The COVID-19 crisis spurred the need for entire franchise systems to enact change – sometimes drastically and quickly – to meet market challenges and survive the crisis. For some franchisors, this required innovation and bold moves that often had a silver lining. Sometimes, those changes resulted in business model improvements with long-term benefits.
So, what are the secrets to change management, and how can franchisors enact change seamlessly across the entire franchise network?
Two confessions: First, I am not a subject-matter expert in the field of change management. Second, after a few weeks of research, I concluded that the title of this article is utterly misleading. The word “seamlessly” is an adverb that will never describe the implementation of change in a franchise network.
Simply put, change management – by its nature – is seldom a perfect process. Moreover, for franchise organizations, change management can be downright messy. As such, if you’re looking for a silver bullet to change management, you may wish to discontinue reading at this point.
“Simply put, change management – by its nature – is seldom a perfect process”
That being said, the world of franchising presents some lessons and best practices, which can prevent franchisors from completely mucking up their change initiatives – and hopefully achieve transformational business results.
What the experts say
I spoke with several franchisor executive colleagues, who are experts in “the school of hard knocks”. I also consulted professional and academic experts in the field of organizational change.
Matt Jarvis has a PhD in Organizational Communication and was employed at NASA in Human Capital Management. He also advised four other U.S. Federal agencies on organizational change projects.
“When it comes to implementing significant change within an organization – of any type – it’s important to consider the current state and potential impacts on all parts of the system,” states Jarvis. “Everything is connected – people, tools, and processes – even if the connections don’t appear obvious. When implementing change, an organization’s leadership must not only anticipate impacts, but expect unintended consequences and mitigate accordingly.”
Jarvis adds, “Success will require a long-term mindset, and an environment of collaboration between upper management and all other levels of the organization.”
Over the past several decades, many professional and academic experts have developed models to better understand and implement change management. One such study was highlighted in a 2005 article in the Harvard Business Review, “The Hard Side of Change Management”, which is a mustread for executives contemplating change initiatives. The study describes the “DICE Factors”, which are four elements that are key to determining the outcome (success or failure) of change management or “transformation initiatives.”
Change management applied to the franchise model
The DICE factors model provides good guidance for most organizations, and these change factors certainly apply to franchise organizations. Franchisors must evaluate the project duration for the short-, medium- or long-term change implementation.
Performance integrity of the team will also be key for the success of a franchise change initiative. Without a doubt, a major change is doomed if it lacks sufficient support and commitment of upper management, franchisor staff and the wider franchisee community.
Finally, the franchisor must carefully consider the effort, bandwidth and burden of the initiative. In the end, a franchisor must ask the question: Will the extra burden and unintended consequences do more harm than good?
Let’s take a look at common types of change initiatives in franchising:
Mergers, acquisitions and rebranding
Change in ownership of companies and brands often results in new ways of doing things and a shift in corporate culture. M&A activity is often accompanied by rebranding of the franchisor or specific brands within their portfolios. Some notable examples include:
• Quality Inns International’s transformation and rebranding as Choice Hotels International in 1990;
• PepsiCo’s 1997 spin off of KFC, Pizza Hut and Taco Bell, and the evolution of Yum! Brands in 2002;
• UPS’s acquisition of Mail Boxes, Etc. (“MBE”) in 2001, resulting in the creation of The UPS Store;
• The Dwyer Group’s corporate rebranding as Neighborly in 2018.
Changes to products or services
Franchising has constantly evolved through innovation or in response to market changes.
One result was new service methods – for example, the pivot of restaurants to take-out and home delivery during the COVID crisis.
Innovation has also resulted in new product launches through franchise history. (The Big Mac and Filet-o-Fish were both introduced by franchisees.) The results have historically been a mixed bag. Some new products and services were successes, and yes, some were flops. Do we all remember the McDonald’s “Arch Deluxe” from the mid-1990s? Probably not.
