New strategic vision
One of our clients decided to implement a completely new strategic vision in their set of conditions. In the past, the franchisor played the role of wholesaler and the (franchise) clients that of the retailers. This resulted in conflicting interests, and frequent disagreements regarding the division of available margins on products. Thus a great deal of energy was wasted and the brand damaged.
A new strategy was implemented: from then on, the interests would be balanced by reaching agreements on sharing the Overall Margin (OM). This includes not only the store margin but also any other discounts and payments from the supplier. By agreeing on a fixed share ratio, the franchisor and franchisee had a proportionate share when the OM was increased or decreased. The new challenge would be to maximise the OM rather than safeguarding their own share of the margin. The franchisor and franchisee would then cooperate more on the basis of equality, with extra focus on the customer (consumer).
The new strategy resulted in a redesign of the chain and was based on three principles:
- Trust: trust is essential as the basis for cooperation and combined efforts
- Recognition of the various roles. The Central Organisation (formerly wholesaler) has the expertise and is assigned the role of conducting Marketing, Promotion and Logistics tasks. Franchisees are involved in the decision-making process through the establishment of steering groups, supervised by the Central Organisation
- Transparency in finance. Franchisees are given full (accountancy) insight into the margins, costs and revenues.
It took a great deal of effort to implement this new strategy. First and foremost, to get everyone on the same page. But also to re-establish the trust (which had been damaged in the past) and to remove the mutual distrust. And thirdly, to interpret the new strategy.
Interpretation of strategy
- Contracts with franchisees
- Contracts with suppliers
- Adaptations to the automation process
- Calculation models for comparison of the past and present methods of mutual settlement.
- Solidarity arrangements: the new method would result in some franchisees receiving disproportionately higher or lower margins. This needed to be rendered visible, and moderated by means of a transition system.
- Reports (at chain level) which could be audited by accountants of both parties
This transition naturally also resulted in a number of concrete issues. What approach to take regarding the individual butcher’s shop in the store, which adds value to the product? How to include direct deliveries to the store in the greater picture? How much room should the franchisee have for local products?
A major role for Recentes
Recentes played a major role in all these points of action (as project manager, directly accountable to the Executive Board). The project is a great success. The final (commercial and financial) results of this transformation have been particularly positive. Margins have increased and the mutual trust strongly boosted. The attention has been shifted to the market and the consumer, resulting in a broader and deeper range without any additional losses. Recentes has been accredited by the client for its contribution.