Maintaining brand standards (oct 2014)

Maintaining Brand Standards When Franchising Copyright, The iFranchise Group, 2014. All rights reserved

The i Franchise Group

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About the Speakers • •

Mark Siebert, CEO, the iFranchise Group More hands-on experience than any other firm – – – –

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26 consultants with over 450 years of franchise experience Our consultants have worked with 98 out of the top 200 franchise companies worldwide Former CEOs, CFOs, and EVPs of major franchise companies Experience with start-up franchise programs, not just established franchisors

Breadth across four functional areas –

Strategic Planning

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Quality Control

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Marketing

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Implementation (Sales Assistance through Franchise Dynamics)

Franchise Dynamics –

200,000+ leads processed

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500+ sales per year

TopFire Media –

Nation’s first fully integrated media firm

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SEO, PPC, Social, Blogging, PR, and Mobile

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Both brand/consumer focused and franchise lead generation

Copyright, The iFranchise Group, 2014. All rights reserved.

The i Franchise Group

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About the Speakers •

Gaylen Knack, Principal, Gray Plant Mooty – – – – – – –

25+ years in franchise law Former in-house counsel public franchisor Best Lawyers in America 2010 – present Legal Eagle, 2007 – present Who’s Who of Franchise Lawyers 2003 - present Chambers USA – Leading Lawyer 2008 - present Frequently published author and speaker

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A lot to cover, so please hold questions

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Will email copies of this presentation, so you do not need to write notes

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A little about you?

Copyright, The iFranchise Group, 2014. All rights reserved.

The i Franchise Group

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The Quality Control Trade-Off • Many people think franchises have lower level of quality – just the opposite is true • The Quality Trade-Off – – – –

More difficult to control Higher Caliber More highly motivated Longer term

• Studies show franchisees outperform corporate operations

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The Four Pillars Of Quality Control

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Quality Control

The Four Pillars of Quality

• Franchisee Selection • Documentation & Training – the Tools • Support • Legal Documents and Compliance

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Quality Control Comes at a Cost The Four Pillars of Quality

• Franchisee Selection – Cost of walking away from a check – Higher costs of marketing

• Documentation & Training – First class tools, Intranet, video, etc.

– More staff required for more training

• Support – Cost of Staffing – Frequency of visits (travel costs, etc.)

• Legal Documents and Compliance – Enforcement actions – Costs of losing a franchisee (even an underperformer)

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Franchisee Selection

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Franchisee Selection • Maintaining quality control starts with the franchise selection process • Philosophy of granting franchises vs. selling franchises • Need to find like-minded franchisees who are a good fit with your system • Franchisees need to “buy into” your operating system • Look for franchisees who want to work within a system rather than change the system • Consider the use of personality profiling

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The iFranchise Group

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Five Critical Points of Qualification 1.

Capitalization 

Biggest reason for failure

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Can cause franchisees to cut corners

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Work ethic

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Business acumen

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“Job Specific” requirements

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Personality 

Experience in leading a team

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Tendency toward being an entrepreneur

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Honesty and ethics

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Philosophy and cultural fit

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Nature (Confrontational or adaptive)

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Compatibility (you are “married” for the next 20 years)

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Ways to Maximize Success in Selecting Franchisees •

Be proactive rather than reactive in generating leads

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Develop and then follow a well defined sales process

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Focus more effort on understanding the candidate’s qualifications and goals, and place less focus on closing the sale

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Consider incorporating a work experience into your sales process

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Have multiple people in your organization assess the candidate

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Speak with the candidate’s professional references, not only their personal references

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Don’t be afraid to reject candidates

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Tools That Will Help Franchisees to Maintain Your Brand Standards Copyright, The iFranchise Group, 2014 All rights reserved.

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Tools to Help Maintain Brand Standards

Brand

Brand Identity Manual

Design Criteria Guide

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Operations Manual

Consumer Marketing Resources

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Brand Identity Manual

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Proper use of logos

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Colors to be used in all marketing and decor

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Font styles and sizes

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Standard forms of communications

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In-store visual merchandising

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Design Criteria Guide To be used by the franchisee’s architect: • • • • • • • •

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Facility layout Interior design elevations Ceiling detail Mechanicals (HVAC, electric, etc.)

Lighting Millwork drawings Signage Material specifications for counters, flooring, wall treatments, tables and chairs, etc.

