Compliance vs. Coaching: Monica Rothgery on How Great Franchisors Build Trust

Today's guest is Monica Rothgery. She's a long time franchising and operations leader whose career has cut across frontline restaurant management, international work, and large scale US operations. Monica served as a lieutenant in the US Army and after starting her post-service career as a restaurant GM at Taco Bell, she moved into HR and training roles within Yum.

And later led a major turnaround effort of 450 KFC restaurants in Thailand. From there, she went on to serve as the COO of KFC United States, overseeing more than 4,000 restaurants. Monica's the author of Lessons from the Drive-Through, an amazing read for folks both inside and outside franchising.

I've had the pleasure of hearing Monica speak several times and her book is a staple at our company library and I'm so excited to have you here, Monica. Thanks for being on the show.

Awesome. Thanks for having me.

So I'd love to start by talking about, the balance between compliance and coaching, right?

You have lived in both worlds, and I know that you're a huge proponent of enablement and coaching and lifting people up and giving them that ownership. How have you thought about that dynamic? Are they in harmony and can you talk through it?

Specifically related to franchising, compliance is always there, right? I mean, it's always the tension between the franchisor and the franchisee, but the opposite of compliance is non-compliance and the result of non-compliance is bad stuff.

And so that is never the direction that I would wanna go. I would prefer a hundred percent of the time for our partners, the franchisees, to understand the rationale behind brand standards, behind the technology we're trying to adopt behind the new initiative and embrace it because it's good for the business.

So, compliance is always there and out of the dozens of years that I led franchise operations, I closed about two restaurants. One in the US for non-compliance, for just refusal to, but they had so many problems with that restaurant. They didn't have any business being open and serving guests anyways.

And I'm proud of that. If you have to resort to the contract. If you have to resort to that, you've lost the partnership. So yes, compliance is a tool, but I will a hundred percent of the time focus on coaching, enabling the partnership so that both sides grow.

It seems like education is the kind of piece there, which is, you said it's not about doing it or not doing it, it's about making sure they understand why. That was the why behind each one of those, call it compliance checklists. How do you distribute that at scale?

I can imagine 450 being hard, 4,000 being even harder, right? How do you make sure the why is distributed and understood when you're talking about so many different things at such a large scale?

Yeah, we had two different businesses, so I'll talk about the US business 'cause that was at its peak when I joined, 450 franchise organizations. Thailand was unique 'cause it was one large franchise. And then the rest were owned by corporate. So in the US, it's education, but it's also listening and understanding the situation that the franchisees are in.

When we talked about a new initiative or a change in standards or procedures, I always tried to search for three greens. And what that means is that whatever we were gonna do, let's say we're gonna do a new product, let's say, we're gonna do a new variation on a sandwich, green has to be green for the customer.

Which is obvious, right? You wouldn't roll something. And it's not always obvious though, actually, sometimes we do stuff that's not green for the customers. We reduce the ply of the napkins, so then they have to use 20 instead of 10 'cause they're so paper thin. It is a cost cutting effort, but green for the customer so that the customer sees this as a win.

It's favorable. There's a lot of ways to test that and measure that. The second green is green for the franchisee, their P&L. If a brand rolls out a new initiative and the franchisee cannot make money on it, they're not gonna be excited about that. And then the third green is for the frontline.

And if you know me and you know what I'm all about, I'm all about making things easy and executable for the frontline, the managers and the team members that have to do it. So if you don't have three greens, you probably shouldn't go forward or you should keep working that initiative until you get to three greens.

Now, in my organization, and in many organizations, the franchisees are represented by various committees. So to the second part of your question, how do you reach all of the franchisees? You work with the most influential franchisees. You work with some of the small ones so that the smaller franchisees, the ones that have two, five restaurants get represented.

And of course, you work with the ones that have, hundreds of restaurants because they're the anchors in your brand. But if you don't have them on your side, if you're not, partners moving forward, you're not gonna see success. And you see this in brands where the franchisees are suing the brand or the franchisees are in conflict with the brand.

No one's winning in that situation. So, yeah, it is a lot of education. I used to call myself, I wasn't the chief operating officer of anything. I didn't operate anything. I was the chief diplomat. I felt like everything was always in negotiation to try and get everybody on all sides, to agree on the right things to do for the business.

Got it. So I like that framework of, do right by the franchisee so that they can do right by their employees, the frontline staff, which then makes sure that you're doing right by the customer. And you're saying that it's a hard thing to prove, right? If you have a new initiative, and we've seen this at other brands too, right?

