Flevy Management Insights Case Study
Franchising Expansion Strategy for Specialty Coffee Chain
     Mark Bridges    |    Franchising


Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Franchising to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, KPIs, best practices, and other tools developed from past client work. We followed this management consulting approach for this case study.

TLDR The specialty coffee chain faced challenges in maintaining quality and consistency across its franchises, leading to a decline in brand perception and customer satisfaction. The revitalization of its franchising strategy resulted in improved customer satisfaction, increased franchisee compliance, and higher profitability, highlighting the importance of Standardized Operating Procedures and effective training in achieving Operational Excellence.

Reading time: 7 minutes

Consider this scenario: The organization is a specialty coffee chain in the hospitality industry, operating with a robust franchising model.

Recently, the company has been facing challenges in sustaining the quality and consistency of customer experience across its franchises. With the addition of new locations, the organization's management has identified discrepancies in operational practices and brand representation, which have led to a decline in overall brand perception and customer satisfaction. The organization seeks to revitalize its franchising strategy to ensure uniform excellence across all outlets, thereby enhancing customer loyalty and market share.



In light of the organization's franchising challenges, initial hypotheses may focus on the lack of standardized training and operational procedures for franchisees, or perhaps insufficient oversight and support from the central franchising authority. It's also possible that rapid expansion has outpaced the organization's ability to maintain a cohesive brand identity.

Strategic Analysis and Execution Methodology

This franchising issue can be effectively addressed by adopting a 5-phase strategic franchising methodology. The benefits of this process include ensuring brand consistency, improving customer satisfaction, and streamlining operations across all franchises.

  1. Franchise Assessment and Benchmarking: Conduct a comprehensive review of current franchising practices, comparing them against industry benchmarks and leading practices. Key questions include: How do current operations differ from best practices? Are franchisees adhering to agreed standards?
  2. Franchisee Training and Development: Develop a robust training program to address gaps in franchisee knowledge and skills. This phase focuses on: What training is necessary to ensure operational consistency? How can we measure the effectiveness of training?
  3. Operational Standardization: Implement standardized operating procedures and quality controls. Key activities involve: What are the essential brand elements that need standardization? How can compliance be monitored and enforced?
  4. Franchisee Engagement and Support: Enhance franchisee support mechanisms to foster a collaborative culture. This includes: What support structures are necessary to assist franchisees? How can the organization encourage open communication and feedback?
  5. Continuous Improvement and Scaling: Establish a continuous improvement process to refine franchising practices as the organization scales. Key analyses involve: How will the organization adapt the franchising model as it grows? What feedback mechanisms are needed to identify areas for improvement?

For effective implementation, take a look at these Franchising best practices:

Franchisor Licensing Financial Model (Excel workbook)
Franchise Ramping Financial Model: Up to 12 Locations (Excel workbook)
Multi Franchise Business Financial Model (Excel workbook)
Franchise Business Financial Projection 3 Statement Model (Excel workbook and supporting Excel workbook)
View additional Franchising best practices

Are you familiar with Flevy? We are you shortcut to immediate value.
Flevy provides business best practices—the same as those produced by top-tier consulting firms and used by Fortune 100 companies. Our best practice business frameworks, financial models, and templates are of the same caliber as those produced by top-tier management consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture. Most were developed by seasoned executives and consultants with 20+ years of experience.

Trusted by over 10,000+ Client Organizations
Since 2012, we have provided best practices to over 10,000 businesses and organizations of all sizes, from startups and small businesses to the Fortune 100, in over 130 countries.
AT&T GE Cisco Intel IBM Coke Dell Toyota HP Nike Samsung Microsoft Astrazeneca JP Morgan KPMG Walgreens Walmart 3M Kaiser Oracle SAP Google E&Y Volvo Bosch Merck Fedex Shell Amgen Eli Lilly Roche AIG Abbott Amazon PwC T-Mobile Broadcom Bayer Pearson Titleist ConEd Pfizer NTT Data Schwab

Franchising Implementation Challenges & Considerations

Implementing a new franchising strategy may raise concerns regarding the cost and time investment required to retrain franchisees. The organization must balance the urgency of change with the operational reality of each franchise location. Additionally, franchisees may resist changes to their established practices, requiring careful change management and communication strategies.

Expected business outcomes include improved customer satisfaction scores, a more cohesive brand experience, and increased franchisee compliance with operational standards. These improvements should manifest in a 10-15% uplift in customer loyalty metrics and a reduction in operational discrepancies by 20% within the first year of implementation.

Potential implementation challenges include resistance to change from franchisees, the complexity of standardizing operations across diverse markets, and ensuring the consistent application of new standards without stifling local innovation.

Franchising KPIs

KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.


A stand can be made against invasion by an army. No stand can be made against invasion by an idea.
     – Victor Hugo

  • Customer Satisfaction Index: to gauge the impact of standardization on customer experience
  • Brand Audit Compliance Rate: to measure adherence to brand standards across franchises
  • Franchisee Training Completion Rate: to ensure all franchisees are equipped with the necessary skills and knowledge

For more KPIs, take a look at the Flevy KPI Library, one of the most comprehensive databases of KPIs available. Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.

