Running a franchise is a unique business endeavor. After all, franchisees aren’t quite entrepreneurs — they have to run their businesses according to their parent company’s rules — and aren’t employees, either, because they’ve invested their own money in the store or service they’re running.   Inc Magazine.

Even if these new rules hadn’t happened, franchises that hid lots of dirty laundry from potential franchisees were being found out anyhow.  Social media and forums was already stripping away some of the barriers to knowledge.

The franchise success depends on competence and compliance as well as the competence of the franchisee.  While the franchise offers training and often grand-opening assistance, there is no way for them to know if the business is going to succeed.  Franchises are not a magic bullet, and many customers simply aren’t doing their homework.  So what you have after a while is a bell curve of success.  On one end, savvy owners making a lot of money and living a great lifestyle - while the “fail” end of the bell curve is full of very loudly upset people - often losing a life savings as they go down.

With consumer-generated-media, the franchises are faced with a really hairy reputation monitoring problem where the brand is only as strong as the weakest location.   Unlike company-owned stores, business model franchises have pretty minimal control over their brand name once a franchise is launched.

Franchise brands are like the dancer with big feet, or the boxer with a big head - it’s just such a big target!

For example, I do marketing for a national franchise, let’s call it “Cheeseworks” (fictional) - and I have a high quality score placement on PPC and organic rank. But competitors are able to bid AND DISPLAY “Cheesework Pizza” on Google Adwords (singular, no ’s’.)

Cheeseworks Pizza
Open a Franchise in Your Town
Excellent Opportunity - Low Cost
http://www.fabuliospizza.com

And then somebody else runs this one:

Cheesework Pizza
Are You Ready to Be Your
Own Boss? Learn More!
http://www.franchise-pizza-leads.com

(this company sells leads to franchises - again this is a fictional representation of a real case)

Yes, we filed trademark complaint about them using the singular version of this mark, but since they do character-by-character checks (apparently) - and rejected the complaint. If someone does broad-match triggering on “Cheeseworks Pizza” the ad with the singular version will show. This is wrong. Trademark/Brands are protected from confusingly similar derivatives. I don’t expect Google to become an arbiter of trademarks - they need a scalable system that does much of this - but this case (it is a real case, just as absurd) they should consider the spirit of trademark law considering “use in commerce” and how their match types work.

The interloper had private domain registration and doesn’t answer emails - we couldn’t prove it but there was evidence they were selling leads to others. We had to spend a lot of effort with attorneys to send a C&D and a real substantial threat. The ad is off now, but it required huge work. We’d not expect them to get involved in the McDowell’s vs. McDonald’s case that was in the Coming to America movie. But this was simply a singular versus plural issue that anyone could see was illegal.

Upon removal of the ad (via our legal work) our brand-specific click through rate jumped 4%. This, over the course of several months, adds up to over $6000 in traffic not to mention possible loss of business to a competitor. There is real talk about suing the other advertiser for the harm done. I know Google wants things to be handled “outside” but this is one case where it shouldn’t be.

At the very least Google needs to block by match type when infringement occurs. They should have disallowed broad match at least.

Note: I’m not an attorney - none of this is legal advice. If someone would like to chime in and clarify these issues I will be happy to hear it.

postscript:  I received an email from Google who has approved the singular version of the trademark block.  It took me three tries, and lots of damage done to my client, but at least it’s gone now.  I want to be grateful but still I’m just mad.  

Image from “Coming to America” a terrific Paramount Pictures film. Highly recommended.

• Donatos doesn’t use their own domain name for the feedback link, prompting Vista mail to flag the message with a phishing warning. In a world where trust is a critical part of branding, this is just foolish. My family is very advanced when it comes to the web, but many customers would just delete the message without reading it.
• Donatos sends our usernames and password in plain text in the message. You just don’t do this, especially with all of the other personal information in the same message. My family uses different passwords for our sensitive accounts such as online banking, but I am absolutely sure this isn’t the case for many customers. This means the Donato’s password may have been used for more lucrative purposes, such as paypal, etc. We all know that keylogger exploits can do worse damage, but at least they require an infection and many have basic protection.

Please see my *update below.

