Consumer Trends | October 2014 | By Nicole Duncan

Cultural Cues

Internal culture changes can revitalize quick-serve operations.
Pizza Patrón’s “Pizza Por Favor” promotion was not embraced by all of the company’s franchisees. Pizza Patrón

Reinvesting in employee training, improved food quality, and more efficient supply chains are all viable options to strengthen an underperforming quick-service restaurant. But before any outward changes can take root, the core of the business must be unified, and several businesses are finding that a better internal culture can lead to better results.

“Why do cultures form? They really form around beliefs about what success is and how it is to be achieved,” says Tom DeCotiis, partner and cofounder of consulting firm Corvirtus, which specializes in company culture. “Culture won’t overcome a bad business idea, but it will sure as heck build a good one.”

Dallas-based Pizza Patrón began a culture transformation a year and a half ago. The company cut a third of its franchisee owners out of the system, which translated to roughly a quarter of all stores. Despite this reduction, Pizza Patrón is still seeing better performance and sales, thanks in large part to a more open and effective workplace culture.

“We’re on track to have our best year ever in the system,” says brand director Andrew Gamm. “We’re really pleased [that] after making some tough decisions, we’re healthier.”

A culture transition can involve reconstructing procedures, principles, and management structures. Before beginning such an involved process, a company should be certain it has a cultural problem, says John Childress, president and cultural transformation chair of the consulting group N2Growth Europe.

“The question I always ask when someone comes to me and says, ‘I think I need to change my culture,’ is, ‘How do you know it’s a culture problem?’” Childress says. When considering internal issues, he says, it is important to examine the company from the top down by looking at the leadership and management, as well as from the bottom up by considering hiring strategies.

Pizza Patrón’s 10-year anniversary as a franchisor—a time when the first franchisee renewals were coming to term—precipitated the company’s reflection and subsequent changes. Company executives thought there was room for improvement.

Victor Vazquez, Pizza Patrón’s business development manager, had worked closely with the franchisees and knew that systemic problems needed to be resolved.

“Because I have the relationships with the franchisees, I already knew that there were elephants in the room,” Vazquez says. “A year and a half ago, ... we made a huge decision to dismantle the franchisee program and focus on the company growth through company stores and selected franchisees.”

The strained relationship between Pizza Patrón and a number of its franchisees was a driving factor behind the company’s move to slow the program. One especially contentious case was the “Pizza Por Favor” promotion, in which customers would get free pizza for ordering in Spanish. The special was intended to appeal to Pizza Patrón’s large Hispanic customer base. After two months spent convincing owners, the promo ran in June 2012.

In the franchise world, such disagreements can often boil down to control. Franchisees sometimes feel they should be more autonomous because they are involved in the day-to-day operations, experts say.

“The stress of the franchisees is very real and palpable,” Childress says. “I think they always feel a little bit like somebody is taking advantage of them, or they don’t feel totally in control.”

Because Pizza Patrón’s Vazquez had worked closely with the franchisees, he knew both sides were unhappy with the arrangement. Part of the success in implementing the changes was Vazquez’s tact and amiable approach, which has earned him the nickname “the Velvet Hammer.” “It’s got to be smooth, but you also have to make sure you get the point across,” Vazquez says.

Vazquez met in person with each group in the system to discuss changes to the franchise disclosure document. He compiled a list of outliers and convinced Pizza Patrón CEO Antonio Swad that it would be in the brand’s best interests to part ways with them. Then the negotiations began.

“I’m not going to talk about the benefits for Pizza Patrón,” Vazquez says. “I’m going to spin it with how it helps him 100 percent: ‘Let’s discuss what we can do to help you go independent.’”

In addition to releasing the franchisees from their contract, Vazquez waived the two-year non-compete clause and offered to speak with the vendors and distributors so the franchisees could still work with them. For the groups that wanted greater control, it was an ideal situation.

Most were happy to take the deal. For those who did not take the offer, Vazquez says, he intends to enforce the original contract to the fullest.

“Culture building is a very hard-nosed process,” DeCotiis says. “It’s really a process of education and getting them to look at the things that they do that are contrary to their own success.”

In addition to a number of franchisees, three of Pizza Patrón’s 11 corporate employees, including the president, left after the changes. Swad assumed the president post, but the loss affected the workplace dynamic.

“To lose three managers, two of whom were executives, it changes the makeup of the company,” Gamm says.

DeCotiis says that in a changing culture, it is imperative to have employees unified under a greater goal.

“A cliché that we use is, ‘You carry the weak and shoot the stragglers,’” he says. “When they’re digging their heels in, they’re poison, and you spend way too much time managing that 5 percent.”

The experts agree that executives should champion cultural shifts by upholding the new procedures and leading by example.

“Most culture changes don’t work very well because they’re usually driven by the top down, and those at the top don’t model the behavior they want those at the middle and bottom to adopt,” says John Baldoni, chair of leadership development at N2Growth. “Senior leaders need to walk the talk.”

Vazquez says that after Pizza Patrón cleaned house, it helped to have an open-door policy with Swad. Executives promised transparency and honesty moving forward.

Today, Pizza Patrón has seven new stores under construction simultaneously—a company record. An additional 20 stores are also under development. “We’ll be able to replace the 25 percent that we closed, and hopefully open stronger and concentrate our efforts in Texas, Arizona, and Illinois,” Vazquez says.

Some of the franchisees who stayed with Pizza Patrón swapped store locations to better concentrate themselves geographically. This so-called “fantasy franchising” allowed franchisees to build a localized presence and team up with adjacent groups to share resources and form super cells.

In addition to happier franchisees, the atmosphere at headquarters in Dallas is more relaxed now that Vazquez and Gamm are no longer spending time putting out fires.

“We’ve still got a little work to do, but it’s a completely different company today than it was a year ago,” Gamm says. “It feels really good to have nothing but positive news.”

Although the morale boost and lowered stress levels are perks of the recent changes at Pizza Patrón, the new working environment is likely the result of a culture shift, not the cause of it, DeCotiis says.

“It’s not necessarily that people feel better about the place, but they’re more focused on it being successful,” he says. “There’s a big difference between being healthy and being strong.” He adds that a strong culture gets people to buy into the concept, but a healthy culture drives success.

The unique and admittedly edgy character of the Pizza Patrón brand has been consistently strong, but now that the company has become more efficient and leaner, it is healthier, too.

“We’ll continue to slim it down if we have to,” Vazquez says. “We lost the weight. We’re going to go to the gym and work out. This time it’s going to be muscle, not fat.”

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