New marketing and advertising programs
Most seasoned franchise executives can share war stories of marketing initiatives. Again, some were iconic successes, and others were abject failures. One of the most painful marketing changes is saying goodbye to beloved taglines, like KFC’s iconic “Finger Lickin’ Good”, tagline that was dropped in 2020 because of COVID hygiene concerns. Thankfully, the tagline was recently revived to glee of greasy-fingered chicken eaters everywhere.
New technology or website
Rolling out a new business management software or other technology can be a painful change process for franchisors and their franchisees, especially if the new technology involves a learning curve for users. New or updated websites are also notoriously complex because they combine technology issues with digital marketing and branding considerations.
New strategy or business focus
Changes in the market environment or new business opportunities may provide the impetus for big changes to a franchisor’s strategy. One of the most common examples in franchising is international expansion. The decision to go global – and transform from a domestic franchise into a global brand – is a major strategic and cultural shift for a franchise system.
“Change in ownership of companies often results in new ways of doing things and a shift in corporate culture”
Collaborative change for franchise organizations
You will notice that the DICE factors model described only two players: top management and employees. However, for franchise organizations, we have another important constituency, a herd of elephants in the room, who cannot be ignored when implementing change.
Of course, I’m referring to franchisees, who will often play a key role in the success or failure of a franchisor’s change initiative. If a franchisor spooks this herd, the resulting stampede could trample the franchisor’s hopes of implementing change.
However, if a franchisor communicates and engages with their franchisees early in the process, then this herd of elephants may serve as a major asset, with the extra power and leverage to pull a change initiative through to a successful conclusion.
For more than 30 years, Simon Broad, executive vice president at FRSTeam LLC, has managed franchise operations and support across diverse franchise organizations. “When a franchisor is contemplating major changes, communication and collaboration with the franchisees is critical,” states Broad. “If you can engage the franchisees early in the process, get their buy-in and solicit their support in the roll-out, things will typically go more smoothly.”
Broad adds, “However, always anticipate some friction, as change is always adopted at different rates among franchisees, regardless of their brand tenure and loyalty. If the change was too smooth, you have to ask yourself: Was the change big enough?”
My business partner, Dan Bish at FranLaunch USA, has worked in franchising since the 1980s. He has experienced change management both as a franchisor executive and as a franchisee. “A good place to begin the discussion of change management is with the Franchise Advisory Council (FAC),” says Bish. “FAC members can provide a great sounding board for new initiatives and projects, because they can identify the pain points from a franchisee perspective.”
One such example was in the early 1990s, when AlphaGraphics leadership identified a need to completely re-write their old franchise agreement. To do this, the executive team worked very closely with FAC members, and incorporated many of their recommendations into the new version of the franchise agreement.
According to Bish, “Because the new AlphaGraphics franchise agreement was written with franchisee input, AG was better positioned as a franchiseefriendly concept.” He adds, “The new AG agreement was a major selling point for prospective franchisees, and it also helped drive satisfaction and testimonials among existing franchisees.”
Change management summarized: four best practices for franchisors
- Ensure that you have the right team, the organizational commitment and the resources to succeed.
The team’s “performance integrity” and effort will be key factors to achieving your change initiative goals. A franchisor must allocate the right people, time and budget as part of the planning process.
- Be realistic when planning the duration/timeline of the change implementation.
Any change that is worth doing should not be rushed (global pandemics aside.) Take the time to research and test new initiatives before rolling them out. The long-term success and ROI depends on doing it right.
- Engage and communicate with franchisees. Franchisors would be wise not to ignore the elephants in the room.
Work proactively with franchisees to involve them the change planning and implementation. If you have no formal Franchise Advisory Council, gather an ad-hoc group of franchisees with the skillsets to help provide input and guide your change initiative.
- Expect friction and unintended consequences.
Change is seldom easy and often messy. Not everyone will like the changes, but if implemented carefully and deliberately, a change initiative can truly transform your franchise and take it to the next level.
Ray Hays is managing partner at FranLaunch U.S.A., a franchise management firm that provides management resources and capital solutions to emerging franchisors, as well as assisting international concepts to enter the U.S. market.