As some of you know I have worked with Franchises quite a bit in my SEO/SEM work in the past. These organizations offer something unique to the market. But it’s not easy thanks of some nasty dynamics. While some franchise buyers realize they’re actually buying a model and should retain consistency, many others think that they’re only buying “guidelines” they should be able to color at will.

I’m proposing a system for improving the quality, fairness, and understanding during due diligence as it relates to business model franchises. Essentially, a way for buyers to know who they’re dealing with as they do research.

Let’s take a real-world scenario involving two franchisees who are about to become the target of a due-diligence routine:

Franchisee 1 follows the business model. The operations manuals are well worn and they give the franchise model benefit of the doubt, especially in the early days of their location. But most of the time they pull through it (”the dip“) and if the model is a good one, begin to succeed as designed. They think of the franchise model as “rules” to be followed to the letter.

Franchisee 2 uses their own ideas. They try to run it the way they’d run a business started from scratch. They aimlessly try different things and frustration builds. Their operations manual is covered with dust. They start to lose money, and 90% of the time they blame the franchise. They think of the franchise model only as “guidelines.”

Potential Franchisee 3 comes along, and wants to do due diligence by way of calling or visiting other locations. They begin calling franchise locations. By Murphy’s Law, they call Franchisee 2, and get an earful of how “bad” the franchise is. This can undermine thousands of dollars in marketing effort, many hours of salesperson time, and is how many franchises bleed to death. But also it may put a stop to what would have become a very profitable venture for #3.

I have a simple idea to level the playing field and would love feedback.

Imagine you develop a Franchisee Compliance Index. This would come in the form of a checklist / audit that is exactly the same from franchisee to franchisee. It would cover an agreed-upon set of success factors within the scope of the franchise model. If you adhere to the franchise model well, you’ll score higher on the checklist, start doing your own thing and your score goes down. This number would then be published in house (intranet), so everyone knows their score. (Of course, you’d provide rehabilitation support to try to get the franchisee to score better next round.)

The FCI becomes a way for potential franchisees to judge compliance to the model. Since the franchise staff are very limited in what they can say about individual locations, this gives them a way to “refer to compliance” via an objective, consistent means.

And now the beauty of the FCI. When a potential franchisee is progressing through the sales process, franchise staff can educate them about the compliance index and its purpose. They can say it’s a method they use to score post-sale willingness to work within the franchise system (a critical success factor.)

The sales staff can recommend to the potential franchisee to ask other locations their FCI score as they continue due-diligence.  The sales staff can now relax knowing that the index will help level the playing field.

The result of that question will be “telling”

• They will answer proudly. “High 90’s” - and here the company operations will likely be benefiting from the franchise model. These are your profitable ventures.
• They will say they don’t know. The potential franchisee will then ask them to get it from the intranet.
• They will argue with the FCI’s premise. “It’s unfair.” (anyone familiar with franchises will know this is bogus.)
• They will say they have a low FCI. This lets the potential buyer factor in noncompliance with any business problems.

Potential Franchisees will be able to sense the inevitable correlation ON THEIR OWN between the high FCI and the profitability. This effectively blocks smear tactics by non-compliant, failing franchisees.

Postscript: I’ve received a few comments saying “If a franchise was run correctly, this wouldn’t be an issue.”  Well, yes and no.  First of all as a franchise grows in number, it becomes nearly impossible to have complete compliance.  Most of the time you would get a bell curve (right.)  Franchises are not run in the sterile environment of the prototype, rather they are in the real world.  It’s human nature to want to try new things, especially among entrepreneurial people.  When a painfully unprofitable month has just prevented someone from buying a nice birthday present for their spouse, it becomes easy to slip away from the franchise model, calling if flawed.

If compliance were strictly enforced in the franchise agreement, this problem would theoretically vanish.  This still requires audits and reviews of each location, along with “real teeth.”  The non-compliance remedy will likely cause antagonism in the system, and possibly lead franchisees to give bad references and embark on another smear campaign.

