Operators face challenges in 2012


Franchise operators must be able to adapt to remain competitive in a challenging business environment where consumer confidence has yet to fully rebound to levels seen before the economy fell into recession, said attendees at the International Franchise Association convention this week.

Franchisors and franchisees from across the country gathered in Orlando, Fla., at the IFA’s 52nd annual event to discuss such topics as how to grow in a sluggish economy, why it is important to communicate with elected officials about business-unfriendly legislation and the need for easier access to capital.

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Yet, even as franchise businesses are forced adjust to new operational and economic realities, participants at the IFA convention also voiced optimism about the future.

“The [American] dream, the excitement, the commitment to the journey, resides in each one of you and in the business of franchising,” said Jim Amos, chief executive of frozen yogurt franchisor Tasti D-Lite and the 2012 inductee into the IFA’s Franchising Hall of Fame. “We are a problem-solving community.”

Changing for the better

Both franchisors and franchisees said restaurant brands can make important changes that allow for system growth and improved profitability, which is of particular importance in a weak macroeconomic recovery.

Don Fox, chief executive of Firehouse Subs in Jacksonville, Fla., said establishing a clearly communicated set of expectations for a brand’s corporate culture lets it grow sustainably, even during tough economic times. The 490-unit sandwich chain added 80 restaurants in 2011, and has a goal to reach 2,000 locations by the end of the decade, he told attendees during the “Franchise Sales Success Secrets” panel.

“I’m about 25 percent of the way there, and my success depends upon my people,” Fox said. “So if my success depends on my people, then my whole future is in the hands of three out of four people I’ve never met. If we haven’t set up a culture and processes that allow a net 75 percent of our system to operate at this level, we won’t succeed.”

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Fox said Firehouse franchisees are coached first to have a solid corporate culture that recruits the right staff, to focus on operational excellence and to drive profitability. His operators then look to optimize the restaurant’s potential by donating to Firehouse’s public-safety fund.

“There’s no doubt customers reward you for conspicuous giving in your community,” Fox said.

It also is important to prove major changes within the brand’s company-owned system before mandating changes from franchisees, Fox added. Before Firehouse required franchisees to increase their marketing fund contributions 2 percent to a total of 5 percent of sales, the brand first did so in its 30 corporate locations. After demonstrating double-digit sales increases in most mature markets after the contribution increase, Firehouse was able to get buy-in from its partners.