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ANN ARBOR, Mich. — Patrick Doyle, president and chief executive officer of Domino's Pizza Inc. (NYSE:DPZ), speaks with Blue MauMau about why he pays so much attention to franchise owners and what style works best in leading them.
Doyle, a University of Chicago MBA, served as corporate finance officer at First Chicago Corporation and subsequently as head of baby food stalwart Gerber Products before joining Domino's as senior vice president of marketing in 1997. He served in various roles in the 9,500 unit pizza chain before being named CEO and president in March 2010.
This is the third installment of a three-part interview with Mr. Doyle.
BMM: In leading a chain, what is the pecking order? What is a franchise owner that a franchisor executive is mindful of him? Is he/she greater than a franchisor's employees, but a little lower than the franchisor's shareholders and corporate officers?
Doyle: It's not that there is a pecking order, but rather that there are three groups for whom to create value. It has to work for the consumers, franchisees and the company. No one of these groups can have success without the others also having success. If the consumers are doing well, but the company and the franchisees are losing money, then the consumers eventually won't be doing well because the product won't be offered anymore. If the consumers are doing well and the company is doing well, but the franchisees aren't, then stores close. There's no longer reinvestment in refurbishing stores. And the same if the consumers and the franchisees are doing well, but the company isn't. That also fails. Ultimately, the position of the consumer and the franchisee is undermined by a weak company supporting them.
I don't think you can say franchise owners are a first, second or third. I think all groups are so interdependent that it has to be all three, or the whole thing comes crashing down.
BMM: What sort of leadership style best fits leading a franchise chain? As I recall, there are fundamental leadership categories — e.g. autocratic, bureaucratic or democratic — with the bureaucratic model being what corporations typically use. Bureaucratic is not a pejorative. It simply describes an authority based largely on official position in an organization. Does leadership in a franchise system demand an autocratic style, like Moses coming down from Mount Sinai with ten clear, succinct operating manual commandments — or else? Or, is it akin to a corporate bureaucratic model between a CEO and those that the organization hires and easily fires? Or, is it most akin to a democratic style in which a prime minister attempts to lead the bickering members of parliament?
Doyle: I think there are fundamentally three kinds of franchise relationships out there. You've got some that are very, very loose. They are kind of shared brands, but you see very different executions across different stores and different restaurants within the franchise system. That's one approach.
Then you have the very tightly controlled approach, where there is far less flexibility given to franchisees. Everything is pretty prescriptive from headquarters.
And the last one, which is where Domino's clearly resides, is somewhat of a mix between the two.
A lot of it resides in the relationship between the franchisee and franchisor.
If you look at Domino's, this is a system in which over 90 percent of our franchisees started as delivery drivers at our stores. They worked their way up to become store manager. Ultimately, they bought their first store. They moved on from that. This is a system that is built upon people who have been very involved with Domino's for a very long time. Many franchisees worked for the [franchising] company before they became franchisees. So there are very deep relationships with franchisees across all functional areas. Essentially, every functional area in this company has an advisory group of franchisees. For example, we have franchisee advisors who formally advise and work with IS (information systems), HR (human relations), distribution and marketing.
Informal relationships between Domino's corporate employees and franchisees are also important. In many cases those relationships go back for a very, very long time.
So some of it is organized communication. But sometimes the more valuable communication is actually the informal. There are simply so many people who know so many folks throughout the company that ideas are constantly being bounced off people. There is certainly a degree of involvement. There are franchisees who choose to be very involved, and those who would rather just run their business and stick to the day-to-day needs of their business. Either of those are absolutely fine. If you think of the three types of franchising models [leadership styles] — very loose, very autocratic and the one that is built more upon relationships — we are clearly in that third group.
BMM: That informal process of reaching an agreement that you mention reminds me of nemawashi. That's the Japanese art of consensus building that can be seen in Toyota and other Japanese company networks of loosely affiliated, independent firms (keiretsu). Your executive presentation at the end of the process seems to be a formal approval of what has already been informally spread, thrashed out and approved from the roots up. I say this because you describe many Domino's franchisees emerging out of corporate (franchisor Domino's Pizza, Inc.). They have also come up from the ranks of drivers. The high degree to which this happens within your chain is unusual. It's an honored career path in which the ties of an entire career (from starting as a driver) would provide an informal, porous venue where word can leak out and leak back in. Corporate employees can tell their franchisee friends that they've seen the proposed product or practice work. Likewise, corporate employees would have early feedback from franchisees.
Doyle: One of the interesting things that I'll also add is that same relationship is not just a domestic occurrence. It happens in international as well. A lot of our international franchisees know our domestic folks well. There's a lot of communication that goes back and forth across the borders. Our franchise owners in the U.S. are aware that something new has been tried somewhere else, and they wind up not being surprised when they hear three months later that we are thinking about doing the same thing in the U.S.
BMM: What are the benefits of leading in the rather democratic leadership style that you use?
Doyle: I think this answer will come as a surprise to a lot of people. I think the value of having built trust in the system is that you can actually move far faster. I think a lot of people look at it the other way. They (autocratic leaders of franchise chains) think that if they just make decisions, announce them and move forward, it's more time efficient. But you tend to get far more resistance, which ends up ultimately meaning that the system moves far more slowly. If the relationship is there and the trust is there, I think it gives the system the ability to move far faster.
Part of building the trust and relationship is that there will be times when it doesn't go smoothly.