FRANCHISE RELATIONS IN ACTION

Moderators: Barbara Moran-Goodrich Moran Family of Brands CEO/President Barry E. Miller Sylvan Learning Center/NBM Management of OH & PA Franchisee/Owner

Speakers: Mitch Cohen Baskin Robbins/Dunkin Donuts Franchisee/Owner Tim Lightner Two Men And A Truck Franchisee/Owner Jack Pearce, CFE Annex Brands, Inc. Exec. Director Franchise Integration Bob McDevitt, CFE Golden Corral Buffet & Grill Sr. VP Denise M. Cumberland, Ph.D. Spalding University Assistant Professor & Director

BARB MORAN-GOODRICH

As Co-founder of Moran Family of Brands, Inc., Barb Moran-Goodrich has over 22 years experience within the franchising and automotive industry. This includes owning and operating a transmission repair franchise. Barbara presides as CEO/President of Moran Family of Brands, franchising automotive service brands include Mr. Transmission, Multistate Transmission, Dr. Nick’s Transmission, Milex Complete Auto Care, Alta Mere Toys for Your Cars and recently added Smartview Window Solutions, with locations in 22 States.

Moderator

BARRY E. MILLER As a 27 year multi-unit franchisee of Sylvan Learning Centers. Barry is the owner-operator of both Sylvan and ETS/Prometric sites in Ohio and Pennsylvania. He is past president of Sylvan FOA Inc. In addition Barry Served two years as IFA Franchisee Forum chair, and is a member of the IFA , and the IFA Educational Foundation Board of Directors. His education includes both Bachelor of Engineering and MBA Degrees.

Moderator

CASE STUDIES Presented By:

Mitch Cohen Baskin Robbins/Dunkin Donuts Franchisee/Owner Tim Lightner Two Men And A Truck Franchisee/Owner Bob McDevitt, CFE Golden Corral Buffet & Grill Sr. VP

Barry E. Miller Sylvan Learning Center/NBM Management of OH & PA Franchisee/Owner Jack Pearce, CFE Annex Brands, Inc. Executive Director Franchise Integration

BARRY E. MILLER As a 27 year multi-unit franchisee of Sylvan Learning Centers. Barry is the owner-operator of both Sylvan and ETS/Prometric sites in Ohio and Pennsylvania. He is past president of Sylvan FOA Inc. In addition Barry Served two years as IFA Franchisee Forum chair, and is a member of the IFA , and the IFA Educational Foundation Board of Directors. His education includes both Bachelor of Engineering and MBA Degrees.

CASE STUDY TOPIC Presented By:

CHALLENGE

• Technology and the Internet created new business opportunities not addressed in the Franchise Agreement

ENGAGEMENT APPROACHES

STRATEGIC

FOUNDATIONAL

PROGRAMMATIC & TACTICAL

FULL COMMUNITY ENGAGEMENT

INDIVIDUAL ENGAGEMENT

CEO Corner Annual Conference National Advertising Committee Monthly Town Hall Calls Monthly Regional Calls ZeeTV Lunch & Learn (w/ FOA) Compliance/QAR Bi-weekly Newsletter

FOA Board FOA License Committee 1-800 Support Center Advisory Councils Regional Town Halls

Consulting Calls/Visits Top Performer Visits

ROLE OF THE FAC

• The Sylvan Franchise Owners’ Association and Sylvan Management worked together to take advantage of new business opportunities.

• Solutions were jointly developed to solve a complex set of issues.

WORKING TOGETHER • Timing to the market was critical, so avoiding costly and

lengthy litigation was imperative for business success. • Over several months the Sylvan FOA Board and Sylvan

Management met via conference call, and multiple in person meetings on two separate issues:

1. Franchisee benefits from central electronic delivery of

Sylvan services within the L.A. specified, territory boundaries.

2. In, and Out of Center delivery of Sylvan Services by

Franchisees using the latest internet delivery technology including Apple IPads and other currently available technology.

