The Franchise Fix: The Business Systems Needed to Capture the Power of Your Food Franchise

By Aicha Bascaro and Aziz Hashim

The Franchise Fix helps franchisees set up their food franchise business for success. Investing on a proven food franchise does not guarantee success for the franchisee. To be a successful franchisee, franchisees must set up the right management systems to support their business as well as take advantage of everything the franchisor has to offer. The Franchise Fix is a step-by-step guide that shows franchisees how to do exactly that! Covering the winning systems and processes that food industry veteran Aicha Bascaro discovered from working with hundreds of successful franchisees across the US and around the world, The Franchise Fix helps franchisees take control of their food franchise and increase their profits.

• Language: English
• Publisher: Open Road Integrated Media
• Release date: Mar 6, 2018
• ISBN: 9781683507499

Book preview

Introduction

The best way to predict the future is to create it.

– ABRAHAM LINCOLN

Sixty percent of restaurants fail in the first three years of operations. Paul, a real estate broker by trade who’d recently bought his first food franchise, read this statistic on the Internet and his heart sank. He took a moment to take a breath and, as he was exhaling, he thought, I had no idea! He was doing research to find answers to his questions. He was a new franchisee and knew very little about the food industry. He figured that if he invested in a food franchise, he didn’t need to figure out things on his own; that it would be easy. That the franchisor would give him everything he needed to run it and be successful. After all, so many were doing it, and he considered himself a pretty smart guy. How hard could it be, right?

Now that Paul had opened one location, he was starting to question whether he’d made the right decision. Owning and running a franchise was not everything he thought it would be. As he was going through the franchise training, he realized that he wasn’t getting everything he needed to run the business. There was a big chunk of things that were not included, and every time he asked about them, he was told, You take care of that on your own. He learned that the brand only provides the things that are directly related to executing the image, the product, and the service, but that there is no guidance on banking, managing staff, or even how to do local store marketing.

So, there he was, with turnover issues and a downward sales trend. Even though he was short-staffed, his labor cost was high and his food cost was going up and down every month. He needed help…fast!

Paul worried that he’d made a mistake. What am I doing in an industry that I know nothing about?! He was a 20-year professional in the real estate business. He had done well, was respected, and had received several accolades in his industry. He could carry out real estate transactions in his sleep and, while that was almost boring, it was also stressful. He was looking for a place to put his savings that could be a secure investment and allow him to grow his money and eventually retire comfortably with his wife. That’s when purchasing a franchise came to mind. After doing a significant amount of research (obviously still not enough), he chose the brand in which he wanted to invest. He thought it was the answer to his prayers.

But after months of analyzing his problem, the more he researched, the more questions he had. A lot of them were about how to implement all that stuff in his franchise that the articles speak about and still manage to have time to sleep and eat. In the meantime, his stress level was increasing and he was losing sleep worrying about everything. His relationship with his wife and kids was suffering because he was distracted and irritable. He began to realize that he needed to do something before things got worse.

One day, when Paul was drinking his morning coffee, and before all of the problems came back to haunt him, he thought about the dream that started it all. He remembered that his goal was to cut back on his real estate business and, little by little, spend more time in his franchise, eventually opening a second, third and even fourth location, with a supervisor to look after them and report back to him on the state of the business. He would then be able to spend more time with his wife, never miss any of his kids’ baseball games, and even take a trip once in a while without having to worry about money, clients, or monthly quotas. And then his thoughts were interrupted by a call from an angry customer, who happened to be his cousin, because one of his team members was rude to him at the restaurant yesterday.

Paul is far from alone in his pain and concern. As a 25+ year veteran in the food industry, I have seen this too many times in many franchisees and restaurant owners with whom I have visited and worked. So many who invested in a franchise with little or no experience and needing and wanting so much help. In many cases, the Fix was easy: just a little better scheduling, a little more fraud control, a little less waste, or some more marketing. In other cases, it was much more complicated. The good news is that there are still a lot of options for you. It will take commitment, learning, implementation, and fierce follow-up. But if you do this, there will be a light at the end of the tunnel.

In this book, you will learn that investing in a franchise can be a great decision, what you can and cannot expect from your franchisor, and what your role and responsibilities are as a franchisee. You will understand what it takes to be the leader that people are looking for and how to create a culture of which you can be proud. You will also understand the importance of having the right people in the right roles, the steps to make it happen, and the value of taking care of them so that they stay with you for a long time. You will understand how providing the right tools can have an impact on employee morale, work efficiency, and the bottom line. You will know the numbers on which you must focus to help move your franchise in the right direction. You will learn the profit control points of the Food Service Holy Trinity™ of Sales, Food, and Labor and what you need to do to master them. You will also know the right amount of capital you need to get your dream rolling, and the systems that you need to put in place to make sure that the money that comes in makes it to the bank. And finally, you will understand how a marketing plan will help you get new customers–and have your existing customers come in more frequently.

This book is for every Paul out there who has made a huge investment in a food franchise with little or no knowledge but has the commitment and determination to learn, grow, and do the work necessary to ensure that he/she is successful and make his/her dreams come true.

If this is you, buckle up and let’s get started….

Chapter 1

Understand What a Franchise is

To be successful, you have to have your heart in your business and your business in your heart.

– THOMAS WATSON JR.

When I graduated from high school, I dreamed of being a fashion designer and entrepreneur, which guided my decision to go to college and get an Associate of Arts degree in Fashion Design and Merchandising. After graduating, I opened a small boutique, a business venture that ended up in a painful and disappointing failure just one year later. I was young and stressed and decided to get the easiest possible job where I could make money and still pay my bills. That is how I entered the food industry and my first job as a pizza delivery driver.