You have a new initiative and there's a skepticism of like, how do you know that's gonna work? And it almost sounds like you're incubating it in a small set of franchisees and then using that as an example, to then broaden it, can you talk about like those building of a case study?

How would you get past those hurdles of, oh, well, you know, I'm in Texas and you know, your star franchisee, they're out in, Maine and that doesn't, apples to oranges. I guess how do you start that education process of the sparks, to the kindling, to the roaring fire?

Yeah. It's a process. It's not a short process. I was talking with a brand, a couple months ago and they were wanting to know how to recover because their team members were really, really struggling. This was a large brand and the root of it was an initiative that they had not planned for.

And so they were running out of product. They didn't have enough equipment to serve the guests. People were having to be turned away. And so the team members were having a terrible experience and they were asking me, how do we help the team members recover from this? I'm like, how did you get here?

What were the results of your test? And the leader I was talking to kind of dropped their head and I was like, what were the results from the test? She's like, well, we didn't test it in this country. We had seen success in other countries, so we just. Okay, so I was like, well, that's lesson number one.

Never again will you launch anything, even if it's a new checklist or a new piece of equipment or a new greeting. You have to test every little thing with the operators. During COVID we were switching from styrofoam to a more environmentally friendly packaging for gravy.

At KFC, the gravy comes in side of gravy. And, they were like, okay, Monica, we have it. It took a long time to get the prototype, we have it. Here it is, we wanna roll it out. I'm like, stop. We're gonna test this. They're like a gravy container. I'm like, yeah, a gravy container. Well, we don't have that many until we sign the contract to go into full production.

We don't have, I'm like, whatever we have, we're sending out. And during COVID, we sent it out to 10 restaurants around the country and all franchise. And I'll get to why that's important in a second. Within days my phone was ringing. That the, operators were getting, the team members were getting burned.

The cups were almost collapsing under the heat of the gravy. I was like, okay, stop, stop, stop. What's happening? Well, it turns out it was during COVID and the lab through no fault of their own, didn't have any gravy because it was the middle of COVID. So they just tested it with hot water.

The viscosity of gravy and the viscosity of water are different. So when they put real gravy in those cups, they collapsed, which would've created all kinds of problems. So we saved a really huge disaster of a rollout, because we tested with the people that use it. Why do I test in franchise? When I got to KFC US, there was a running philosophy that we prove things in the business, in the restaurants that KFC US owns, the corporate stores and then we roll it out. I turned that around because no matter what, the franchisees didn't believe our results. So I just let them test it. I had whoever volunteered to wanna test whatever it was, whether we were testing french fries or kiosks.

They tested it and then they talked to each other, and then all of a sudden I have pull. Then they're calling me like, what's taking so long? Why can't we get this rolled out? And when I get those phone calls, then I know we're winning.

Interesting. 'Cause, in my experience talking to brands, the corporate test, whether it be software, whether it be the container, whatever it might be, there is always a prove it in the lab, the corporate store is a lab, and then it gets rolled out. Why do you think that?

And I have a follow on question to this after, but why do you think there is that kind of hesitancy of, no, that's not applicable to me. The corporate store is a different beast in and of itself.

It's about trust, right? And it's about the P&L, like the franchise P&L is different.

The corporate stores didn't pay royalties to itself. So when you put that into the mix and you are running two stores, or 10 stores your profile for what is gonna work and be successful looks different. And so, I thought it was just a path of least resistance to get it into my huge franchisees, to get it into a few small franchisees, that were really good at picking out every little problem that we were gonna have, whether it was software or a new piece of equipment. So that we could solve it before we launched it to 4,000 restaurants.

It is really, really hard. So you almost can't afford to make mistakes. So if it means testing six months longer to make sure it's perfect, or adding to the test, sometimes we'll start with a small pod and then slowly grow that so that we get more and more momentum around franchisees and owners wanting whatever the new initiative. Sometimes look, sometimes there just wasn't agreement, especially geographically.

The Midwest was like, we're never gonna be able to sell this product. And the East Coast, West Coast, were like, we have to have a non meat alternative. And so then you have to reconcile it and decide, then ultimately you have to decide what's best for the brand, where you're gonna be able to serve the most guests and make, the most franchisees feel like they can be successful.