OUTCOME

• Extremely complex business issues were resolved without litigation due to a commitment to negotiated solutions by both the Franchisor and Franchisees

LESSONS Conclusion: • Good Franchisee Relations was the

key to managing changes to the Sylvan business model, to the mutual benefit of all involved.

MITCH COHEN Manages the production and distribution operations for his network of 10 franchise locations in Long Island, NY which include Baskin-Robbins, Dunkin’ Donuts restaurants. He has been an active franchisee for more than 28 years including his current roles as Baskin-Robbins Advisory Council Co-Chair, Co-Chair of Dunkin Donuts Baskin Robbins Community Foundation as well as on the IFA Board of Directors, IFA Presidents Council, FRANPAC and Franchisee Forum board member. In 2009, he was honored as Franchisee of the Year and received the Pathfinder Leadership Award in 2007. Mitch attended St. John’s Military Academy, Lincoln College and Eastern Illinois University; he has been a guest speaker at NYU’s School of Business.

CASE STUDY TOPIC Presented By:

CHALLENGE • Working with two Brands owned by the

same parent company. • Making one of the brand’s product

available in the other’s restaurants • Ad fund Contribution • Proximity • Marketing to our guest

ROLE OF THE FAC • Working together with both Brands

advisory council • Insure profit and store sales were not

affected negatively • Keep the guest in mind at all times • Make sure it’s a WIN, WIN, WIN

WORKING TOGETHER

• In this case we had 2 FACs and the Brand

• Created a plan to insure all parties benefited

OUTCOME • There are now over 400 Baskin Robbins

in California selling DD Kcups • There are over 25 Dunkin Donuts selling

Baskin Robbins take home quarts • Both Ad funds are increasing • The Brand has increased sales and

more Brand awareness in markets where they were not.

LESSONS • Early inclusion with the FAC helps take

the tension out of the relationship • Increase the trust between the Brand

and Franchisees • Always think of the Franchisee,

Franchisor, and the guest

TIM LIGHTNER Tim is a 20 year franchisee of TWO MEN AND A TRUCK®. serving 5 counties in South Central and South Eastern Wisconsin. Tim recently completed his 8th year as member of TEAM, the FAC, and serves on several local boards. Tim is an IFA member, member of the Franchise Congress, serves on the Franchisee Forum and the special task force on franchise relations. Tim lives in Madison, WI with Sheri Rice and daughter Alexandra.

CASE STUDY TOPIC Presented By:

CHALLENGE • Technology Implementation

– Home Office had researched and decided to implement IP phone technology based on its potential benefits and promise.

– Implementation timeline was presented and options provided for rollout.

– Vendor issues, excessive expense, and other issues became quickly apparent.

ROLE OF THE FAC • TEAM (FAC) fielded calls from

franchisees. • Brought Issues to Home Office. • Detailed individual issues were shared

to determine common issues. • FAC acted as conduit between

franchisees and Home Office.

WORKING TOGETHER

• Respectful, honest, open communication.

• Conference Calls, field visits and vendor meetings.

• Kept a customer focus and brand focus through process.

OUTCOME • Initiative was dropped. • Vendor (large telecom) could not live

up to quality of service promised in contract.

• Working together Home Office and franchisees pulled out of commitments.

• Refocused on other more profitable endeavors and initiatives.

LESSONS • Open and honest dialogue are critical. • Keeping the brand and the customer

in focus keeps stakeholders pointed toward common goal.

• No room for grudges. • These issues don’t always have to go

through the FAC. • Communication must be cultivated

and maintained.

BOB MCDEVITT Bob McDevitt has been in the restaurant business over 30 years. He joined Golden Corral in 1994 as Vice-President of Marketing, responsible for Marketing, Food and Beverage and Purchasing and Distribution. In 2002, Mr. McDevitt was promoted to his current position as Chief Franchise Officer responsible for Franchise Operations, Franchise Sales and Franchise Development. Mr. McDevitt also manages the Quality Assurance Department responsible for execution of restaurant assessment, food safety and customer feedback systems for all Golden Corral restaurants. In January of 2012, Mr. McDevitt assumed responsibility for the Purchasing and Distribution Department responsible for purchasing and distribution for all of the restaurants.

