Mary Ann O’Connell, Founder and President of FranWise, joins the podcast to share her expertise from 30+ years in the franchising industry. In the episode, Mary Ann discusses what works and what doesn’t when it comes to franchise operations, including how to make the most of the people side of the business.
Speaker 1: Welcome to The Best Team Wins podcast with Adam Robinson. He’s talking to today’s industry leaders and entrepreneurs about the people side of their business.
Adam Robinson: Welcome to The Best Team Wins podcast where we feature entrepreneurs and business leaders whose exceptional approach to the people side of their business has led to incredible results. My name is Adam Robinson, and for the next 25 minutes I’ll be your host as we explore how to build your business through better hiring.
Adam Robinson: Today on the program, I am so excited to have special friend and guest, Mary Ann O’Connell, founder and president of FranWise, located in the beautiful but colder than average this year, temperatures of Costa Mesa, California. Been in business since 1996 and has a wealth of knowledge on the franchising industry and what works and what doesn’t as far as operations go, and we are so excited to have you on the show today. Mary Ann, welcome.
Mary Ann: Thanks, Adam. It’s a pleasure to be here.
Adam Robinson: Mary Ann is an active member of the International Franchise Association. She sits on the IFA’s board of directors, has seen the good and the bad in franchising for 30-plus years, and we are going to learn from her today, ladies and gentlemen. But first, let’s set the stage. Mary Ann, give us 30 seconds on FranWise and what you do.
Mary Ann: All right. Well, we have companies that give us their vision and we take our wisdom to help them franchise well. We help people franchise more efficiently and we’re consultants, probably be considered mostly generalists, but we focus on strategy, operations and compliance. But we’re best known for writing manuals for lots of different aspects of franchising, and then we help businesses convert to that franchise model.
Adam Robinson: So for listeners who are not as familiar with franchising, just give us a quick couple of bullet points on why manuals? What’s so important? What’s the deal with manuals in franchising?
Mary Ann: Great question. There are only four major reasons. It is not a legal requirement, but the four major reasons you want to do it is it’s going to codify the system. And that way, since franchising is all about replication, if you have a good manual, it is explaining clearly what is expected of everyone, then you’re going to have a more consistent system. It’s also great for marketing because when people are considering a franchise, they get to look at the table of contents of the manuals, so you get to express the breadth and the depth of the information that you’re going to share and how much support they’re going to get. It also is great for taking some of the pressure off of staff. If you have good documentation that people can use mostly as a reference material, they can get the answer to the repetitive mundane questions in writing online rather than burden your staff. And that way you can grow the system without having to grow the staff exponentially.
Mary Ann: The final thing, which is probably the least fun part is for legal reasons. If you have clearly defined what’s expected of everyone in that manual, if that franchisee wants to renew or expand and the franchisor sees that they have not really been compliant with the agreement or with the terms in the manual, then it’s a better way to go to court and say, “Your Honor, we were clear in what we expected, they were clear in what they didn’t do. So we either want them out of the system, or we want to hold them back a little bit.” So those are the four main reasons you want a manual.
Adam Robinson: Okay. Thank you for that. Let’s talk about the people side of the franchise business here. When you are approached by a brand to help with operationalizing or defining operations within the system, people are always the stickiest part of this. Talk about the common challenges you see brands facing as they are scaling up and working with franchisees on how to build teams.
Mary Ann: I think the number one problem starts from day one where the founders of the company don’t truly understand their new role as a franchisor. Let’s use the food business since that predominates in franchising. So they may have an excellent menu for healthful foods, they’ve put together a terrific supply chain. They have that end of the business down pat. And so when they write their manuals or they start to hire people to support all of that, they’re looking for people who come out of the restaurant business. But they’ve been so used to telling the employees what to do that they can’t make the transition to not being allowed to do that anymore. They have to set brand standards and they have to know now how to be influencers. So rather than being someone who’s going to hold an employee’s life in their hands, they are now trying to influence franchisees to get their employees to do the right thing. And it’s a very different business model. You can’t fire the franchisees, not easily.
Mary Ann: So you are switching from understanding the entire business. You now have to understand more than the food business, you have to understand what they’re going through in terms of contractual obligations and profitability, be able to put it all together and influence their behavior.
