In most businesses, the conventional wisdom is that your most important customers are those people who actually buy your products or services. That is, your customers. Sounds obvious, doesn’t it? But is this really the most effective and powerful way to run a franchise business?
The unique nature of the franchise model, where franchisors and franchisees operate in co-dependent relationship, can create an argument for franchisees to be placed at the top of the stakeholder pecking order.
In the simplest terms, happy franchisees make happy franchisors and only when this union is strong and thriving is there any real hope of happy customers.
While the ‘franchisee-first’ mantra does pop up from time to time in franchising, we don’t think we have ever heard the reasoning behind it, and the benefits that can flow from it, explained any better than in the inspiring example of the Popeyes Louisiana Kitchen franchise chain in the USA.
We came across this great article by Cheryl Bachelder, the CEO of Popeyes, in the Harvard Business Review and we just had to share some of the amazing lessons it highlights for all leaders of a franchise business.
Cheryl, who had held a number of senior executive roles at major food franchising companies such as Domino’s and KFC, became the CEO of Popeyes in 2007.
In the article, she recounts the experience of her first big franchisee meeting in Orlando where one conversation stuck in her mind. A veteran franchisee, a 68-year-old man from Texas, said: “Miss Cheryl, don’t expect us to trust you anytime soon. We’re like abused foster children, and you’re just a new foster parent.”
As Cheryl explained, it was a humbling moment and a realisation that the company’s relationship with its franchisees was severely strained. Until the company demonstrated some value to its franchisees, she knew it was unrealistic to expect any enthusiasm from them in return.
Popeyes was struggling due to lack of strategy, too much short-term thinking and little consideration for new product innovation. There was no brand building, no national advertising, and consumer awareness was low. These issues, along with poor financial results, created an angry and frustrated group of franchisees.
In order to turn Popeyes around, Cheryl and her team came up with new model dubbed ‘servant leadership’, in which the leaders of the company would put people above self-interest. And the most important people in the organisation, which were to be prioritised over all other stakeholders, were its franchisees.
“The more my team and I talked about it, the more we saw the franchisees as our primary customers. They have mortgaged their homes or taken out large loans to open restaurants. No one has more skin in the game – they have no plan B.”
By making Popeyes franchisees the company’s most important customers “we decided to measure our success by their success,” Cheryl says. We began focusing on the metric that matters most to owners, which is restaurant-level profitability. Franchisees depend on those profits for their income and for the cash flow to open new locations. We hadn’t even been measuring that number, but we began tracking it very closely.
Cheryl says a key focus of the Popeyes turnaround was on regaining franchisees trust and firing up their enthusiasm for the future, which takes time, as “franchisees have elephants’ memories”. “In franchising you’re only as good as yesterday’s results—there is no emotional bank account into which you can make deposits.”
She says a pivotal moment in the turnaround came when the company proposed to increase franchisee funding for a national advertising campaign. They agreed but only if the company committed $6 million to increase the number of weeks of advertising. “That was a big ask. It would require board approval and would lower our earnings. But it was essential to gaining systemwide franchise alignment. We committed the dollars and saw it through.”
Nine years later, and Popeyes’ results have improved dramatically. While its relationship with franchisees isn’t perfect, it is remarkably better than at that 2007 meeting in Orlando. “We made some missteps along the way. But we kept at it, we found some winning new products, and sales and profitability began to improve.”
Cheryl is a passionate advocate for franchising and the Popeyes turnaround is a wonderful case study in what happens when leaders think about serving others – in this case, their franchisees.