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Franchise innovation winners revealed: All their tips and tricks

Written on the 10 October 2012

Wednesday 10 October 2012

By Cara Waters & Patrick Stafford

Famously, Google engineers are allowed to spend 20% of their time working on their own projects in a bid to encourage innovation, but for smaller businesses without the resources of Google this approach can seem prohibitive.

That’s why SmartCompany sponsored the Franchise Council of Australia Franchise Innovation award, which was presented last night. The award recognises an individual or group within a system responsible for creating a successful business innovation. The innovations recognised are achievable and sure to inspire you in your own business.

We’ve spoken to the winning business and the finalists to explore how they foster innovation.

1. Winner: Battery World

In 2007, Townsville Battery World franchisee Greg Leslie had what he called “a light bulb moment” to bring people into his new franchise he would get consumers to drop off their old batteries for recycling.

At the same time, Leslie guessed they might hang around and check out the store.

He was right and now a battery recycling scheme is run across all of Battery World’s 77 franchises. The company estimates it has achieved over $1 million worth of editorial space purely because of its recycling initiatives.

Kerry Hannah, national marketing manager for Battery World, told SmartCompany that Battery World has to battle consumer perceptions that they don’t necessarily need that many batteries and getting consumers to come into a store is the hardest step.

“On the other side of things we wanted to be responsible socially; we were selling batteries and we wanted to close the loop on that,” says Hannah.

“That was the acorn of the innovation side of it, not just the product we were selling but looking at what we needed to do, which was be responsible and to get people into the store.”

Hannah describes Leslie’s idea as one “founded in necessity” and says innovation is not just about a product, it is about working within the community as well.

Once Leslie told Battery World about his idea the marketing department assisted him with design and communication issues, creating a Battery World character that the recycling message could be built around.

The initial scheme involving Leslie’s Townsville store operated as a pilot for the innovation and Battery World then considered how to share the scheme with the other franchises.

“That’s hard because when you introduce that idea to a whole heap of franchisees they may not be passionate about it,” says Hannah.

“We used those franchisees who had taken it up and who had experienced success to speak to the other franchisees and explain the process. So it was a matter of using their peers and building it into the company and culture so people think about being responsible for recycling.”

Hannah says the key was “finding a level that everyone can be passionate about” so Battery World could put one standard offer out.

She describes this as “the transition between one franchisee’s idea and making it something that works in a network.”

“Innovation comes from both necessity and a crazy idea that is sometimes hard to put into a franchised group. So it is not always easy to put into something that is systemised but within those ideas there is always something you can pull out and work through,” Hannah says.

“That’s why you join a franchise group, because you want the assistance to take those ideas to the next level.”

2. Runner-up: Coffee Club

Coffee Club has been enjoying a significant amount of success, expanding to over 270 locations across the country and the Asia-Pacific. But joint chief executive Dominic Gallo ran into a problem after he conducted research into how his franchisees were tracking.

As it turned out, despite ongoing success the franchisees simply didn’t have an idea as to how they were performing in relation to the rest of the group.

“A third of the franchisees were unsure of how they were performing,” he says. “They were asking things like how they sat in the system, and how they knew they were doing well.”

“So we needed to come up with a way of benchmarking everything.”

The company came up with a system called the Six Star Consistency Program. It uses a range of surveys to find out how each franchise is performing in relation to expectations, performance, brand engagement, and a range of different metrics.

But while the results allow the company to identify weaknesses in the business, it doesn’t necessarily translate to a whole lot of extra work. Gallo says by simply making the franchisees aware of the results, it creates an incentive among the individual locations to beat each other.

“Now, we publish them nationally, so people can see how they sit within the franchise.”

“If they spend a lot of time working on their business and driving it, their star rating will improve.”

The detail of each survey allows each franchisee to delve into each specific problem: it contains marks on transaction growth, sales, mystery shopping, a short store visit appraisal and an annual appraisal.

The six stars stand for progress report, business development review, mystery shopping, comparative growth, sales model and product alignment.

It’s a simple system, but by documenting each benchmark, Gallo ensured improvements across the network.

“The biggest improvement we’ve seen is just with people engaging in the system. So we’ve seen some real improvements just from that alone, from franchisees wanting to do better and to get a better star rating.”

“It’s really promoting a sense of achievement and recognition across the system.”

3. Runner-up: Lenard’s

Lenard’s has sold poultry through its iconic franchise for years, but managing director Bruce Myers had encountered several problems during that time.

Over time, he saw that franchisees are sent the same amount of chicken each day, which they are required to cut and sort, but the amount of chicken sent didn’t accurately reflect the sales trends of each individual store. It resulted in a lot of waste.