CASE STUDY TOPIC Presented By:

CHALLENGE

Convince the franchisees that a change to National TV from the current system of spot TV through co-ops can be effective and equitable and is in their best interest as a system and as individuals.

CHALLENGE • Give up local control /

autonomy. • Create an equitable formula so

no one loses. • Results worth the risk (not

testable). • Franchise Agreement

ROLE OF THE FAC

The FAC was used for its intended purpose: as a sounding board for input and ideas on the idea itself; and, importantly, a process to best educate and involve the total community.

ROLE OF THE FAC

• It is an achievable goal and how.

• Review of “equity” formula. • Review of evidence suggesting

potential success. • Develop a plan to educate

franchisees and garner support.

WORKING TOGETHER

The FAC supported the idea, but recommended spending the time and effort to do a road show series of meetings, inviting every franchisee to hear a description of the program, the equity formula and the likelihood of success.

WORKING TOGETHER

• 30-day traveling media plan road show.

• Market specific discussions. • Franchisee specific impact. • One-on-one questions and

support building.

OUTCOME

• Over 90% of system expressing support.

• FAC confidence in supporting the program.

• Program rolled out in January 2009.

• Franchisees supported an increase in spending in 2010.

LESSONS

• Sometimes the FAC isn’t enough.

• On major issues, give the FAC some political cover.

• The better you communicate, the stronger your support.

JACK PEARCE Jack Pearce is a Certified Franchise Executive currently employed as Executive Director of Franchise Integration at Annex Brands, Inc., a 430+ unit franchise organization comprised of five unique brands within the mail and parcel, custom packaging and shipping industries. He was formerly the Chief Operations Officer and Chief Financial Officer at Navis Logistics Network and serves on two national IFA committees, Franchise Relations and Information Technology.

The Impact of Multi-Brand Acquisitions on a Franchise Advisory Council

Presented By:

CHALLENGE Annex Brands Case Study

• Current market conditions demanded unique and creative growth strategies.

• Multi-brand acquisitions were an alternative to organic growth, but with them came franchise relations challenges.

• Difficult to maintain a system-wide “win-win” culture among multiple brand constituents.

• Need to develop an advisory structure to equally serve each brand’s needs while still operating effectively and efficiently.

CHALLENGE • Acquired and combined five unique brands within

the mail and parcel, home office services and residential custom packaging and shipping industries in order to achieve a franchise vision: “Building a franchise network to provide more service to more people in more places”

• Each brand included an FAC group – Pro: Each FAC contributed valuable input – Con: Duplicate structures added redundant

costs and operating inefficiencies • Challenge: maintain the advisory and involvement

components of each FAC while eliminating costly duplication

ROLE OF THE FAC • Typical Franchise Advisory Councils are intended to

embrace and harness the front-line experience and knowledge of current franchisees for the mutual benefit of the entire franchise organization.

• The FAC concept contributes to the key principles for success in franchising, that is – Establishing a positive company culture – Improving or supporting strong franchise relations – Assist with complex organizational development – Support a common set of operating techniques

WORKING TOGETHER

• Preliminary idea was to select FAC reps from each brand, a “cross pollination” type of structure

• Collaborative discussions between franchisees and franchisor revealed the five brands all fell within two mutually exclusive groups: – “Retail” locations selling over-the-counter – “Commercial” locations selling via outside sales

representatives and client relationships • These two “business model” groups clearly defined

support, operations and marketing needs • With assistance and “buy-in” from the multiple FAC

groups all agreed changing to a business model structure would best serve all the brand’s needs

OUTCOME • Legacy FAC groups were actively involved in the

process of completing the organizational change • The entire process took a fair amount of time,

building of trust, alignment of goals, effective franchise relations and strong communications