Adam Robinson: So what would an important difference … So the franchisor level as they’re staffing up then … Knowing that franchisors must lead through influence, right? You can’t make franchisees do what you want them to do, though you have to influence them to do it. What types of teams or philosophies about team building at the franchisor level have you seen be more successful? Where do franchisors get it right and where do they make mistakes, typically?
Mary Ann: I think that most franchisors that get it right are the ones who can understand which of their employees, who are in the core business, have that flexibility to make the move and to adopt a different set of pronouns, for gosh sakes, when they’re talking with people, but they have that flexibility to understand this business from another point of view. If they put those into the operational side, then they are going to get the best of both worlds. You have someone who truly understands the core business, and then they can overlay what it takes to be a franchisee. I think that most franchisors should, first, hire into franchise development. So that’s the semantics for the salespeople, but if they can get those good people in operations and make a transfer. If not, I would say one of the first hires they should be looking for is someone who has franchised operations support background. They understand the intricate balance of the relationship.
Adam Robinson: What I’ve heard you say before at industry conferences, I’ll paraphrase what you’ve said, but franchisees are in the business of making great food, or running an awesome fitness facility, or educational facility. Franchisors are in the business of selling licenses to entrepreneurs and helping them make money. Is that an accurate set of statements there?
Mary Ann: Absolutely. And it might sound that that’s very basic, but I firmly believe that, that the franchisor should know what makes the business successful. What are those key performance indicators that they should be watching, that they can tell those franchisees to be measuring so they can move forward? They should have a good plan of support people that can relate the requirements that go with that brand with profitability. It’s a great way to influence people, is just show them how they’re going to make money by changing their behavior. And it is the franchisees who are now in the business of cutting hair, making the burger, fixing the car, walking the dog, helping your loved ones, whatever it is that you’re franchising, absolutely. But the franchisor still has an obligation to keep their finger on what’s happening in the marketplace so that they can make marketing shifts, they can make shifts in what they’re offering based on trends, particularly in food, that probably has the most variable.
Adam Robinson: Have you seen great concepts fail because the franchisor has hired the wrong people at franchisor level? And conversely, can you see great teams turn mediocre concepts into really successful national brands?
Mary Ann: Yeah. I’ll call one out that really did a great job was Menchie’s Yogurt. So when frozen yogurt came back into the field, it was dominated by Pinkberry and Red Mango, a whole new taste profile. But the founders of those companies were very protective and were not hiring from the outside. So when you’re only hiring family members and people who really didn’t have an understanding of this new business model, it was going to cause problems. You could see the writing on the wall from day one. But if you look, then Menchie’s came in, granted, they changed their flavor profile a bit to be more American centric. But Amit Kleinberger immediately went to putting together a great team that understood franchising, understood taking franchisees from zero to 100 miles per hour in as fast a track as they possibly could, and that made a difference. And so you look around at where those other two brands now as opposed to Menchie’s, and you can see what the difference in hiring did.
Adam Robinson: So to extract value lessons learned that everyone here listening can can learn from, it sounds like what Amit did was he knew exactly where he wanted to go with the business, knew the outcomes he wanted to generate and was pretty relentless about putting people in the seats that helped him get there.
Mary Ann: It’s funny you said relentless, because that was the word in my little head. Yeah, absolutely relentless.
Adam Robinson: And conversely, the folks at Red Mango perhaps knew where they wanted to go but were unwilling to let go of the rope enough to let other people pull it. Is that fair?
Mary Ann: Yeah, and I would say that I can speak more directly to the founders on Pinkberry. They were very protective and also very caring about their family. I mean, I want to say that this wasn’t simply a bad decision. It came from a cultural point of view, it came from a caring point of view, but it came from a protectionist point of view, and that was dangerous. You have to admit you don’t know, and go hire what you don’t know.
Adam Robinson: So many of our listeners are part of family businesses, either their standalone family multi-generational businesses, their franchise businesses, their car dealerships that, ypu know, father, son, grandson or granddaughter transitions going on. What I’m hearing here is that staying insular in today’s marketplace is fraught with risk, and there’s a couple examples of that. Would you go so far as to say it’s philosophically, brands are better off acquiring talent from the outside versus where maybe you’re optimizing for experience, whereas insularly you’re optimizing for trust and familiarity? I mean, both have advantages, but would you say one works better than the other based on your track record?