(*update -  My attitude has changed a lot and I am now wondering, openly, if the strength of a franchise business model works in this era of “tribes.“)

I’m very excited about the Local/Mobile marketplace, especially with my developing expertise in working with franchises in internet marketing, and hope to shore that up even more in 2008 with some specific offerings under the PrecisionLocal brand. This is a tough, tough marketplace for consulting as the resources for local search are still quite fragmented and difficult to understand for clients.

Flickr Sets for SMX Local/Mobile

So if you’re going, Twitter me (id: scottclark) to catch up or meet.

If you are operating a restaurant, you should visit P F Changs as a customer. Yeah, the food is very good and tasted authentic, and the decor is impressive, but pay attention to the serving system. It’s a step beyond steakhouses and Italian restaurants. These places always seem to be just barely getting the food out. PF Changs seems to be operating well under capacity, even when the place is packed.

• Observe the order taking process, the sequence between events, the way the meals are delivered, the way sauces are lined up, the way plates are cleared.
• The place was packed, but our food arrived in minutes.
• Notice little things like how the glasses are not removed during refills, new ones are delivered.
• The guy delivering food was tall and fit, and held the tray of entrees above his head so other staff could walk beneath him minimizing the chances of spillage and keeping the flow moving.
• There’s nothing theatrical about it - it is just very, very efficient.
• Near the end, they ask you if you’d like boxes (not the other way around) and don’t toss styrofoam on the table. They come with a small table and put your food into take-home boxes packed into a neat bag, all branded with PF Changs.

These are the little things (tiny really) that make this place remarkable, and it doesn’t take that much staff time - just attentiveness and training. We asked for nothing - it was all provided before we thought to ask, but just when it was needed.The training became especially apparent during a small plate snafu. We ordered two appetizers, and the waiter cleared our appetizer plates before the second arrived, placing our entree plates on the table. There was clearly friction. System disruption. A screw up. I saw it in our waitresses face. They decided to not disrupt our dinner and let us continue without exchanging plates again. But I’m guessing a scolding was given behind the kitchen doors.

My wife and I are very tolerant of the wide variations of service because in the past this is just a part of finding the best ethnic foods, but the same is not true of most of the population. Many will drive past dozens of empty mom and pop Chinese restaurants to visit PF Changs for the consistent experience. You can take business associates or a date there without worrying.

A dozens of chains have shown us, it’s not necessarily the food that matters, it’s the rest of the experience that can bring success. Here, they have both. Jackpot.

You don’t have to copy their system, but you need a system, with rewards and consequences for the staff.

I looked at a franchise website’s homepage today, and found that they were all gushy about being listed on the “Franchise Times” Fast 55, so I checked that list out. It even looks like the make a plaque (see photo.)

This list, published by the Franchise Times, lists franchises based on their rate of growth and without regard for the type, size, investment or length of agreement. So, home based franchises such as in the case of Weathersby Guild, is strictly by single-person, work-from home franchisees doing highly skilled labor on site. Just to get a sense of scale for the business, I did a little bit of poking around using a few reverse phone lookups and windows live.local.com which showed me that almost all of the Weathersby folks work from home, often from apartments. There is nothing wrong with that, but consider that Mobile Attic is listed next to them in the list - naturally requiring a vastly larger capital investment (30 containers must be ordered,) a rollback truck, 1-4 acres, and a twenty year agreement. These two franchises are not even the same species. To grow Weathersby by 100%, you find some people ready to be trained in their system and equip them for the work. To do the same for Mobile Attic, you need earthmovers and a steel mill.

Entrepreneurs should try to realize that if the franchise you’re interested are not advertising in these magazines, they may actually be a lot smarter than you think - and any franchises that prominently boasts themselves in such lists could be a tad desperate for market coverage. Look for substance in the press releases. Know which magazines matter, and which are make-believe!

If you’re buying a franchise…Go visit, in person, the franchises you’re considering. I would not let the corporation call ahead - I would just GO. Talk to the owners (not the possibly underpaid staff.) Then…because some franchisees are just plain-old-grumps… go to another town, talk to those owners. And do it until you get a feeling for the company, and whether it’s compatible with your own goals (which you’ve written down, right?) Ask them if you can work for them, for free, for a couple of days.

Spend the time and you’ll not be sorry, especially with $80-100k on the line.