Interesting. So I guess my follow on question was pretty related to that. I think you brought a pretty good example, which is, the West Coast behaves different from the East Coast, which is different from the South. And there's all this regionality and transparently, a lot of my business is built on the fact that, you can use data to overcome that. If you have that person in, that really believes that their suburb of Minneapolis is just unlike any other market in the world, right? It has its own economic trends that can't be reconciled in any way.

The idea is that we believe that you could use data in a really organized way to craft that narrative in an automated way. How did you do that in the past? This person who believes that for whatever reason, their market behaves differently. Or, an abundance of data doesn't seem to change their mind, but then compliance is the last resort, right? Those kind of seem like they're in tension.

Every market behaves differently. Just ask the operator. They'll tell you every restaurant, well, I don't know about anybody else's restaurant, but in my restaurant, I've probably heard that 10,000 times. And the thing about franchising is and this is a watch out to anyone who wants to go into franchising. You are signing up to be a part of a brand.

If you wanna operate your own independent restaurant, then go for it. Do that. And then you can have whatever customizations Minneapolis needs or wants. But if you sign up to be part of a brand, you're signing up for what that brand stands for and where that brand goes. Do your homework, make sure it makes sense for, whatever your goals are.

But once you're in, you're a part of that brand's community. We had buffets for a long time. So this was like a single price, and then you could go through the buffet line to get as much chicken and jello that you could want. And during COVID we had to shut down the buffets as everyone remembers, 'cause they weren't safe.

And then wanted to never reopen them because they were detracting from what KFC the brand was trying to do and to be. And it was a fight. Because some of these smaller towns, that KFC Buffet was like a staple, right? And so ultimately, there's a decision that gets made for the brand and not everyone's gonna always be happy, for sure.

Interesting. What I'm hearing you say is something like the fact that being in a franchise business means your default is a belief that the brand knows what it's doing. If the default is that you, the franchisee, know what they're doing, then you know, maybe a solo operator's kind of the way to go.

But by being part of a brand, by being part of something that has cohesion, consistency, that is the thing that is important. So help me understand this idea. You've gone through a lot of these transitions and change management and testing. I'd love to understand the role of data, in this education process.

I know you talked about reaching out to the one to five unit operators and crafting the case study, and that's maybe the narrative side of it. How did you go back to the data and start proving out the fact that, this change this, green new initiative does right by your P&L?

Again, I'm gonna go back to that three greens. There's plenty of customer data generated from market tests, plenty. From transaction growth, sales growth, check growth, day part growth, and that's just the, sales factor. Then there's customer intercepts, customer surveys, customer comments and complaints.

Plenty of customer feedback. P&L feedback, it's easy to measure the impact of a new initiative on food cost, on energy costs, labor, all that. Any decent brand has all of that available. And for the franchisee, it's a little bit tricky because we didn't have access to all of their P&L information. And we had to rely on them self-reporting and sharing with us.

Are you making money off of this? But the third factor was the green for team members. How do you measure that? We didn't have a way to measure it other than the project team, led by the marketing team would go into the test market and have a round table with the managers. And so all these marketers and project team would be sitting around a table of the managers saying questions like, so you guys, how do you like it?

It's great, the customers love it, right? And so you have these managers basically just nodding their heads, saying these new, nuggets or pick a new tool. The managers often didn't feel comfortable speaking out. Then the marketing team or the project team would come back to leadership and the franchise leadership and say, oh my gosh, they loved it.

They loved it. I heard that so many times. The field loved it. Did they? So what we built was a tool called, Voice of the Restaurant Manager. We had Voice of the Customer, so we built Voice of the Restaurant Manager, which was a, quantitative survey, ultimately using Net Promoter as the decision maker.

So the ultimate question to the managers who tested was, should we roll this out to the whole country? And then we established a baseline of like 4.3 out of 5. And any initiative that didn't at least hit 4.3, we knew we had problems. So that's like probably the best example of using balanced data to make a solid decision that would be friendly for the field, friendly for the franchisees, and of course the big one for the guests.

Interesting. I like that because there's a reality that franchisors sit at the nexus of how much data, right? And there's the structured data, which is things like you're talking about, which might be surveys, but largely is POS data and all that, right? And then there's this abundance of unstructured data, which, everyone's talking about customer reviews as a classic one.

But what you're talking about is, ideally we'd be able to get the input of our frontline workers because they have maybe the most intuitive feel for what's actually gonna resonate with the customer because they engage with them all the time. So I think there's a nugget of wisdom there of engaging and leaning on that voice as much as you can, leads to that green for the franchisee and that P&L success.

