National Restaurant Development CEO and “Franchisee of the Year” Aziz Hashim recently spoke to Blue MauMau about what it takes to improve relationships between franchisors and franchisees. Hashim believes franchisors have difficulty communicating with franchise owners as equal and end up relying on top-down management techniques to make up the difference, which leaves franchisees feeling like less a part of the team and unwilling to cooperate and collaborate for the greater good. Franchisees must be approached as peers and partners, says Hashim, if franchisors hope that changes will be implemented to increase bottom line sales and the overall bottom line. For more on this continue reading the following article from Blue MauMau.
Franchisee Aziz Hashim, a recipient of franchise awards and a well-known leader in the industry, speaks about what a good franchisor leader looks like from the vantage point of a franchise owner.This is part of Blue MauMau’s ongoing series seeking to understand what sort of leadership and environment it takes for franchise owners to flourish.
Named as the National Restaurant Association’s "Franchisee of the Year," to name just one of many awards, Aziz Hashim is president and CEO of National Restaurant Development Inc., a quick service restaurant operator and developer. His firm owns nearly 60 restaurants under the Popeye’s, Checkers/Rally’s and Domino’s brands. The company formerly owned Subway sandwich shops too.
Hashim has a big operation. His Atlanta-based firm employs 1,200 people in California, Arizona, Georgia and Florida. Some are even former franchisor executives.
The franchisee CEO argues that chief executives of franchisor companies often have difficulty gaining franchisee support because they do not know how to speak or persuade from a CEO to CEO level. They fall back on top-down corporate management techniques. He thinks that style serves the franchisor CEO poorly when leading a brand’s franchise network.
BMM: What’s been your experience on how the CEOs of your best franchisors gain the support of franchisees?
Summary: A good CEO doesn’t know it all. In facilitating an innovative culture that moves past competitors, franchisor CEOs need to learn how to better tap into the talent pools and wisdom of franchised business owners as an integral part of brand decisions.
Hashim: Ironically, franchising has the unique distinction that its two major stakeholders, franchisor and franchisee, derive their benefits from diametrically opposed goals. The franchisor typically makes money from growing top line sales and the franchisee makes money from the bottom line [store profits].
The two are not always linked.
The successful franchise brand is one where there is a ‘partnership’ between the two groups. Not a partnership in legal terms, but rather a partnership in attitudes. There’s a spirit of collaboration, where both parties realize that each one is dependent on the other. Neither one is dispensable, nor a "necessary evil" that has to be tolerated.
Innovation, and therefore initiatives, is the lifeblood of success in this highly competitive environment. Initiatives cannot be realized in a vacuum and "top down" approaches in franchising are a thing of the past. The franchisor has the role, resources and responsibility to keep their brand relevant and distinctive. But franchisees, as the implementers, must be made an integral part of the equation so that valuable time is not lost. To gain acceptance of new initiatives, a CEO would do well to involve franchisees early and often, through appropriate task forces and work from the bottom up in a spirit of mutual benefit.
It is not necessary for the CEO to know it all. Many a franchise brand has suffered because the leader "died on the sword" for their own ideas rather than accept the fact that he did not have all the answers.
BMM: What’s the pecking order? How important should a franchisee be to a franchisor CEO compared to the needs of the franchisor’s shareholders, employees and customers?
Franchisor CEOs need to stop their bad habits of top-down management and learn how to collaborate with franchisee CEOs as peers.
Hashim: Collectively, the CEO and brand [franchisor] team, working hand-in-hand with franchisees and outside consultants when necessary, come up with the right solution. The pecking order is simple: there is none. The franchisor and franchisees have a symbiotic relationship: without the success of both, the failure of both is all but guaranteed.
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Franchisees and brand leadership are on an equal footing. Employees of the franchisor are the same as my employees and my executives in my office in the pecking order. When it comes to the top of the pecking order, every franchisee is a CEO in their own independent right. Therefore, we are right there with the brand CEO. And our conversation with the brand CEO should be at a CEO to CEO level, franchisor and franchisee. My employees and my executives, and the franchisor’s employees, its executives, its vice presidents and directors, are at a different level.
Too often what happens is that the entire brand — the franchisor, even mid-managers who work for the franchisor — have such a condescending attitude towards franchisees. You have nice people, but essentially young MBAs and young people in their early thirties telling seasoned franchisees with millions of dollars at stake how to run our business, as if they somehow understand.
That’s a mistake.
BMM: What sort of leadership style works best with franchisees?
Situational leadership skills are needed. Circumstances can call for a quick autocratic style; however, most times a style in which franchisees participate in leadership decisions is needed.
Hashim: Franchisees often sign 20-year agreements and therefore endure several business cycles. The type of leader required is one who has particular skills for "reading" the business climate and adapting their style to the conditions at hand. For example, in time of crisis, solid, quick decision making or an autocratic style may be required as franchisees would want a decisive person protecting the brand.
