Three keys to franchising success.
An interview with Joe Bourdow about what it takes to survive and thrive, right now.
These days, few doubt the widespread impact of economic conditions on the franchising community. It’s cliche to even talk about it. What to DO about it is far from cliche, however. Franchisors are experimenting with countless tactics to attract new franchise owners and new customers, for example. The rise of social media in particular, has created a flurry of activity and spending in an area that few understand well. But is that the best route to recovery? Or will it be some other change to standard business practices that sparks the growth we’re all looking for?
According to Joe Bourdow, President of Valpak, the most powerful strategies for franchising success aren’t anything new. In fact, they might sound kind of boring. The truth is, however, the three keys he identifies are universal to successful franchising. Joe should know. Having been involved with Valpak since 1978, and as an active member in the franchising community, he’s seen what works and what doesn’t. And to hear him say it, there are just three principles that matter most to Valpak’s success:
- A truly great product.
- Strong franchise relationships.
- Highly efficient operations.
The primary product: direct mail coupons. Not the sexist sort of product, to be sure. They have been around for a long time, and they are often categorized as “junk mail.” Are they still useful? Does anyone read them? Conventional wisdom might say No, but the numbers tell a different story.
Valpak’s Blue envelope is delivered to over 45 million homes in the US and Canada each month, with offers from some 65,000 businesses over the course of a year. Those are some big numbers, especially when you consider that those mailings comprise half a billion coupons annually– but that’s not the most interesting part.
92% of adults who receive Valpak envelopes are aware of it, and 90% of recipients open them. Talk about market penetration! Valpak’s ability to maintain such a powerful presence has allowed them to weather the decline in advertising spending that has hamstrung so many others across the country.
“The concept of co-op mail is really good,” says Mr. Bourdow. “It can saturate a market and produce measurable results,” which are two deciding factors when advertisers get picky about their spending. And on the consumer side, the Blue envelope “cuts through the clutter in good times,” when companies are flush with advertising dollars and inundate consumers from all angles. On the other hand, “consumers look forward to receiving our coupons in bad times, as they pay more close attention to their buying decisions.”
Valpak also has a growing online presence and a sophisticated targeting mechanism, which both serve to improve the value they provide to consumers and advertisers. When all is said and done, however, Valpak is staying true to their couponing roots, and it pays. Without a solid offering, no amount of packaging, repositioning, or marketing tricks can make a franchise (or any business concept) profitable in the long run. Had they chased fickle advertising trends, departing from their core offering, they would have suffered with the rest of their industry. Instead, Valpak is poised for more growth and to improve upon their already dominant market position.
When it comes to the franchise relationship, Mr. Bourdow knows exactly what makes it work: “We are crystal clear about their unit economics.” It’s one thing to provide a great product or service to the public, but quite another to ensure that your franchise owners are empowered to run their businesses as profitably as possible. Valpak’s world-class training and support programs are rationalized according to this logic, and their communications with franchise owners continually reinforce this point.
Given that their wholesale model may afford opportunities that conventional royalty models may not, it’s understandable if franchisors resist the argument to invest more heavily in their training and support programs. However, the case isn’t necessarily one for greater expenditures. Mr. Bourdow would argue that being committed to franchise owner profitability is about creating a culture, and recognizing exactly what makes more money, and what doesn’t. It’s no surprise, then, that a great deal of Valpak’s training and support programs are dedicated to sales proficiency– a component that is decidedly lacking in many franchise systems.
As a manufacturer, operational efficiencies also play a central role in Valpak’s success. Just this year, Valpak completed their transition to a new manufacturing process that represents the state of the art in print processing and fulfillment. This modernization effort was many years in the making, and not without it’s challenges. Most franchisors know well the magnifying glass with which franchise owners examine their new initiatives, and would not envy such an undertaking. Mr. Bourdow and his team wisely included multiple franchise owner task forces throughout the transition, not only helping to ensure buy-in from the system, but to leverage the insight and perpective of many stakeholders. The franchise system is far more than just a management challenge– it’s a tremendous resource for continual improvement.
While operational efficiences may seem to matter less to a smaller system that processes fewer bits of information and more modest top line revenues as compared to Valpak, the bottom line is still the bottom line. Failing to create positive cash flow during a system’s infancy too often creates a larger system that also struggles with cash flow, causing an unsustainable reliance on franchise sales. It’s easy to wait for the day that technology and other operational investments seem like a no-risk gamble. That day rarely ever arrives. Valpak’s planning started years ago, and came to fruition at a time of great uncertainty.
Now, rather than merely surviving, Valpak is thriving. Despite all of the factors stacked against them, profitability is up, franchise owner satisfaction is as good as it’s ever been, and the company is fully prepared to double their capacity as they move into new markets, and further penetrate existing ones.
When I first contacted Joe for this article, he didn’t think there was much to share about his experiences. I suppose having grown so accustomed to an environment where best practices are the norm, it’s easy to take them for granted. Perhaps this piece will help other franchisors to examine what they take for granted, and whether those ideas represent the best for their system. At Valpak, they most certainly do.
