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How A&W’s Culture Shift Created a Comeback

February 27, 2018

The brand leadership and franchisees worked together to revive the brand

By Joe Mathews
Founder, Franchise Performance Group

I believe franchising is driven by two basic metrics: unit-level economics and trusting franchisee-franchisor relationships. Attend any CEO roundtable and you will hear such things as, “We collaborate with our franchisees,” and “We have a franchisee advisory council and we solicit their feedback.” Yet these steering committees, advisory committees, and task forces franchisees sit on seldom have any decision-making authority. Regarding brand strategy, operational procedures, and most things brand-related, it’s almost always the franchisor’s final call.

Franchisors know franchisee collaboration and buy-in are essential to ensure sound, street-level execution. However, nothing in the franchise agreement obligates franchisors to solicit and operationalize franchisees’ advice and feedback. And nothing in the agreement obligates franchisees to buy into the franchisor’s vision. Yet we know both are mission-critical for the chain to be competitive and the brand to be sustainable.

What do you think would happen if franchisee collaboration suddenly became part of the legal structure and corporate governance of your franchise chain? Would such forced collaboration become a strategic brand advantage driving operational excellence to new levels, or would it be an operational liability akin to the inmates running the asylum?

Several years ago, this is exactly what happened at A&W Restaurants. That’s why A&W is a brand to follow.

This nearly 100-year-old iconic franchise is, in fact, owned by a partnership of international and domestic franchisees, including the National A&W Franchisees Association (NAWFA). In other words, the inmates not only run the asylum, they own the asylum. The 5-member governing board includes one seat for the CEO — and up to four seats for NAWFA franchisees. Nothing gets passed or enacted without franchisee sign-off. Franchisees have total veto power.

“To operate a company such as this, you certainly have to leave your ego at the front door,” says A&W President and CEO Kevin Bazner. “If you’re going to be collaborative, which we have to be, you’ve got to be open to other people’s ideas.”

Tactical vs. strategic

Bazner knows very well what it’s like to run a restaurant. He started out in his youth as a dishwasher, worked his way through the ranks as a line cook, did time as a bartender, and eventually became a franchise owner himself. A&W corporate leadership learned the food business from the trenches and can relate to franchisees’ penny-profit mentality.

A&W Restaurants President & CEO Kevin Bazner

Kevin Bazner

“We’re very different from a large franchisor whose executives may never go in their restaurants,” says Bazner. A&W has 625+ units nationwide, and another 340+ internationally.
“We have a lot of respect for people on the front lines. We’ve all been there.”

Because franchisees sit on the board, board meetings can often get overly tactical. “The biggest challenge we have is we really have to be mindful that we provide leadership to stay on strategy.”

Franchisees bought the company back in 2011. “The best thing we ever did was in 2012, in Year One, we engaged our franchise association and the franchisee community at large in developing our strategic plan,” says Bazner. “We’ve maintained strong strategic focus.”

Strong franchisee alignment and no exit strategy

Bazner proudly states, “At A&W, everyone wears an apron.” All members of the corporate staff in Lexington, KY, headquarters work a full shift in an A&W restaurant at least once a quarter. It’s a unique way to make sure everyone understands how their decisions impact franchisees’ operations and ultimately the bottom line.

Another unique thing about A&W is their ownership has no exit time horizon. Many brands get passed from equity firm to equity firm, and make decisions to maximize their exit along a 5- to 7-year timeline. Building a long-term sustainable brand is someone else’s problem. Equity firms always enter with an exit plan.

A&W franchisees, many of whom are second- and third-generation owners, are in this for the long haul. This 100-year old brand is creating and executing a continuity plan to keep the brand relevant and in operation for another hundred years.

Three chicken tenders, one broken in half, wit a plastic ramekin of sauce.

A&W’s top-selling Hand-Breaded Chicken Tenders? They were first created by a franchisee and then voted on by the Board of Directors, which includes a strong franchisee voice.

Regarding operating procedures, marketing, and brand standards, NAWFA, comprised of individual franchisees, has half the votes, and the A&W leadership team has the other half. To change standards, the A&W brand requires a two-thirds majority. This means that the A&W leadership team can realistically force its agenda if it can convince a minority third of franchisees to side with their agenda. But Bazner won’t even consider pushing through an initiative unless he has a majority of NAWFA’s votes.

“A big part of this alignment has to do with trust,” he says. “I would put that at the top of the list. If they’ve got 11 votes and I’ve got 11 votes and 16 gets you over the line, I only need 5 of their 11. But I won’t do it on 5 of their 11, because the majority is against me.”

“If we can’t provide the leadership, the data points and the logic to get the majority of their votes, then we’re not doing our job,” Bazner says.

How is it working?

A&W franchisees’ sales are up 30% since the change in ownership. Keep in mind A&W operates in a competitive space where other food chains are struggling to stay flat. They point to their change in ownership and corporate governance as the driving factors behind their sales gains.

Compared to A&W, how is your chain doing?

Points to ponder

Sometimes franchisee advisory councils are put together as a token gesture to stop a franchisee uprising. Others are stacked by the franchisor to maintain an illusion of collaboration.  Still others are legitimate advisory bodies, but almost none have real decision making authority, meaning its the franchisor’s call.  What if these advisory bodies, while well intentioned, become self-imposed barriers to the next level of performance because they don’t take collaboration far enough? If collaboration works, then why don’t more franchisors take A&W’s lead and bake collaboration into their corporate governance? What if franchisors are actually foregoing market share and profitability to maintain an illusion of control?

Now for the real question: When push comes to shove, do franchisors value control more than they value an increase in market share and profitability?

About FPG

FPG is a thought-leading specialty consulting firm helping franchisors achieve breakthroughs in franchisee recruitment results. We collectively have almost 100 years of franchising experience as executives, multi-unit franchisees, and suppliers to franchisors. Since our inception, we’ve worked with 110 emerging growth, regional, national, and resurgent brands including Arby’s, A&W, BrightStar Care, College Hunks Hauling Junk and Moving, Huddle House, Chem-Dry, Taco John’s, Great Clips, Molly Maids, Fantastic Sams, BP and Subway.

About Joe Mathews

Joe Mathews, founder of Franchise Performance Group, has more than 30 years of experience with such national chains as Subway, Blimpie, MotoPhoto and Entrepreneur’s Source. He is a regular presenter at IFA conferences, and has served as an instructor with the ICFE (Institute of Certified Franchise Executives). Joe specializes in franchisee recruitment, franchise sales and franchisee performance. He is author/co-author of four books: Street Smart Franchising, Franchise Sales Tipping Point, Developing Peak Performing Franchisees and How to Create a Franchise Sales Breakthrough. Guaranteed.