• Franchisee satisfaction improved as the benefits of “concept-based” support and structure were realized by all parties

• FAC efficiency improved as problem solving, strategic development and operational issues became more concept-centric

LESSONS • Effective franchise relations lead to a

variety of enterprise benefits, including: – Even in a multi-brand acquisition growth

environment each brand has been able to retain their unique market identity

– The resulting concept-centric FAC groups have become strong advocates and communication forums for all brands

– Franchisee satisfaction and approval have grown with the success of the FAC collaboration efforts

LESSONS • Increasing franchisee satisfaction and

trust directly translates into: – New benefits realized from intra-brand synergies

and referrals – All parties realized alternative advantages from

the strength and benefits of a multi-brand market penetration strategy

– Created stronger buying power in combined marketing and supplier programs

– New strength in franchise development based on a wider range of business model opportunities

DENISE CUMBERLAND, PH.D.

Denise has over 20 years of experience in franchising. As Director of Insights & Innovation for Yum! Brands she forecasted trends based on restaurant data and consumer research. She is now a professor in the business school at Spalding University and she conducts research and assessments for franchise boards and advisory councils.

EFFECTIVE FAC Presented By:

A FRANCHISEE LAMENT The issue with franchise boards is mistrust. We spend a lot of time and money going

nowhere. We ultimately get somewhere, but it takes

too long. We should grow franchisees who sit on these boards and not just let them be puppets of

some type of anarchy scheme. We are all human, but we have to do a

better job of building trust.

SEEKING ANSWERS What are the reasons that franchise councils and

board form?

What types of stakeholder relationships exist?

What roles do franchise councils and boards

play?

What practices can facilitate more effective

councils and boards?

SOURCES FOR INFO

Qualitative investigation

Franchisees & Franchisors 25 Interviews

FAC’s FAB’s

Ad hoc franchisee groups

Board Types

Industries

Restaurants Automotive Beauty

Tax services Marketing Health care

BOARD ROLES

Role #1: Spreading the News

Strong alignment between zees and zors

Role #2: Promoting Power Plays

Zors focus on representation and legitimizing Zees focus on monitoring and decision-making

Role #3: Bridges & Bonds

Description of board roles varied somewhat depending on interviewee status.

FINDINGS Governance patterns shared amongst board types:

• Councils and boards favor elections

• Meetings occur at least quarterly

• Communication from board to constituents haphazard

• Role ambiguity leads to distrust

MORE SOURCES 8 Months spent inside three franchise organizations.

Portini’s

Restaurant - 150 Units

- Original Owner

FAC - Elected

- 7 Members - 20 to 25 years old

Zen Masters

Health Services - 70 Units

- Original Owner

FAC - Elected

- 6 Members - < one year old

Euro Salon

Personal Service - 1300 Units - Equity Firm

FAB - Elected

- 7 Members - 30+ years old

FOUR RELATIONSHIPS

Partnership Model

Political Model

Supporters Club Model

Monitoring Model

Allies

Agents

Activists

Antagonists

THE DYNAMICS

DYNAMICS

Working Together

United Front

Tension

Power & Politics

“A board of directors” Beth w.

“Developing the brand” Connie G.

“Bad publicity leads to mutual annihilation” Franklin C.

“Danger of mouthpieces for the corporation” Sam P.

“Creating a list of grievances” Dale C.

“Wanting to make things work” Tom C.

“Ensuring test marketing of new products” Toby R.

BEST PRACTICES Initiate early in life cycle of system Clarify purpose of council regularly Bylaws created jointly Decision-making span of board clarified Training for chair and new members Accountability for communication to constituents Social capital processes built-in Annual board evaluations Benchmarking conducted Built in mechanism for council survival

A FRANCHISOR’S PLEA What I would like to learn is whether there is a better way to hardwire a

franchise board so that we work together.

Is there something plumbed into the system to help create transparency.

Now that would be nirvana.