Ethical Performance
inside intelligence for responsible business


How to stop franchisees from talking baloney

July 2009

After a business partner’s billboard appeared to show Burger King denying climate change, the firm was forced onto the defensive. EP considers the CSR pitfalls of corporate franchises

Local reporters dream of global scoops. Chris Davis didn’t even have to go looking for his. It was gifted it to him in just four words. ‘Global warming is baloney’. Davis, a staff writer on the weekly Memphis Flyer, saw the slogan plastered on signs outside two downtown Burger King restaurants. Not long after he filed last month, news that the ubiquitous US fast-food chain denied climate change was circulating the world.  

The story turned out to be a little more complex. The signs were the handiwork of Mirabile Investment Corporation, a franchisee that owns and manages more than 40 Burger King restaurants in Tennessee and neighbouring states. Davis’s report carried an official response from Burger King clarifying that the messaging was unauthorised and had been removed. But the damage had already been done.

Aside from its newsworthiness, the incident flagged up an important issue about the relationship between companies and their franchisees. Corporations in 85 industries, from senior citizen care to cleaning services, license independent businesses to use their brand. But how can the franchisor ensure its franchise network shares its vision on corporate responsibility? Can it oblige franchisees to behave responsibly? And if so, how?   

There are two issues here. One has to do with compliance, the other with values. On the face of it, the first of the two should invite little debate. Every franchisee must meet the core standards espoused by its parent brand. This is more than mere aspiration. Owner/operators are generally bound by contract to do so. Note that Burger King used the word ‘unauthorised’.

Compliance requirements are common to all modern franchise contracts, observes Tim McIntyre, vice president of communications at US-based Domino’s Pizza. In the case of Domino’s, franchisees are explicitly forbidden from any communication that doesn’t promote the company’s products.

But a compliance-based system can never be 100 per cent effective. For starters, it requires policing. Burger King declined to comment on its enforcement policy, but has obviously been found wanting. That said, it didn’t waste time in taking corrective action as soon as news of the signage broke. Likewise, Domino’s Pizza has disciplined a number of its owner/operators in recent years for running mayoral advertising campaigns on its pizza boxes. In cases of consistent or serious non-compliance, franchisors often rescind a franchisee’s contract.

Ensuring franchisee compliance also depends on contract terms. That works for newly-struck deals, but some franchisees operate under contractual terms signed several decades ago – long before corporate responsibility had obtained its current prominence.

A more significant hurdle centres on behavioural psychology. Stopping franchisees making wrong moves is one thing. Encouraging them to actively live out a brand’s ethical values is quite another. Governing franchisees’ attitudes, rather than their actions, presents ‘inherent difficulties’, points out Michael Tuffrey, director of consultancy firm Corporate Citizenship.

That should not stop brands from trying to promote franchise ethics. Getting owner/manager buy-in is not easy, but to do so, the brand must use similar arguments to those it uses to gain internal buy-in, advises Giles Gibbons, co-founder of the London-based Good Business consultancy.  ‘There has to be more of a business case put to franchises in order for them to agree to do it’, Gibbons argues.

Most franchisees are local businesses and therefore quick to see the positive impacts that community involvement programmes accrue. Where the franchisor’s charitable programme is generic and relevant enough to allow its franchisees to participate at a local level, all the better.

But building a degree of flexibility into the franchisor-franchisee relationship is critical, according to Alisa Harrison, vice president of communications at the Washington DC-based International Franchise Association. She cites the example of healthy-eating in fast-food restaurant chains. ‘If you are a franchisee in a heavily African-American area, you might tailor your messages to issues that are facing that particular segment of the population.’ Straightforward though it sounds, franchisees frequently lack such room to manoeuvre. Compliance-heavy systems on the part of the franchisor are often to blame.

The best franchisors foster a two-way relationship with their franchisors when it comes to day-to-day business decisions. In such circumstances, a new advertising campaign would pass through a committee or working group of franchisee representatives prior to roll-out.

The same should happen on corporate responsibility. As a minimum, close participation and communication would ensure franchisees are up to speed on the brand’s position. That should help avoid more ‘Baloney’ style incidents.

Ethical Performance | Global | Corporate governance

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