The Single Most Important Question

I am just back from the International Franchise Association convention in New Orleans, a massive event attended by over 3,000 people. The session that had the biggest impact on me was an address by Cheryl Bachelder, CEO of Popeyes Louisiana Kitchen, a leading QSR chain of 2,600 stores. Over the past five years Popeyes has had consistent same stores sales growth, a 6% increase in market share, a $70,000 net profit improvement per store and a 400% increase in its stock price. They also have a queue of franchisees wanting more stores.

I was interested in what she had to say because earlier in the convention I had participated in a case study on Popeyes as it was in 2007, a troubled franchise chain characterised by unhappy franchisees, declining store sales and market share, and a rock bottom share price. Our first recommendation was to change the leadership of the franchisor, which is exactly what had happened.

Who is your most important stakeholder?

In her convention address, Cheryl Bachelor talked about the single most important question she and her executive team tackled when she came on board in 2007, and to which she attributes the company's subsequent success. The question was "Who is our most important stakeholder?"

To achieve consensus they had to lock themselves away for several days. The Chief Marketing Officer argued the company's success would always be dependent on satisfied customers, so they were the most important stakeholder. The Chief Financial Officer argued that shareholders were the most important group because they owned the company and ultimately their satisfaction would dictate the share price and the value of the company. The Chief Operations Manager argued it was franchisees who ultimately delivered the customer experience and controlled the company's growth, therefore they were the most important stakeholder.

After intense discussion, debate and soul searching the Popeyes executive team concluded that their franchisees were the most important group. They figured if the franchisees were making money and were satisfied, customers and staff would be looked after and the company and shareholders would prosper. She said from that point the company focused on respecting and listening to franchisees. Regular satisfaction surveys and working groups have become a part of their culture and they have collaborated with franchisees over product, marketing and store design innovations.

The right path is often not the easiest

Cheryl admitted this has not always been an easy path, though it has been a profitable one. For example when they rolled out their new store design with much fanfare and gave franchisees a tour of the new stores, the concept was criticised as being too expensive and crazy from an operations and customer perspective. Franchisees said the design needed to be simpler, more efficient and more affordable. Rather than defend the new store concept, the franchisor dumped it and embraced the concept "sales before signs".

It took Popeyes another two years to come up with an alternative refurbishment model. However this time the franchisees got behind the initiative and thousands of stores were quickly converted, resulting in immediate improvements to sales and store profitability. When I asked her how the franchisor team coped with this initial set back, she responded that it was tough to swallow their pride and take on board the franchisees' feedback, but it was definitely the right decision. She said, "The boldest thing we've done is to partner with franchisees - a combination of smart and heart. All decisions are made through the filter of 'Does this serve the franchisees well?' Collaboration is the key."

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