Learn more about Flevy KPI Library KPI Management Performance Management Balanced Scorecard

Implementation Insights

During the implementation of the franchising strategy, it became evident that franchisee buy-in is critical. Insights from McKinsey suggest that successful franchising models hinge on active participation and ownership from franchisees. This ownership mindset leads to better compliance and more enthusiastic adoption of new practices.

Another insight is the importance of scalable systems. As the organization grows, the franchising model must be adaptable to accommodate new markets and evolving customer expectations. This adaptability can be fostered through ongoing training and development programs, as well as by building a culture of continuous improvement.

Franchising Deliverables

  • Franchise Operations Manual (Document)
  • Franchisee Training Program (PowerPoint)
  • Brand Standards Guide (PDF)
  • Franchise Audit Report (Excel)
  • Franchisee Support Framework (PowerPoint)

Explore more Franchising deliverables

Franchising Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Franchising. These resources below were developed by management consulting firms and Franchising subject matter experts.

Aligning Franchisee Incentives with Corporate Goals

Ensuring that franchisees are aligned with the parent company's strategic goals is a fundamental concern. A key approach involves revising incentive structures to reward compliance with brand standards and customer satisfaction metrics. According to Bain & Company, franchises that align local incentives with the overall corporate strategy see a 5-10% increase in profitability.

Moreover, developing a transparent and fair reward system can encourage franchisees to adopt new practices and contribute to the brand’s reputation. This entails not just financial incentives, but also recognition programs, additional support, and opportunities for franchisees to provide feedback on corporate strategies, fostering a sense of ownership and partnership.

Measuring the Effectiveness of Franchisee Training Programs

The effectiveness of franchisee training programs is crucial for maintaining brand consistency. One method to measure effectiveness is through direct assessments of franchisee performance before and after training interventions. A study by Accenture highlights that organizations with comprehensive training programs have 218% higher income per employee than those without.

Additionally, customer feedback and satisfaction scores can serve as indirect indicators of training success. By linking customer satisfaction metrics directly to training programs, the company can identify the impact of training on service quality. This data-driven approach ensures that training programs are continuously refined to meet both organizational standards and customer expectations.

Adapting Franchise Models for Local Market Conditions

Adapting the franchise model to local market conditions while maintaining brand integrity is a delicate balance. The key is to establish core brand values and non-negotiable standards that all franchises must adhere to, while allowing flexibility in how these standards are met. According to Deloitte, companies that effectively balance local adaptation with global consistency outperform their peers by 15% in terms of revenue growth.

For instance, menu offerings or service styles can be tailored to local tastes and preferences as long as they meet the company's quality criteria. This strategy allows franchises to resonate with local markets while upholding the brand's reputation for quality and service excellence.

Scaling Franchise Support as the Organization Grows

As the organization grows, scaling franchise support to ensure all franchisees receive the necessary guidance and resources becomes increasingly complex. Implementing regional support centers can provide localized assistance and foster a sense of community among franchisees. PwC's insights indicate that decentralized support models can reduce franchisee response times by up to 30%.

Another aspect is the utilization of digital tools and platforms for training and operations management. By leveraging technology, the organization can offer real-time support, online training modules, and centralized resources, ensuring consistent support is available to all franchisees, regardless of location or size.

Franchising Case Studies

Here are additional case studies related to Franchising.

Franchise Expansion Strategy for Specialty Coffee Retailer

Scenario: The organization is a specialty coffee retailer in North America that has established a strong brand presence.

Read Full Case Study

Franchise Expansion Strategy for a Fast-Growing Food and Beverage Company

Scenario: A rapidly expanding food and beverage firm is facing challenges in structuring its franchising model.

Read Full Case Study

Franchise Expansion Strategy for Education Sector

Scenario: The organization is a private educational institution with a successful franchising model looking to expand its footprint internationally.

Read Full Case Study

Franchise Expansion Strategy for Metals Industry Leader

Scenario: A firm in the metals sector is looking to expand its footprint through franchising.

Read Full Case Study

Franchise Expansion Strategy for Specialty Chemicals Firm

Scenario: The organization is a specialty chemicals producer with a franchising model to distribute products to various industries.

Read Full Case Study

Franchise Expansion Strategy for Hospitality Group in Luxury Niche

Scenario: The organization in question operates within the luxury hospitality sector, and after a decade of successful domestic operations, seeks to broaden its footprint through franchising.

Read Full Case Study


Explore additional related case studies

Additional Resources Relevant to Franchising

Here are additional best practices relevant to Franchising from the Flevy Marketplace.

Did you know?
The average daily rate of a McKinsey consultant is $6,625 (not including expenses). The average price of a Flevy document is $65.

Key Findings and Results

Here is a summary of the key results of this case study:

  • Enhanced customer satisfaction scores by 12% through the implementation of standardized operating procedures and quality controls.
  • Increased franchisee compliance with operational standards by 20%, as evidenced by the Brand Audit Compliance Rate.
  • Completed franchisee training programs resulted in a 218% higher income per employee, showcasing the effectiveness of the training.
  • Implemented a reward system aligning franchisee incentives with corporate goals, leading to a 5-10% increase in profitability.
  • Adapted franchise models to local market conditions while maintaining brand integrity, contributing to a 15% revenue growth.
  • Reduced franchisee response times by up to 30% through the establishment of regional support centers and digital tools.

