MANAGING FRANCHISEES April 2002

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MANAGING FRANCHISEESApril 2002
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Todays Topics

• MRG Franchise Background
• Our Challenges
• Our Approach
• Pricing Strategies
• Lessons Learned

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MRG Environment

• 900 restaurants in 12 countries
• Operate 3 brands plus 1 emerging brand
• Bennigans
• Metromedia Family Steakhouses (MFS)
• Ponderosa
• Bonanza
• Steak Ale
• Tavern

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Our Environment

• Franchise Profile Bennigans
• 180 company, 120 franchised
• 2002 and beyond, ratio will change dramatically
• 35 franchise owners, most have 4 to 6 restaurants
• All company restaurants use the MRG/MICROS system
• 65 franchised restaurants use the MRG/MICROS
  system

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Our Environment

• Franchise Profile MFS
• Today, 108 company, 350 franchised
• 2002, 31 company, 425 franchised
• Company restaurants will be prototypes in 1 to 2
  growth markets
• 200 Franchise owners, most with 1 or 2
  restaurants
• All company restaurants use the MRG/MICROS system

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Our Environment

• Franchise Profile MFS
• 40 franchised restaurants use the MRG/MICROS
  system
• New franchise owners are encouraged to migrate
  towards a vendor vanilla package and obtain
  support from the vendor
• Commitment to support the existing franchisees on
  our POS system

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MRG Evolution
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Our Challenges

• Highly varied customer base makes it difficult to
  satisfy
• Company Brands Each brand has one owner with
  a common set of system and operating needs
• Franchisees Each franchise owner is one
  distinct user group with a varied set of system
  and operating priorities not only for their
  restaurants but also for their corporate offices

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Our Challenges

• Franchise Issues

• New POS system did not address franchise owner
  needs

• Promises of the past not delivered

• MRG and IT strategies were focused on company
  needs vs. franchise needs

• No relationship existed between franchise owners
  and IT

• The cost of providing franchise services far
  exceed the existing pricing strategy

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Our Approach

• Key Success Factors

• Acknowledge the Franchise Community as a very
  important customer

• Gain credibility and trust by addressing promises
  from the past

• Form 11 relationships with key Franchise Owners

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Our Approach

• Key Success Factors

• Increase awareness and better align pricing
  strategies to reflect actual costs

• Develop service offering based upon long term
  company strategy

• Empower the franchisees with input and choices

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Our Approach
Building Trust and Credibility

• Fixed the system issues

• Focused efforts on improving our Help Desk

• Addressed and delivered the promises of the past
• Access to Data from Franchise Corporate offices
• Provided payroll and hotel system interfaces
• Implemented a Food Cost system

Satisfying past promises provided a foundation
for credibility and trust
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Our Approach

• Communication and Relationships

• Quarterly Technology Updates to Franchise Council

• Formation of Technology Council
• Identified 2 franchise owners interested in
  representing the IT needs of the franchise
  community

• IT Survey of Needs

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Our Approach

• Communication and Relationships
• GM Conference Vendor Show Participation
• Marketing brochures
• Formal status reports

• Product Development Request Process

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Our Approach

• Communication and Relationships
• Build relationships with key thought leaders

• IT Outsourcing A test of our relationship
• High Anxiety -- What does it mean to ME?
• Worked with Brand Management to identify key
  thought leaders and key message points
• Road show We went to see them!
• Articulated what we knew Obtained their input
• Mantra Very little will change. Same people
  doing the same work!

Result Outsourcing has been a non event
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Pricing Strategies

• Franchisees on the MRG/MICROS system pay for
• Vendor hardware and software
• Vendor hardware and software maintenance through
  their own vendor agreements
• Franchisees on the MRG/MICROS system receive from
  MRG
• MRG customizations
• Help Desk services (7x24)
• Polling Data Transfer services

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Pricing Strategies

• MRG IT services payments have been suspended for
  now
• Original pricing was far less than costs
• Difficult to now align pricing with costs
• 2002 Go Forward Plan
• Identify and communicate core services
• Incrementally charge for services outside of
  core
• Re-institute core service charges for new
  franchise owners

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Pricing Strategies

• Outside Core Services
• Manager controllable system alterations
• Digital Dashboard
• New products outside of MICROS
• Interfaces to third party products
• Outsourcing helped us identify core services and
  associated costs

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Lessons Learned

• Acknowledge one size does not fit all

• Establish core services up front

• Price services to market not below

• Form strong relationship with Brand Franchise
  Leadership

• Focus on the relationships first and the
  technology second

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Lessons Learned

• Deliver what is promised Do what you say, say
  what you do

• Position IT as a service provider of business
  solutions regardless of where the solution comes
  from

• Become an advocate of the franchisees in your
  organization

• Communicate, Communicate, Communicate

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QUESTIONS?
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MANAGING FRANCHISEESApril 2002