Back then, I didn’t know the distinction between a brand and a franchise–or between a corporate and franchise store. All I knew was that I was having fun and learning all the things that I should have already known as a business owner. I was lucky that I started in a corporate store where profit and loss (P&L) statements were shared openly, and where training procedures were being followed with great discipline. I saw how assistants became general managers–and I was hooked!

This made me curious to learn everything my GM was willing to teach me, and that eventually landed me in the manager-in-training program. Within three months, I was the general manager of my first store, which led to my first experience of fixing franchises. That first store was losing money. On my first day as a new manager, my supervisor sat down with me and we reviewed the store’s P&L together. Then he proceeded to teach me the break-even formula and what I needed to do with sales, food, and labor to get there. I worked extremely hard with my very small team, and within three months we turned a profit. It was amazing! I was quickly promoted to a larger store where staffing and turnover were a serious problem. I figured out how to stop the human resources drain; six months later I was running one of the highest-volume stores in Dallas. I loved it! It was like figuring out a puzzle to me. Once you found the issue, you attacked it with everything you knew, and voila–it was fixed! What fun!

About a year later, I applied for a job in the international division and, six weeks later, I became an international training specialist–part of the opening team for the first store in Spain. That was the next phase of my journey of fixing franchises. For the next three years, I had three-to four-month assignments in different countries to either open new markets or work with existing franchisees and their teams to address and correct different challenges that appeared in the business. I received as much knowledge as I gave in each of those jobs–and that became the foundation for the rest of my career.

Since then, I have had many jobs. I have been responsible for the financial performance of corporate regions in franchise and non-franchise organizations. I have also been on the franchise side, running entire markets. I have lived in fourteen countries, supported hundreds of franchisees in the US and around the world, and belonged to executive corporate levels in four different brands. I am one of those rare food-service career people who have been in the field side by side with the people on the front lines and at high corporate levels, which gives me a unique perspective of the business and what is possible.

I have loved every step of my food service adventure, and I feel honored that now, in this book, I get to share a lot of the knowledge, tools, and best practices that I collected through the years from the best operators in our business in the US and the world.

One of the things that I have learned in my career is that some of the biggest frustrations from franchisees come from the unfulfilled expectations of what they would receive from the brand. For this reason, I find it important that we take a quick look at defining a franchise and a brand, and learn what franchisees can and should–and shouldn’t–expect from their franchisor.

What is a Franchise?

A franchise is the purchased right to duplicate a brand as your own business for profit in exchange for a franchise fee and ongoing royalty fees. The expectation is that your business will be an exact replica of the brand prototype in every aspect that affects the customers’ experience. The goal is that the customer should be unable to distinguish any difference between one franchise and another within the same brand. There is very little flexibility in that area. The integrity of that duplication is what ensures the success of that brand. and therefore, your franchise.

While it is true that when you purchase a franchise, you lose any flexibility in the interpretation of the brand’s product, service, and image, you gain a proven model, usually with years of successful experience. Many locations have already been opened and operate with success. The menu, service, and image have been embraced by customers, and the business model is viable and profitable for the brand (assuming they have their own units) and existing franchisees.

When you purchase a franchise, you are also buying into a brand that will provide you with ongoing support via your brand-assigned business consultant. This person will be your liaison with the brand and the source of information, guidance, and operational support. Your brand/franchisor will also be evaluating your franchise to ensure that you are operating according to the brand standards you agreed to follow when you signed the franchise agreement.

The last thing you are buying is the advantage of being part of a network of existing franchisees under the same brand with whom you will be able to learn and share best practices. They will be a great source of ideas and reference points to make sure that you are getting the appropriate results from your business.

What are Franchise Fees?

There are generally three different kinds of franchise fees: development, royalty, and marketing fund fees.

Development Franchise Fees are normally the fees you pay to have the right to open a new franchise location, and you will pay these fees every time you open one. If, when you approach a brand, you’ve already decided to open multiple locations, you can negotiate a better (lower) franchisee fee for a multiple-location commitment. Just make sure that you comply with the growth agreement or you can find yourself with steep fines or lost fees. It might seem like lower franchise fees are a better deal, but I have found that the fees charged by franchisors are correlated directly with the risk factor of the brand. If you research the success rate for specific franchises, you’ll see that the better the success rate and brand performance, the higher the franchise fees and the better your chances for success. So, never chose a franchise based solely on lower franchise fees, because cheap is rarely better.

Royalty Fees are the fees that you pay as a percentage of your sales for the ongoing right to operate a brand franchise location and receive the ongoing support from the franchisor. These fees are usually paid on a weekly or monthly basis and they range from 3–7% of net sales depending on the brand.

When you purchase a franchise, you may also commit to pay Marketing Fund Fees. These fees can range from 0–4% of your net sales, and they represent the budget that the franchisor uses to support their marketing efforts. Depending on the size of the brand, they may have National, Regional, and/or DMA (Designated Market Area) promotions that they sponsor with that money. If the brand is too small, they may not collect these fees, but that also means that they don’t have coordinated marketing efforts. We will be talking about this support in more detail later in this book.

Notice that the Royalty Fees and Marketing Fund Fees are based on your top-line net sales. You will have to pay these fees whether or not you are profitable. You need to give this proper consideration when building your Business Financial Plan and making the franchise purchasing decision. Calculating your breakeven point will be critical in this process.

What is a Brand?

A brand is much more than a logo, a name, or the look of a building. A brand is everything that encompasses what that business and product represents, including the way it looks, the way it smells, and the way it makes you feel.

For example, if I say the word Nike®, what is the first thing that comes to mind? Is it the swoosh of the logo? Is it the tennis shoes? Is it the athletes who wear them, or maybe the sweat running down your neck after a hard work-out? All of that is the Nike brand.

There are millions of hours, many years, and dozens–if not hundreds–of people that go into the making