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Best Practices Operations Manual • Serves many functions – – – – – –

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Sales Tool Training Guide Reference Tool Liability reduction Enforce system standards for Quality Control Extension of the legal documents

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Developing a Best Practices Manual • Determining what to document • • • •

Scope of the manual Standards to be enforced Procedures to be required Procedures to be recommended

• Manual development process • Gathering pertinent information • Determining best practices • The drafting and review process

• Use of Subject Matter Experts

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Development of Best Practices Operations Manual

Discussions with Key Stakeholders

Review existing material, forms, & documentation

Develop preliminary outline

Determine gaps in current documentation

Assign responsibility for content creation

Identify Subject Matter Experts for gaps

Interview Subject Matter Experts

Onsite observation of units & documentation

Resolve Best Practices Conflicts

Draft material to cover all identified gaps

Edit all material into common style & “voice�

Revise first draft of Operations Manual based on client input

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Beyond the Operations Manual • Faster growth requires formal training programs – For your staff – For franchisees

• Train-the-Trainer too – Franchisee will train their staff – Should have tools to do so

• Video pushes QC to lowest level of organization • On-line training decreases costs, increases quality, and can decrease liability – Customized by employee – Document what is reviewed and test scores – Lowers on-site training time and costs for both the franchisor and the franchisee Copyright, The iFranchise Group, 2014 All rights reserved.

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Consumer Marketing Resources • All consumer marketing undertaken by your franchisees should be approved by the franchisor • As a franchisor, you must provide franchisees tools that will make their local marketing more consistent and successful

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Consumer Marketing Resources Target Marketing Approach

Point Of Sale In-Store Marketing

Community Marketing Global Marketing Copyright, The iFranchise Group, 2014 All rights reserved.

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Consumer Marketing Resources Online Ad Builder Site

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Consumer Marketing Resources Annual Marketing Calendar

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Using Field Support to Maintain Your Brand Standards Copyright, The iFranchise Group, 2014 All rights reserved.

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The Role of Field Support in Maintaining Brand Standards

Key roles of your field support staff: • Brand ambassador • Trainer and coach • Conduit for sharing best practices • Field marketing support • Financial analysis

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The Role of Field Support in Maintaining Brand Standards Issues to consider when setting-up your field support program: • Necessary qualifications for field consultants • Span of control between field support consultants and franchise owners or locations • Frequency and duration of visits with franchisees • Role between business coach and monitoring of brand standards • Documentation of the field consultant’s activities

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Legal Issues In Managing Quality Control Copyright, The iFranchise Group, 2014 All rights reserved.

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Protecting Your Brand Trademarks Many new franchisors don’t understand the importance of protecting their trademarks. Here are a few key questions to ask:  Why should I protect my trademark?  Should I protect my trademark in my State, or at the Federal level?  What trademarks should I protect?  How long does the registration process take?  How are franchisees able to use my trademarks?

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Legal and Sales Best Practices

Limiting your liability:  Be sure your contract and FDD have the necessary levels of control  Document should allow you the flexibility to make changes as the system matures  Develop and monitor a system for monitoring contract compliance  Develop and monitor a system for determining financial qualification  Train your franchise sales force on quality standards for franchisee selection  Notice to cure and default process used when appropriate

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Accounting and Auditing Best Practices

Limiting your liability: ď ś Install a system for tracking and documenting that each franchisee is maintaining proper insurance coverage ď ś Install a system for tracking and documenting that all franchisee licensing is kept current ď ś Install a system for documenting appropriate franchise background checks, financial diligence, representations.

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Operations Documentation

Limiting your liability:  Ensure that your franchisees are properly representing themselves as an independent business, and not as your agent  Operations Manuals must provide you with adequate brand control but should not be too prescriptive – a fine line  Must avoid potential areas of negligence or take great care when prescribing actions  Should cross-reference regulations and not cite them  Should be updated annually and reviewed by professionals and attorney.

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Operational Support

Limiting your liability:  Have a standard compliance checklist for field support that does not leave room for interpretation  Make sure your support people document all necessary information and that you keep a detailed file on each franchisee including all correspondence, contracts, FA, FDD, etc.  Supplement field support visits with Secret Shopper Programs  Document all client calls using Contact Management Software  Incorporate a “smart writing” directive and train your staff on a regular basis on appropriate franchisee communication and interaction– especially emails!  Develop a Field Support Manual for identifying problems and maintaining best practices.

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10 Common Mistakes in Quality Control 1.

Poor franchisee selection

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Insufficient training provided to franchisees before they open for business

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Failure to adequately document quality control standards within the operations manual and training materials

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Failure to update the operations manual at least annually

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Hiring staff that are not qualified to support franchise owners

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Failure to address franchisees that are not in compliance with the system’s standards

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Lack of trademark protection for the franchisor’s brand

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Failure to adequately monitor the quality of suppliers to the franchise system

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Inadequate field consulting practices (visit frequency and effectiveness)

10. Lack of ongoing training provided to franchisees and their employees Copyright, The iFranchise Group, 2014 All rights reserved.

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Questions