Following a franchise owner satisfaction survey, the company discovered its franchisees were too stressed. Employees were receiving packages of chicken, then cutting and packaging each cut individually.

So it decided to outsource the entire operation by deboning the deboning.

“But now, what we’ve done is taken the deboning part out of everything, and then put that in a poultry service. Inghams can do that in their own factory where they can automate it, and it makes the process more efficient for them and at a realistic price for our stores.”

The entire “easy cuts” system is automated. The chicken is cut in factories into individual pieces, which allows it to be packed and then shipped to each franchisee according to those locations’ sales trends.

“Our franchise owners knew they could eliminate some labour at the store level, because if you bring in a whole bird, it has the same proportions – two thighs, two breasts, and so on.”

“But if I only need half of that, I have a balance issue. Now, we can track the balance over the entire system. My store only needs X amount of fillets, and so on. So you don’t get the whole bird, and that’s worked out quite well.”

The benefits of the system reverberate across the entire chain: the system gets labour out of the store, which reduces costs, and also means each location is less cluttered.

“They’re boning the birds mechanically and manually, and then cutting the portions that we require and sending them to the individual store.”

“We’ve essentially just outsourced the manufacturing process while still maintaining the fresh chicken each day.”

And as Myers points out, this means the company can search out smaller retail locations, reducing costs over the franchise as a whole.

Currently 52% of franchise stores have converted to the new system, with the hope that 80% will convert by June 2013.

By moving chicken production to another firm, Myers says the company is able to drive the franchise program even further which will, hopefully, “drive more customers to the counter”.

4. Runner-up: Foodco Group

Foodco is a giant in the Australian franchising world with over 350 franchise business retail outlets trading through the Muffin Break bakery café franchise, Jamaica Blue café franchise and Dreamy Donuts donut and coffee franchise.

This scale means Foodco’s latest innovation, a state of the art training academy at the Foodco head office, was a significant undertaking.

The idea was generated through the Foodco’s HR and training team who conducted franchisee surveys.

Their main feedback consisted of making improvements to ensure that staff members were better trained on day-to-day operational issues.

Drew Edie, national marketing manager for Foodco, told SmartCompany the training centre was designed to introduce new franchisees to a real life in-store environment and is built like one of Foodco’s cafes, complete with a $250,000 commercial kitchen.

Franchisees go through two weeks of intensive training before going into stores and every new staff member (including head office staff such as Edie) go through the training centre so they are qualified to work in the stores.

“The franchisees are fully prepared to go and run their own business once they have done it,” Edie says.

Edie says the challenge with encouraging innovation in a franchise is rolling something out nationally across an established network.

“We have systems in place that are tried and tested, so sometimes it is hard to change,” Edie says.

“We definitely share best practice and if things are working in certain areas we look to replicate that across the country.”

5. Runner-up: Gelatissimo

Dominic Lopresti had a problem.

He, along with his brother Marco, both joint executives of gelato chain Gelatissimo, wanted to start exporting their product overseas. But given gelato doesn’t have as many preservatives as ice cream, the transportation and logistics were costly, complicated, and driving them nuts.

“We wanted to create a point of difference,” Dominic tells SmartCompany.

“We tried to think about how we could be different to what competitors are doing. If you look at the major ice cream companies, they use a system of making in factories then distributing through cold logistics.”

That’s okay for ice cream, which relies on preservatives to keep the product tasty. But just as baked bread is best fresh from the oven, gelato is best when fresh – so the company found a way to make it easier for stores to make the product on site.

The pair came up with a type of kit production system, which contains premium quality raw ingredients and gelato-making machines, complete with instructions on how to make the product.

Not only does the system cut down on waste, but it ensures franchisees are able to convince customers they’re buying something fresher than the rest of the market can allow.

“It’s this whole idea of wanting to be different,” he says. Both he and his brother wanted to recreate the concept of making gelato, just as they did in their own father’s shop in the early 1990s.

“I wanted to get back to our roots. And we just thought; how could we recreate that atmosphere?”

But there’s a secondary business proposition to the creation of a production kit – it allows the company to send product overseas and to expand international franchise opportunities.

Now, the company exports to Asia, with the kit allowing franchisees to start production much earlier than they otherwise would have.

“When the product gets there, it’s in perfect condition, and the customer gets to experience the product that’s freshly made in store.”

“They can try gelato that’s just come out of the machine – and that’s a unique selling point for us. We encourage people to have a sample first. And for our competitors, unless they’re making product in store, they just can’t compete.”


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