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Flexible Franchises

(@Anonymous)
New Member

I thought you may like to see yesterdays article in the WSJ:

New Franchise Idea:
Fewer Rules, More Difference
Freedom to Alter Menus,
Prices May Help Chains
Compete Better Locally
By RAYMUND FLANDEZ
September 18, 2007; Page B4

Customers going into one of the two-dozen Wings Over buffalo-style chicken-wing franchises across the country won't find raspberry chipotle sauce on the menu -- unless they are in Florida.

What's unusual, though, isn't the Florida establishments' sauce preference. It's that Shawn Rouse, the co-owner of the two franchises in the state, was allowed to put the sauce on the menu to begin with.

BREAKING THE MOLD

The Situation: Some franchises are giving franchisees the freedom to run establishments as they see fit -- from changing menus to setting prices.
The Pros: It allows franchises to better compete with local businesses and other franchises that have a more cookie-cutter approach.
The Cons: Service and quality can differ among locations. And individualization can dilute brand recognition.And the sauce is just part of it. Wings Over restaurants can incorporate the city or region where they're located into the name -- say, Wings Over Washington, D.C. -- "to make it feel more homey," says Mark Simonds, president of the Agawam, Mass.-based Wings Over franchise chain. In addition, stores in college towns, where Wings Over is popular, don't have to open until 4 p.m. and can close at 3 a.m. to 4 a.m. Usual weekday hours are 11 a.m. to midnight.

"We really endeavor to let our franchisees have more of a say in the company," Mr. Simonds says.

Freedom to Fiddle

Franchises are sticklers for the cookie-cutter approach. Rules and processes are set down for owners buying into a uniform system. The decor has to be set just so; the products have to be prepared a certain way; and all signage needs to be consistent.

But a crop of franchisers are taking a very different approach: They are giving their franchisees some freedom to run their own operations, much like an independent small business -- from personalizing store names and menus to fiddling with prices.

Part of the strategy is to give franchisees the flexibility to compete against independent businesses. But many franchisers also see it as a way to attract franchisees, who have a growing number of businesses to pick from. More than 900 new concepts have begun franchising since 2003, according to the International Franchise Association, based in Washington, D.C. There are nearly 800,000 franchised businesses in more than 80 different industries nationwide.

Of course, this un-franchise way of doing business has its risks. With personalization, customers may not necessarily get the same level of service or quality in each of the franchises they patronize. And individualization can dilute brand recognition for a franchise.

"There are usually strict franchise agreements so that you can maintain the integrity of the brand," says Gary Findley, chief executive of Findley Group, a Waco, Texas, franchise developer. "That's what you're trying to do, and if you give people a lot of latitude out there, you lose the branding and, in my opinion, you lose value."

Kat Tidd, founding partner of Kat Tidd P.C., an Addison, Texas, franchise law firm says, "Generally, what I tell clients is that you can pretty much frame out a franchise relationship to be whatever you want that you can conceive of. But the question is, does it make good business sense?"

From the Bottom Up

It does for Mike Ferretti, president and chief executive of Great Harvest Bread Co., who calls the approach to running his business "freedom franchising," a term the company recently trademarked. He describes it as a culture in which the best ideas in running the business come from the bottom up, not top down.

The Dillon, Mont.-based company encourages its franchise bakers to come up with new ideas, such as a recipe for chicken salad, and share it with other franchise owners through an internal company Web site. If the idea works, then it can be rolled out in other markets, perhaps tweaking some ingredients, he says.

Mark Simonds, president of Wings Over
There are only a few stipulations. Bakery owners must use approved wheat, which the company supplies; respect territorial rights; and pay the royalties, which range from 4% to 7% of total sales. Other than that, "we encourage bakeries to make decisions on a local basis that works for them," says Mr. Ferretti.

That kind of thinking appealed to Michael Kenny, who runs a Great Harvest franchise in Lititz, Pa. "With Great Harvest," says the 46-year-old franchisee, "there are great resources and a collective knowledge to draw upon, but you know you're not required to do any of it. You can digest it and take from it what you will and make your own independent decision."

That means Mr. Kenny doesn't have to make pumpkin-nut spice cake just because it's October. But if he does, he can add nuts or an extra spice to it. Also, while not all Great Harvest stores have hard-crusted bread on the menu, Mr. Kenny added it to his store because he couldn't afford to ignore Northeastern customers clamoring for it. He also uses local honey, dairy and fresh herbs from farms that dot the Lancaster County countryside.

In addition, while other franchise eateries around the area "don't even get to decide where they can buy their napkins from," Mr. Kenny says he has the freedom to shop around for the best price for supplies.

Price Push

Pricing freedom is key for Beef O' Brady's Inc. franchisees.

Four months ago, the Tampa, Fla.-based sports-pub franchise unveiled a new corporate menu with a 3% price increase, to $6.99, for 10 chicken wings with bleu cheese and celery. The increase was in response to a 28% jump in the price of wholesale chicken wings in Florida, to $1.46 per pound from $1.14.

But Don Bosko, owner of five Beef O' Brady's franchises in the state, decided the 3% jump wasn't large enough for his establishments, whose buffalo-style chicken wings account for 26% of total sales. So he checked with competitors as well as other franchisees in his region and decided to raise his price to $7.49.

"We don't like a jump like that either," says Mr. Bosko of the price increases. Still, he's taking the gamble even if it means answering to his loyal customers. "We've had it in place for three weeks now," he says. "We've only had two complaints that I know of."

Nick Vojnovic, president of Beef O' Brady's, says the company was concerned about losing business in that market because of the higher prices. But he says his franchisees knew the market better there so he let them change the menu price.

"We are kind of unique in the latitude we give our partners," Mr. Vojnovic says.

Still, with 230 locations and 21 more slated to open this year, the franchise is going through some growing pains. "As we grow, we do feel that we need to be tighter and do more streamlining...to create a clear brand for our guests so that they know what to expect," Mr. Vojnovic says. He says, for example, that some franchisees haven't done a good job with store decor; some haven't put up pictures of local sports teams on the wall that reflect their community better.

"Some customers don't realize that it's a chain," he says. "They figure it's locally owned and operated."

Quote
Topic starter Posted : 19/09/2007 1:40 pm
(@Anonymous)
New Member

Re: Flexible Franchises

This is a great article, it sounds like franchisors are wising up which could mean tougher competition for the independents

ReplyQuote
Posted : 21/09/2007 12:01 pm
(@Anonymous)
New Member

Re: Flexible Franchises

I would much more likely consider a franchise that was flexible like this - then you would feel you own the business and have the flexibility to change it.

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Posted : 22/09/2007 11:35 am
(@Anonymous)
New Member

Re: Flexible Franchises

Bizhub;32712 wrote: I would much more likely consider a franchise that was flexible like this - then you would feel you own the business and have the flexibility to change it.

I agree it looks like some of them are getting it right

ReplyQuote
Posted : 24/09/2007 11:46 am
(@Anonymous)
New Member

Re: Flexible Franchises

I think this is a great change in franchises but you have to be concerned that if you give the franchises too much rope they will hang themselves - there has to be some balance.

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Posted : 25/09/2007 12:23 pm
(@Anonymous)
New Member

Re: Flexible Franchises

SBA;32731 wrote: I think this is a great change in franchises but you have to be concerned that if you give the franchises too much rope they will hang themselves - there has to be some balance.

I agree one of the reasons why you buy a franchise is because it is mindless

ReplyQuote
Posted : 26/09/2007 11:42 am
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