be everyone else. Chains have started as places for adults to go to and then decided to change to kids and vice versa. And there are chains that have absolutely no idea who they are and waver day to day. If I don’t understand the personality of someone, how can I like them and want to be with them? I buy from someone I like. Just as you have a personality, your company must have one and stick to it.
Here are some other things to watch for.
Don’t try to serve everything from Dolmas to fried green tomatoes. As soon as something gets trendy, folks buy the equipment and try to serve it, forgetting what they are known for. Pizza is more than cheese and dough, and coffee is more than a cheap price.
You’ve got to keep innovating. And you’ve got to solve the drive thru. We can’t keep putting 60 percent of the business through one window. There has to be a better way and a better package for french fries to go home in.
Then there’s over-capitalization. Get your existing stores really successful before you worry about lots of new ones. This takes us to where to open new stores. If your home is in Missouri, own that state before you worry about Maine. It’s really tempting when that Maine millionaire calls and says he will open 20 stores in Belfast, but how are you going to watch over and help him?
Do great advertising, but remember promotion can cost real money. One of the first Big Mac commercials we ever did just talked about Big Mac, no discounts, coupons, or free fries. We ran out of meat and buns. And make sure you are supporting your community. It’s tough for a kid in a soccer uniform with your name on it to go into a competitor.
If you are considering selling out to a stronger brand, just be aware that you may be swallowed up by him. Your profit may be used to solve his problems. I have never understood how a Chevy dealer can have a Ford dealership, too. One of those companies has to suffer.
Take a look at your corporate structure. If you have a lot of committees, you are in trouble. Odds are you have no decision makers, just lots of excuses. And while you’re at it, look at your management. Are they inflexible or will they try new ideas? Do they really listen and act? Is there an ideas budget? And is there one person truly in charge of the brand? There ought to be. Do operations and marketing love each other—really, really love each other?
If your manual is more than 23 pages long, including the cover, watch out. It’s called simplicity. And part of that is cleanliness, which is next to everything.
Be careful that there is a clearly understood plan and direction, not just more sales. What about profit for the operators? And make sure a good percentage of those profits goes into growth, not just into pockets.
Be consistent. Watch out for fads versus longevity. Be contemporary, but don’t change your menu every day. And for your sake, don’t get caught in the less-product-for-the-same-price-in-the-same-size-package movement. Shame on cereals.
I read a recent research study from a well-known magazine. Almost 38,000 sampled people had recently made more than 98,000 visits to quick serves around the country. The results are a road map for you to follow. The study found that people got good service but lousy food. Cheap food may not be a bargain, because people look for more than taste—they want value, what you get for what you pay.
They also want a better experience. They want the place to be nice as well as valuable. They said that sometimes fast food isn’t, and that is a huge problem. And, no surprise here, they talk thin but eat fat. We offer them healthy alternatives, but food reward wins every time.
So again, look at your organization. If lots of this list is happening, buy your regional manager lunch at your place and have a talk, or e-mail me. I love this business and you’re the new generation that can make it all better.
Happy Trails, a Peaceful Life, and a Powerful Brand.
Food & Beverage
Thank you for signing up to receive QSR's flagship e-newsletter, A.M. Jolt. To help us better serve the information needs of our audience, please complete the information below.
In addition to A.M. Jolt, we also offer the following e-newsletters and communications. Please mark those you would like to receive.
- Business Services
- Cleaning & Sanitation
- Computer Systems/Software
- Dispensing Equipment
- Disposables, Packaging, Plastics
- Equipment Installation/Repair
- Financial Products/Services
- Food Products
- Franchise Opportunities
- Kitchen Equipment
- Safety Services/Products
- Security Systems