When planning long-term capital expenditures for the brand, a more participative style is needed. After all, franchisees are the ones footing the tab! Trust is a key element in the process. The successful brand executive engenders trust with the franchise community by demonstrating that franchisee success is the primary objective of the brand. The leader must understand the critical role and stake of franchisees in the brand and that franchisees are neither employees, nor vendors or affiliates; they are independent CEOs in their own right and key "partners" with whom they should collaborate.
A CEO who has any less regard for franchisees will eventually fail. The brand may continue to grow and recruit new franchisees in the short term, but the sophisticated franchisee, one that can add value to the system, will never grace that brand’s doorstep.
BMM: It sounds like you think there is a problem with a whole mindset among many franchisor CEOs. They aren’t treating franchisees as captains of companies and as equals.
Franchisees are rarely given top billing. That’s a mistake.
Hashim: Franchisees don’t like the fact that some CEOs consider them to be an issue to be dealt with. They don’t have the proper understanding or respect for the role of franchisees within the success of the brand. What we really like are CEOs who understand that the franchisee is as indispensable as the franchisor is. That is the CEO who understands franchising.
If I can put it bluntly, does the franchisor CEO understand that his brand depends on successfully collaborating with franchisees?
It’s really easy to do lip service to franchisees. Real easy. But to actually implement strategy, the [franchisor] CEO should instruct their team behind closed doors, saying: "Listen. This is our attitude towards franchisees. I am not going to tolerate anyone in the company taking a poor view of franchisees."
Then things move forward much better.
The franchisee-franchisor relationship has changed over the past 20 years or so with an increasing sophistication of franchisees. Even the single-store franchisees today are remarkably more informed than they were 20 years ago because of the power of the Internet. It doesn’t take much now for a franchisee to understand what’s really going on.
We franchisees are looking for a franchisor CEO who has this ability to understand what franchising is all about, the role of franchisees and their stake in the game. They need to send the signal by deeds that the CEO of the brand is willing to work with franchisees as partners.
There are autocratic, top-down CEOs out there that just feel that they are going to talk down to franchisees.
Here’s an example: whenever I look at franchise conventions or trade shows, 99 percent of the speakers are franchisor staff, as if to say that all of the knowledge in the franchise industry emanates from the franchisor. There have been times when I see headline speakers in franchise conferences, sometimes CEOs, who can’t hold a candle to most of the franchisees in their system. Yet because they are the CEO of the franchisor, they are billed as somewhat of an expert just because they hold that title.
How often do you see a franchisee be a headline speaker, a marquee speaker, in any of the shows — whether the conference is the National Restaurant Association or the Restaurant Finance & Development conference? When was the last time the headline speaker was a multi-unit franchisee?
I have never seen one.
Yet when you look at a multi-unit franchisee’s net worth, for example, we typically dwarf these CEOs, who are essentially employees. We dwarf them in terms of net worth. We dwarf them in terms of risk in these brands. We sometimes even dwarf them in the number of employees who directly report to us. There are large franchisees with 20, 30, 40 or many more people just working in administration. There are franchisors out there where their executive teams aren’t nearly as big as that.
So why is it that franchisees are never given top billing? Do we not have anything to say? The industry as a whole still does not recognize the value of franchisees. We are just a commodity to be dealt with. It’s there. If you don’t like one franchisee, you get rid of them and get another. That’s how it is.
It is changing, I must say. But franchisor CEOs have not caught up yet. We still don’t see this wide understanding and acceptance among CEOs of the role of franchisees.
Those brands that do recognize it will move ahead. You show me any good brand — it used to be you show me any good restaurant and I’ll show you a good general manager — but you show me any good brand today and I’ll show you a CEO who understands the value and role of franchisees.
That’s pretty much the bottom line today.
BMM: What sort of support should a franchisor be giving a franchisee?
Field operations managers should be the top talent among a franchisor’s employees. Hashim thinks that in the future more field operations representatives with franchise owner experience will be hired.
Hashim: Brands that do well really make sure that their field ops [operations representatives from the franchisor who advise store and restaurant owners] or field business consultants whom they send out into the field are the best that can be. In my view, the field representation of the brand should be the most talented people in the brand. They should be the most experienced people because they are franchisee facing. Those brands that are very careful in sending very seasoned [talent] are a meritocracy in which if a manager qualifies to be a field representative, you have reached the very pinnacle of that brand’s talent.
That’s when you have a lot of success. Franchisees can communicate with such field representatives at a much higher level. We can get stuff done in the field because we are talking to someone who actually understands running a business.
I’ll tell you a trend. I think in the future a lot of these field operation representatives will be former franchisees. Does a franchisor CEO want some real traction in a brand? Then make sure the field consultants are former franchisees so that they understand what the franchisee is going through. They understand the franchisee experience. They’ve been there. At the same time, the consultant can’t be one-sided. They also understand the brand reputation and the brand promises. But it makes it a much easier conversation when the field operations guy has actually been there and run a franchised business.
A lot of these brands hire young people straight out of school or with limited experience, and put them out in the field. Even very large brands do this to minimize their field support expenses. To compound the problem, they hire one field op that spans 200 restaurants. Are you kidding me? That means they’ll rotate a visit to a store in two or three years, maybe. That’s just not going to work.
This article was republished with permission from Blue MauMau.