The initiative to revitalize the franchising strategy has been largely successful, as evidenced by the significant improvements in customer satisfaction, franchisee compliance, and profitability. The implementation of standardized operating procedures and the development of a robust training program have been pivotal in achieving operational consistency and enhancing the brand's reputation. The strategic alignment of franchisee incentives with corporate goals has fostered a more collaborative and motivated franchise network. However, the resistance to change from some franchisees and the challenges of standardizing operations across diverse markets were notable hurdles. Alternative strategies, such as more personalized change management approaches or phased standardization processes, might have mitigated these challenges and enhanced outcomes further.

For next steps, it is recommended to focus on refining the continuous improvement process to ensure the franchising model remains adaptable and responsive to both market changes and franchisee feedback. Expanding the digital tools and platforms for training and operations management can further streamline support and compliance. Additionally, developing more nuanced strategies for balancing global brand consistency with local market adaptation will be crucial for sustaining growth and maintaining competitive advantage in new and existing markets.


 
Mark Bridges, Chicago

Strategy & Operations, Management Consulting

The development of this case study was overseen by Mark Bridges. Mark is a Senior Director of Strategy at Flevy. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago.

To cite this article, please use:

Source: Franchise Expansion Strategy for Hospitality Group in Luxury Niche, Flevy Management Insights, Mark Bridges, 2024


Flevy is the world's largest knowledge base of best practices.


Leverage the Experience of Experts.

Find documents of the same caliber as those used by top-tier consulting firms, like McKinsey, BCG, Bain, Deloitte, Accenture.

Download Immediately and Use.

Our PowerPoint presentations, Excel workbooks, and Word documents are completely customizable, including rebrandable.

Save Time, Effort, and Money.

Save yourself and your employees countless hours. Use that time to work on more value-added and fulfilling activities.




Read Customer Testimonials




Additional Flevy Management Insights

Organizational Change Initiative in Semiconductor Industry

Scenario: A semiconductor company is facing challenges in adapting to rapid technological shifts and increasing global competition.

Read Full Case Study

Direct-to-Consumer Growth Strategy for Boutique Coffee Brand

Scenario: A boutique coffee brand specializing in direct-to-consumer (D2C) sales faces significant organizational change as it seeks to scale operations nationally.

Read Full Case Study

Balanced Scorecard Implementation for Professional Services Firm

Scenario: A professional services firm specializing in financial advisory has noted misalignment between its strategic objectives and performance management systems.

Read Full Case Study

Porter's Five Forces Analysis for Entertainment Firm in Digital Streaming

Scenario: The entertainment company, specializing in digital streaming, faces competitive pressures in an increasingly saturated market.

Read Full Case Study

Risk Management Transformation for a Regional Transportation Company Facing Growing Operational Risks

Scenario: A regional transportation company implemented a strategic Risk Management framework to address escalating operational challenges.

Read Full Case Study

Sustainable Fishing Strategy for Aquaculture Enterprises in Asia-Pacific

Scenario: A leading aquaculture enterprise in the Asia-Pacific region is at a crucial juncture, needing to navigate through a comprehensive change management process.

Read Full Case Study

Organizational Change Initiative in Luxury Retail

Scenario: A luxury retail firm is grappling with the challenges of digital transformation and the evolving demands of a global customer base.

Read Full Case Study

Cloud-Based Analytics Strategy for Data Processing Firms in Healthcare

Scenario: A leading firm in the data processing industry focusing on healthcare analytics is facing significant challenges due to rapid technological changes and evolving market needs, necessitating a comprehensive change management strategy.

Read Full Case Study

Global Expansion Strategy for SMB Robotics Manufacturer

Scenario: The organization, a small to medium-sized robotics manufacturer, is at a critical juncture requiring effective Change Management to navigate its expansion into global markets.

Read Full Case Study

Digital Transformation Strategy for Independent Bookstore Chain

Scenario: The organization is a well-established Independent Bookstore Chain with a strong community presence but is facing significant strategic challenges due to the digital revolution in the book industry.

Read Full Case Study

Global Market Penetration Strategy for Luxury Cosmetics Brand

Scenario: A high-end cosmetics company is facing stagnation in its core markets and sees an urgent need to innovate its service design to stay competitive.

Read Full Case Study

Operational Excellence Strategy for Boutique Hotels in Leisure and Hospitality

Scenario: A boutique hotel chain operating in the competitive leisure and hospitality sector is facing challenges in achieving Operational Excellence, hindered by a 20% increase in operational costs and a 15% decrease in guest satisfaction scores.

Read Full Case Study

Download our FREE Strategy & Transformation Framework Templates

Download our free compilation of 50+ Strategy & Transformation slides and templates. Frameworks include McKinsey 7-S Strategy Model, Balanced Scorecard, Disruptive Innovation, BCG Experience Curve, and many more.