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For franchise brands to grow, operators and their franchisors need to share clear expectations for one another and align around common entrepreneurial values like creativity and tenacity, three veteran franchise executives said.
Jimmy John’s founder and chief executive Jimmy John Liautaud, Culver’s founder and chief executive Craig Culver and Sbarro chief executive Jim Greco shared many of the lessons they have learned during long careers in franchising at the Franchise Operators Presidents Panel at the National Restaurant Association Restaurant, Hotel-Motel Show in Chicago.
All three panelists said leading franchisees begins with setting the example at the top.
When he first started his 1,400-unit sandwich chain out of his garage in 1983 at age 19, Liautaud had yet to learn that lesson, he said.
“I didn’t know about leading by example,” Liautaud said. “I didn’t know it was the leader’s job to take the toughest tasks for himself and delegate the easiest ones to the people below you. I was the owner, working Monday and Tuesday day and Wednesday and Thursday night, and I smoked pot and drank beer Friday, Saturday and Sunday.”
That management style lead to Liautaud’s first two employees quitting on him, leaving him no other choice but to work around the clock seven days a week to build his business, he said.
Before growing Culver’s to its current level of 451 locations, Craig Culver opened his first unit in 1984 with his father, George, and kept the restaurant going despite losing money the first year. His management team, including his wife and both parents, helped him through the tough start by working 16-hour days with him.
“Every leader needs people around him,” Culver said. “Every leader needs support. I had good enough people telling me, ‘Craig, somehow we’re going to get to the next day.’ Challenges don’t go away; they’re part of what we do.”
To lead by example, franchisors have to put the time into improving systems and recruiting the right franchisees, those who are active managers and not passive investors, Greco said.
“This is a business that really requires attention, and it’s a management-intensive business,” he said. “It’s not something you can do passively. So the first thing we want is someone who is going to be dedicated to the business and put a lot of time into it.”
Liautaud and Culver agreed, saying they expect the same out of franchisees that those operators should expect of them as the leaders of the franchisor organization: honesty, integrity, setting the right examples and engagement. As such, they both rule out golf enthusiasts when picking potential partners.
“I don’t hire golfers,” Liautaud said. “It takes a lot of time to be a good golfer, and if they’re as good on the golf course as they are in the restaurants, we have a problem. My guys running the company and in the stores don’t have the time for that.”
The executives also shared some of the best lessons they learned from mistakes they had made.
Culver said that early on, he was unwilling to give enough decision-making authority to other people. "If you empower the right people," he noted, "they’ll make the mistakes but they’ll learn from them just as you did, and they’ll make money when they correct them.”
Greco told attendees that they should not beat themselves up about mistakes. “They should be viewed as a learning experience, and if you’re not making some mistakes, you’re not trying enough ideas,” he said. “The key isn’t to avoid mistakes, it’s to have more successes than failures.”
Liautaud agreed, and said the biggest lesson he learned was to bring in franchisees and corporate staff that understood his corporate culture and to develop them so that he could promote from within. He went from having to turn around about 60 failing franchised stores to opening hundreds of locations, he said.
“The biggest mistake I made when I look back at the first franchise effort was to think that everybody would be as excited as I was to wake up and make sandwiches every morning,” Liautaud said. “When I took our franchising operation over, we took those stores over one by one and turned every store around. … Now all the leadership in our organization comes from within, and it’s a farm system.”