Mary Ann: It’s the stage that they’re developing. In the beginning, they need to have a blend, because you need to maintain the culture and the romance that created the brand in the first place. So let’s say it’s a family brand. You want some of those family members there in the beginning, they carry the history, but they should be blended pretty quickly with the expertise. And then they’re growing and the number of franchises get bigger, then I think you really want to move into your expert class because now you’re really in the franchise business and it has a whole different set of issues and a different set of measurements. So yes, I think there’s an arc and eventually the family members and the founders need to take a more sideline position and let the pros come in and blow this thing up.
Adam Robinson: So franchisors, they build their own team of course, in terms of franchise sales and support, but they’re also in many ways building a team of entrepreneurs who eventually, that’s the royalty stream, but they’re supporting them and helping them be successful. It’s really easy to take a check from anyone that’s got one. Talk about the nuances of team building in an environment where saying no costs you 25, 50, 100 thousand dollars worth of franchisees, even when you know it’s maybe the wrong cultural choice, but the right financial one in the short run. How do franchisors balance that?
Mary Ann: What you’re asking, Adam, is a critical part of franchise success. It is really hard for a new franchise company that is bleeding red ink, just like any company when they’re starting. And yet someone is coming and they’re saying, “We want your business. Here’s a check and we’re alive. Please take us.” It is very hard and you really have to have your team steeled that they understand what the vision is to say no. It also means that you, as a successful franchisor should have a terrific profile of who the person that you are trying to attract is, and it’s not just their skill set. It’s really got to be their values also because you’re going to be in a long relationship and marriage, which this is, can get rough. So pick the partner well. And it’s hard to say no.
Mary Ann: You also need a process that’s going to test them, test their resolve, test their ability to follow instructions, test their ability to respect that there is a system in place. So if you don’t do that in the beginning, it’s going to absorb so many resources to support somebody who is such an obvious misfit that it will distract you when you won’t grow.
Mary Ann: The other two things that can happen that are similar, is a new brand opens, somebody from Europe, or Asia, or the Mideast hears about it and they come in and they wave a huge check and say, “Give me the rights to all of Arab Emirates.” And that’s enticing. That makes you international immediately and it gives you money, but now you’re failing if you make a mistake on an international scale and you haven’t figured out that there’s no way to support somebody who’s six or eight thousand miles away from you. Again, don’t be seduced. The other seduction is when someone comes in and says, “Why don’t you give me all of the state of California? I’ll develop it in about five years.” And you get this big check and then you’ll have money coming in, and they will rush to this area development model. The statistics on people, fulfilling their obligations is very low, and they haven’t prepared for the fact that they now need an entirely new level of training and manuals and support not just for the franchise concept, but now to support this other activity which is area development.
Mary Ann: So it is hard. I counsel my clients, don’t go to market until you really know who’s there or who you need and say no. It’s easier to say no if you come in well capitalized. If you are bootstrapping in this day and age, it is really easy to make the mistakes because you need the cash.
Adam Robinson: Well said. Let’s talk then about systems values. I mean, great franchise brands work because the something special in those first few units translates out to the system you and scale it. So someone as operationally focused as you, core values are … You can’t always codify a step by step process to instill love and all ingredients in the recipe kind of a thing. But if that’s a core value, how do you operationalize a motion? How do you operationalize the intangibles of a brand such that you can teach and train it when someone licenses that from you? And I know that’s a big question, but for our listeners, I want them to listen for really operationalizing the thing that makes you special. That’s really what you help brands do. I mean, how for our listeners here thinking about doing more scaling up, but keeping what’s special, special, pick an example from your background? What can brands do to make sure they don’t lose that special sauce when they get [inaudible 00:18:54]?
Mary Ann: So let’s talk about one that has successfully done that on the retail side, Nothing Bundt Cakes. I have people ask me all the time, how can you franchise a bakery that sells one thing, Bundt Cakes, different sizes, but one thing, and they’re expensive? And it’s because they’re not a bakery and they don’t sell cakes. They sell celebrations. And everything they’ve done in their branding is about celebrations. Everything they talk about in their qualification process is about this caring, is about being part of the celebration and thinking above and beyond for the customer.
Mary Ann: I was in a Nothing Bundt Cakes in Las Vegas just last week with a mutual friend of ours, Susan Beth. And she was buying some small ones for somebody who had won some award. Jenna Lamb was on it, “Hey, why don’t we put this décor in it. Let’s wrap it this way. This will give you a better message as you present. It’s not just a cake.” Susan was thrilled because she would never have thought of that on the fly and the cake looked great. And I asked her afterwards, her co-worker that received it was absolutely thrilled.