We didn't always get it right, but we had a lot of wins in the four and a half, five years I was with KFC. And I can't certainly take credit for it. We were led by a guy named Kevin Hochman, who's now at Chili's. And you could see what they've done and his leadership plus, we had some amazing marketing support,

we had tech support, and we had great relationships with the franchisee in the sense that they had a seat at the table. That we listened, that they had a voice.

So I think this is maybe my last question. I know we're nearing on time here. One of the things that I've heard you say in the past is that complexity kills performance.

There's the complexity of the franchisee versus the objection of the franchisee and the frontline staff and the customer, and the fact that you have all these different data sources, and some of them are more reliable than others and they're structured and unstructured data.

What's a good framework of thinking about how to pull out the complexity or kind of distill the complexity into performance, right? Because, those two maybe don't go together very well.

Yeah. Ultimately everything starts and ends at the restaurant. It used to drive me crazy when people in the headquarters or in the support center would say, we've rolled it out. Meaning we've trained the trainers that are gonna go out.

No, we have not rolled it out until this thing is live in every one of our 4,000 restaurants. Everything starts, nothing's live until it's in every single restaurant. The only way to measure complexity or execution is to see what's happening in those restaurants, and it's a bell curve.

You're gonna have some restaurants who can do anything and some restaurants who cannot ever do anything. But that middle 80%, if compliance is continually a problem, if execution is not happening, it is not the fault of 3,000, 4,000 restaurant managers and team members out there. It is the fault of the system or the process.

One of the things that we struggled with, I don't know what their situation is now, but running outta food. It was often that you would go to KFC and they wouldn't have. We don't have that chicken, or we don't have those parts. And the reason is because the menu was so complex.

There was so many meat blocks. There was chicken on the bone, there's nuggets, there's tenders, there's sandwiches. There's two kinds or three kinds even of chicken on the bone. Spicy, original recipe, crispy. Every one of those is an opportunity for failure. And then to expect the manager to have that whole SKU list of products available, hot and fresh, and maintain profitability.

It's just setting that manager up for failure. If you look at brands that are really successful right now, especially chicken brands, their complexity is they don't have that many meat blocks. Look at Chick-fil-A. What are they known for? They're known for their sandwiches and nuggets primarily.

Or Cane's, Raising Cane's. They do tenders, that's it. So the more you go down the complexity lane, the less likely you have success at the restaurant level. Above restaurant, complexity can be figured out. Whether it's through data or resolving inconsistencies or conflicts between. Whether it's marketing and operations, or HR and operations, or franchise-franchisee, you can figure all that out.

But ultimately where simplicity needs to lie is at the restaurant. Like why do you have to have a small, medium and large cup? The reality is you need two, call 'em small and large, call 'em medium and large, but you really don't need three. And just that little simple change, simplifies things for the managers, for the team members.

Interesting. It sounds almost like a focus thing, right? It's focus on one thing, do it well, and then in the case of your staff and the team see it to completion, right? Find the right thing, do the thing, see it through, and then once it's done, then you get to move on to the next one.

And it's a, running a business is infinitely complex. You have to do everything right and there's no margin for error. And you and I both know. So really the idea is figure out the thing that's gonna get you the most value. Do that, then move on to the second one, and then reassess continuously.

To be honest, in a legacy brand, as old as, and you see this in other legacy brands too, I could rattle 'em off, but I don't need to because you know who they are. It's very difficult to evolve, especially if you've added and added. When you start to take away menu items that, a very small but loyal part of the customer base loves, you get uproars. That's what happened with, Taco Bell when they tried to take away the Mexican pizza. So it's very difficult for legacy brands to continue to evolve, especially if they haven't and then they wanna simplify.

Got it. I like that. I like that focus and, the importance of it, not just in the early stages, but continuously and through evolution. Monica, this is awesome, what a treat. Also, for those that can't see, Monica has Lessons from the Drive Through behind her.

A fantastic read. I highly, highly recommend it to anyone. Monica, any parting words for our listeners? Anything else, that we didn't get to in our few minutes here?

No, I would just, again, go back to the where we started, which is there's a partnership between the franchisee and the franchisor.

And, when everybody's, pushing and pulling in the same direction, you get further faster together. So compliance is always a tool you have in the toolkit, but hopefully it's the last one you have to take out.

I love that, well said. Monica, thank you again. We'll talk soon, and that's all.