Franchisees and the Question of Control

 

I have a very strict gun control policy: if there’s a gun around, I want to be in control of it. – Clint Eastwood

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A number of years ago, utilities companies, telecommunications companies, insurance companies, etc. started offering customers automated payment options as a convenience.

The premise was simple: Why bother taking the time to pay your bills each month when we can simply (with your permission, of course) automatically take the funds from your bank account or credit card?

When this was first offered, I must admit that I resisted for quite some time. I preferred receiving the bills each month, logging into my online banking site, selecting the payee and filling in the dates and amounts. I had control.

Month after month, my bills would arrive, each time with an insert or a perforated flap on the return envelope encouraging me to just give them my bank account or credit card number (and relinquish my control) to make my life easier. I continued to resist.

On occasion, I would make a dumb mistake entering the amount or the payment date. As a result, I would get dinged with late payment fees or other charges. I considered these penalties a small price to pay for retaining my control.

After years of managing my bills this way – and for no reason in particular – one month I came to the realization that not once had I ever decided to pay any amount other than the amount due on any other date than the payment due date. Not once. Ever.

It turns out that I wasn’t truly “controlling my destiny”. I was just wasting my time.

So I started signing up for automated bill payment with everyone who offered it. The bill would still arrive a couple weeks before the due date so that I could review the amounts and challenge any mistakes (i.e. I still had control), but no longer did I have to bother with all of the administrative nonsense to actually make payments.

With good reason, more and more retailers are moving in the direction of centralized store replenishment. Each day, POS data is collected and shared with the home office. And in many cases, the stores keep perpetual on hand balances and active planograms for every item. By planning store replenishment centrally, retailers can reap huge rewards by extending the planning process from stores to DCs to suppliers in a tightly integrated fashion (how does 98% in-stock while simultaneously dropping inventory sound?).

It’s really a shame that retailers with , owner/operator or dealership models can’t likewise benefit from centralized store replenishment. And why not, you ask?

Because the franchisees would never relinquish their control.

Hmmm…

Do the franchisees all use their own separate systems for store operations and staff their own I.T. departments? Does each store owner have his/her own fleet of trucks to pick up shipments? Do they each deal directly and independently with suppliers to bring product into their own dedicated warehouses? Does each franchisee develop his/her own advertising and promotion campaigns to draw customers into the stores?

You see what I’m getting at. There is a long list of value added services that a franchisor already provides to its franchisee store owners. Why couldn’t store replenishment also be such a service?

Like with automated bill payments, there are a few simple elements required in a franchisee model to ensure that independent store operators retain their control, while only relinquishing administrative tasks that add no direct value to customers.

Common Goals

From a customer standpoint, there is no line of delineation between the franchisor and the franchisee. There is a shared brand that receives the blame for poor customer service (or the accolades for a job well done). The needs of the end consumer must always be recognized as the raison d’etre for both the franchisor and the franchisee and be built into the supply chain processes like at any other retailer.

Transparency

Consumer centric rules of engagement need to agreed upon and executed faithfully at all times. For example, when there is a supply shortage at the DC, available stock needs to be rationed. Every franchisee wants to get his/her shipment, but when there isn’t enough inventory to go around, stores at risk of losing sales (and alienating customers) must have higher priority than those whose displays contain sufficient stock, but just won’t look very nice for a couple of weeks.

Where rules cannot easily be made, open and direct communication is a great substitute.

Visibility

Ronald Reagan once famously quipped: “The nine most terrifying words in the English language are: I’m from the government and I’m here to help.” Many independent store operators will have a similar reaction if the franchisor says “Trust us to handle your store inventory.” Franchisees are business people. As such, they will likely not be in favour of blind trust as a way to manage the businesses that feed their families.

Instead, franchisees will be better served if they can see the replenishment plans that are being managed on their behalf (much like getting your bills a couple weeks before the due date) and have the ability set their own policies to suit their individual businesses.

From the standpoint of meeting the most basic needs of the customer, there is no difference between a franchisee retail model and a corporate store retail model. Customers want stock availability and a good experience (however they define that) at a price they’re willing to pay. The fact that the ownership of inventory may have changed hands at the back door of the store before getting to the shelf is – to the customer – administrative and immaterial.

Why, then, should the process for managing the supply chain from the supplier to the shelf be any different under a franchisee model than for a retailer with corporate stores?

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