Mary Ann: So how do you make that happen? You have to be putting things in your licensing process that are situational questions where you’re creating scenarios, where you’re asking how people are going to react to see if they get it. Are they going to respond from heart, or only from head? Because in their business, if you let your heart rule, your head and your wallet ought to follow. And they’re scaling this to be very big. They’ve made great operational changes in their bakeries that have increased their efficiencies. They haven’t changed their core that what they sell is celebrations.
Adam Robinson: I love that.
Mary Ann: And so they’ve just screamed for it.
Adam Robinson: Fantastic example. How do you recommend that franchisors award high performing teams? Look internally, philosophically, the best brands do what inside when they achieve success?
Mary Ann: For their support teams?
Adam Robinson: Yes.
Mary Ann: I find the best brands get everybody to buy in and they do scaled bonus programs. So they will set a goal for the company, first of all, everyone is tied to that. So one tier, a company wide bonus will be if the company as itself hits its bonus. Then they’ll break that down by department because if I’m in the department that is in charge of building out the stores, I can’t have the impact that the guy who’s awarding the franchise licenses is going to have. So they look at what the effect on the business is and they create a model, a reward system there, and then they can get it down particularly if you’re on the sales side of things to individual goals, or if you are on the real estate side, how many leases did you get signed?
Mary Ann: So there is a good financial model that seems to work and keeps everybody … Everybody has their eye on a collective goal, which to me works really well. And if you’re on that bigger picture, how’s the company going to do as a whole? It can’t do that on a whole unless all of you are doing your part on the department level. But I find the ones that really have great success internally, they’re also going to turnaround and take their high performers on a trip. Friend of mine just came back on her franchise systems trip to Hawaii, where the folks that were instrumental in hitting their franchise development numbers. So that’s another way to do it. Me, even when I worked on the franchisor side of things, I prefer, or at least always want to put personal recognition in it. I want to take a picture, I want to post it, I want them to be able to go home and brag to their family about what they did because we have their best hours. They’re awake more with us than they ever are at home, and we want to validate why they go to work every day to those people they leave at home every day.
Adam Robinson: Mary Ann, what is the number one thing your clients could do to be better at the people side of their business?
Mary Ann: You’re going to be surprised, but I want to say to be better at the people side of the business, they need to be better at the number side of their business.
Adam Robinson: Tell me what you mean?
Mary Ann: Well, if they truly understand what drives the profitability for that franchisee, they can turn into coaches instead of police, which sets a very different tone. They can be proactive if they’re watching POS report come in and they see that somebody is … I don’t know, their membership numbers are down, their repeat numbers are not right, they should be able to go in and be in a prescriptive visit, rather than in a monitoring visit. And that way you can talk with people with much more compassion because you’re dealing with it way before it’s a problem. It should just be a signal that you need to have a conversation. And when everybody understands what they’re there for, they can be more relaxed and work from that heart point to be better influencers.
Adam Robinson: So with our final minute here, if you were to come back on this show a year from now and report to us on whether or not you were able to tackle the single biggest people-related opportunity that your clients face today, what would you be telling us happened?
Mary Ann: Wow. I think I would be telling you that people are hiring well despite a 4% unemployment market.
Adam Robinson: There you go. Ladies and gentlemen, that’s the final word. We’ve been learning from Mary Ann O’Connell, founder and president of FranWise. Mary Ann, if listeners want to learn more about what you do, what’s the best way for them to do that?
Mary Ann: They could send me an email at firstname.lastname@example.org.
Adam Robinson: All right. Thank you so much for being with us on the program and sharing a wealth of knowledge. Thank you very much.
Mary Ann: My pleasure, Adam.
Adam Robinson: All right. Ladies and gentlemen, that’s a wrap for this week’s episode of The Best Team Wins podcast. We’re featuring entrepreneurs and business leaders whose exceptional approach to the people side of their business has led to incredible results. My name is Adam Robinson, author of the book “The Best Team Wins”, which you can find online at www.thebestteamwins.com. Thanks for tuning in as always, and we will see you here next week.
Speaker 1: Thanks for listening to The Best Team Wins podcast with Adam Robinson. You can find out more information about Adam in his book, “The Best Team Wins: Building Your Business Through Predictive Hiring”, at thebestteamwins.com. Thanks again for listening, and we’ll see you next week.