There’s been an interesting trend in the news lately. Franchisees are raising their voices about how loyalty programs impact the businesses they own.
Too often we think of brand relationships as two dimensional, between the customer and the brand. But for many major brands, there is a third party whose support is critical: the franchise owner / operator. For companies as diverse as global hospitality chains, convenience stores, CDRs and QSRs, the bottom line depends on the franchise operator to uphold brand standards, deliver a consistent customer experience – and support loyalty efforts.
And the operator expects loyalty programs to add value to their business.
In the past year we’ve seen a major franchise-dependent brand, Subway, deploy a loyalty program that cut deeply into operators’ margins. Thousands of US franchisees publicly revolted, resulting in the program being pulled after just eighty-two days in market. It seems to me that Subway either didn’t consult with their owners – or didn’t listen to them – or they could have avoided a costly mistake.
It’s been reported by the Wall Street Journal and others that operators of brands in the Marriott International family have demanded – and been granted – a greater share of Bonvoy loyalty program revenue.
Given the importance of franchisees as stakeholders, I thought I’d ask one of the leaders in owner engagement for his thoughts. I recently spoke with Steve Sickel, CEO of the IHG Owners Association, an organization independent from IHG that serves as an advisory voice to IHG on behalf of IHG franchisees.
IHG grew from the pioneering efforts of Kemmons Wilson, founder of Holiday Inn in the early 1950s. By the mid-fifties, the Owners Association was formed, and has been a model for such groups ever since. While many brands solicit franchisee input periodically, the IHG Owners Association is a permanent organization and serves as an integral input into IHG’s decision making across many aspects of the business including marketing, technology, and operations.
Along with their guests,” Sickel says, “franchisees are also IHG’s customers. Kemmons Wilson always believed that the franchise model requires the brand and its operators be partners in a relationship of equals.”
Sickel elaborated: “The purpose of the Owners Association isn’t just about the good vibes of making franchisees feel heard, it’s about driving bottom line impact to hotels. Our operators’ unique and intimate operational knowledge is a massively valuable asset for IHG to leverage in their plans for brands and the IHG One Rewards program.”
While this seems like common sense, it’s clear that some marketers fail to leverage the assets their franchisees can provide. We all know that revenue isn’t primarily driven by the managers at headquarters. It is the operators and their employees who deliver the experience that fosters loyalty and builds the bottom line.
“Our operators are just as critical to IHG’s success as the technology, marketing, financial and other professionals in IHG’s organization,” Sickel concluded. When it comes to engaging franchisees fully, how does your organization stack up?