Postscript: While writing this I came across this little jewel of absurdity

“The first and biggest factor is finding a franchise doing something you love! If you love to cook, find a restaurant. If you like to clean up, select a carpet cleaning or maid service. Do not assume that just because you own the franchise that you won’t have to work it, you will have lots of times where an employee won’t show up and you will be doing their job. Doing something you love will make the hard work and long hours bearable!”

No… what makes a business bearable is to design yourself OUT of it. Choose a franchise where you can be profitable and expendable. You should not be required at the location much, if at all. The system should allow you the freedom to live your life the way you want it, not work “long bearable hours.”

1. Keep in mind the widely variant level of computer literacy amongst franchise owners.� Franchisees are not always computer savvy, and often the assumptions made about user abilities will get you into trouble.� � Simplicity is critical in portal design, but not to the point that the system loses its usefulness.� Be careful not to task the portal deployment team with computer training of novice users - that’s a different task.
2. Plan on lots of questions - and provide video training using a screen recording tool.� Adobe Captivate or Camtasia are terrific tools that allow rapid screen recording with narration of commonly-requested functions.� � These recordings are published in Flash, meaning they are visible on 98% or so of all computers on the Internet.� Make sure you use a high quality microphone for narration, and that you not get stuck in “perfection-land.”� Videos like this can be reviewed many times as needed - saving endless phone calls and emails about the same question.
3. Portals are fluid - your first design will not be the last one.� The user community will tell you what’s wrong with the portal.� You will want to listen closely to their feedback and ideas for making the portal better.� This is not a marketing website, and the point of the portal is to remove friction from the enterprise.� Every idea should be considered - but the good of the many should govern the design itself.� � Give credit to users who come up with ideas that are used in designs - this encourages others to participate.
4. Build a team of enthusiasts to run the portal.� You’re going to need moderators for various interactive components such as discussion boards and blogs.� Responses to inquiries on these components needs to be rather quick, or the portal will lose its credibility.� Often the ones who stand to gain most from the portal’s existence (the ones who’s life is being made easier) are the ones best suited to operate a portion of it.� Make sure the team gets lots of credit - they’re work and savings of time is being multiplied across the entire franchise.
5. Make sure that adoption of the portal is consistent, and rewarded.� If some are using unofficial calendars or forums for their work, reel them in.� The portal’s success will be based on its adoption - and this means some compromise.� If functions are not suitable to the user community, consider improving them.�
6. Offer live content through the portal.� Often, a filtered and cleaned set of news feeds are a great way to add value.� By having this information in one place the franchisees will feel they’re saving time and staying informed.� � � Blog feeds from internal or external bloggers are also powerful.
7. Provide rapid support from the corporate franchise entity through the portal.� Make it clear that any other support mechanism is less efficent and probably slower.� Demonstrate the efficiency of the portal to deliver requests and get them solved better than days of phone tag.
8. Make it easy for the portal to be the franchisee’s desktop.� Adding a clock, a weather badge, or other desktop-like items can encourage use of the portal as the home page for the franchisee.� Links to third party vendors and other commonly used services are also important.
9. Stick to the brand identity of the corporation.� Make the entire portal consistent with the brand - and update it to reflect any brand changes.� Set an example to the franchisees on brand consistency.� A portal is an excellent place to post your brand manual and a library of marketing materials.
10. Use the portal to give a personal touch.� Put a face on the information.� Avatars and face icons are a great way to keep things personalized in what can otherwise be a rather distant relationship - especially in a larger franchise.
11. Keep the news feed completely up-to-date.� Make sure that the first place the franchisees hear about any news is on the portal.� Not the local news or via email.� The portal should be the first place any franchise news or changes in policies should be posted.� If the portal can generate RSS feeds then it’s fine for people to use those feeds in their favored feed reader.
12. Manage all franchise-wide date-driven information through the portal.� � Make sure the franchisees can see the activity happening franchise-wide. Give the franchisees an ability to post events and show the buzz of what’s going on.� It builds energy and helps motivate the organization.� No memos, faxes, or emails about events.� Let the portal send out any notifications that might be needed.