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LOUISVILLE, Ky. – The Association of KFC Franchisees (AKFCF) released the results of a systemwide survey showing franchisees are not happy with the direction of the brand. And they are telling management how it can improve.
In their March 31 letter to Kentucky Fried Chicken Corporation’s president Roger Eaton, the association presented the 2010 Survey: “Building Future Success” (pdf). Although the survey was jointly developed between the independent franchisee association and the senior management team of KFC Corporation, the franchisor decided at the last minute to scrap the project. According to an undisclosed source, KFC notified the association last December that it was pulling out of the joint endeavor, but AKFCF proceeded to execute the survey without the company’s participation.
The objective of the survey was to identify barriers that interfered with the working relationship of KFC and its franchisees, and to pinpoint those concerns. It also aimed to identify the strengths and successes of the relationship. The franchisee association hoped that the survey results would build stronger organization trust and partnership with KFC Corporation, part of Yum Brands (NYSE: YUM).
The questions were developed late last year by Balanced Scorecard Committee members and KFC’s management team, with the assistance of an independent consultant, Mike Takla (MGT & Associates). The survey was distributed to a target of 539 AKFCF recipients with a completion date set for the February 2010 KFC Convention. Survey Monkey, a designer of customized assessment tools, handled the on-line collection and consolidation of the results.
The letter to Eaton revealed that approximately three-fourths (74%) of KFC franchisees responded to the survey. In the franchisees’ analysis of the results, they identified four major action areas in need of immediate attention.
AKFCF representatives asked for Eaton’s thoughts (pdf) regarding the 2010 Survey, inviting him to comment on how KFC Corporation plans to improve upon the various performance measures indicated in the results. They requested his response prior to disseminating the survey to the franchise system on April 9.
But to the reporter’s knowledge, KFC’s president has yet to respond.
Action Areas Identified
In analyzing the four major action areas, the association identified their first concern; lack of trust in leadership. They stated that there was a lack of recognition of the franchisees’ core role, knowledge and expertise. “Too much top down, condescension, arrogance, lack of listening, understanding, bullying,” the analysis explained. As a solution they stated, “KFC leadership needs to demonstrate leadership with honor and integrity,” suggesting this action, “Quit bullying, bulldozing, attacking and policing. This is a partnership, not a dictatorship.”
Franchisees feel too many new and unprofitable products are “killing bottom line.” Among other issues, they said that 83 percent don’t believe the KFC system has a strong marketing calendar that will drive sales growth. “We are making quick product changes, but some are too quick, not thought out enough, and/or not the right changes we should be making.” They chastised the National Council and Advertising Co-op [currently in litigation with franchisees], saying, “NCAC needs to get its act together and not simply sit back and blame KFC for poor products.”
The survey results show there needs to be a much better process and discipline prior to new product launches. Franchise owners feel they should be involved throughout the development process.
Operational Excellence and Training
The results showed that less than half of franchise owners believe that sufficient knowledge, resources and support are provided to achieve operational goals and objectives. And less than half feel that operational and performance standards are clear and reasonable and consistently applied and executed on a nationwide basis, including inspection standards. In the analysis they explain, “KFC needs to get their vindictive inspectors off our backs.”.
Regarding training they reveal, “60% do not believe that training is reliable, accessible and cost-effective.” They state that the company has done a poor job of providing quality, bug-free training for the monthly fee it charges franchisees.
They feel the KFC system should improve availability of tools, knowledge, resources and support, and it should be accessible to all franchisees.
Among the findings, the franchisee poll shows that 82 percent of owners don’t believe that the KFC system is doing all it can to improve business profitability, saying, “Many are hurting.” Sixty-three percent (63%) don’t feel that financial data used to make business decisions is shared in an open and effective manner. “Overly-rigid upgrades. . . 84% don’t believe that new builds and remodeled restaurants are cost effective,” they state.
Their action plan (pdf): “Care about the business growth and success of franchisees, which clearly isn’t the case now.” Franchisees feel largely not listened to by their franchisor. In regard to this sentiment, franchisees give this goal: “Jointly identify initiatives directly aimed at improving both KFC and the franchisees’ profitability.
The survey goes on to show that 84 percent don’t believe that franchisees and KFC leaders work jointly, in a spirit of trust and mutual respect toward brand growth and success. Eighty percent (80%) don’t feel that franchisees and the company are responsive to each others’ concerns, and almost three-fourths of all operators (74%) don’t believe that healthy debate and two-way dialogue is occurring between the parties.
In answer to Blue MauMau’s request for an interview with Roger Eaton or other officials, the public relations department stated that “for confidentiality reasons, KFC would not comment on internal correspondence between the company and its franchisees.”
Telephone calls to the Association of KFC Franchisees were not returned.
Survey Valuable Tool for Stock Analysts
Franchisee surveys are beneficial to stock analysts as well. Restaurant analyst Mark Kalinowski of Janney Montgomery Scott said these are the sort of issues that interest him when he reports to Wall Street investors. “We reach out to franchisees and try to discuss with them what is going on in their businesses. And we certainly incorporate that into our thinking about the company that we are researching,” he said.
Kalinowski also feels that franchisee profitability and satisfaction are pretty important. “In the short run we can get by without it, but in the long run a healthy franchise system is a blessing for the franchisor.” He also said franchisee performance is not an afterthought for evaluating a franchisor, it is the early warning predictor of operational issues. “As an analyst I try to have very close contact with as many franchisees as possible in a variety of systems,” he added.
|Building Future Success Survey Report (April '10) .pdf||2.59 MB|
|Action Priorities.pdf||34.38 KB|
|Roger Eaton letter with Survey results.pdf||104.41 KB|