22 May 2019

The Dodo Pizza Manifesto: Why people hate franchising and how we dare to change that

The Dodo Pizza Manifesto: Why people hate franchising and how we dare to change that
Maxim Kotin

Maxim Kotin

Dodo Pizza storyteller

Quite a few entrepreneurs I respect don’t believe in franchising. They say it isn’t a decent way to grow a business. And although we at Dodo Pizza are building a franchise, I can relate to that sentiment.

Old-school franchising’s sins are numerous indeed. They range from inconsistency in quality and service to a lack of trust between partners that can border on open hostility.

We at Dodo dare to say we can change this. Our team aims to build not only a digital-first pizza franchise, but a franchise of a new kind altogether.

If you know how legacy brands operate, some of our unconventional principles and practices I set out to describe in this post might come as a shock to you.

So have your pills handy in case you have a heart attack.

 

Our business is transparent

What are the true costs of setting up a new shop? How much money are other franchisees making? What does a real unit’s P&L look like?

This is something you want to know as a prospective partner. But usually you can’t. When it comes to real financial data, traditional franchises tend to be reserved and secretive.

We at Dodo Pizza follow the principle of radical transparency.

So our financial business model is available for our prospective partners, and Dodo’s corporate chain publishes its P&L for each of its units. Even our pizzerias’ monthly sales are public.

 

We don’t hide our failed units

Old-school franchises always promote their best-performing units and never tell you about their failed shops.

For us, being transparent means being open about our flops. So you can study Dodo Pizza’s full ranking and see not only its leaders but its losers too.

In May 2019, when this article was written, our first pizzeria in Uzbekistan still lagged in 468th place with just $6,178 in sales—which is a poor result for a three-year-old pizza shop.

 

We don’t make money on hidden fees

Franchisees are normally obliged to buy equipment or ingredients from certain suppliers approved by the franchise, and brands often take a cut of the money partners pay to suppliers.

This practice makes the supply chain more expensive for partners and basically serves as a hidden royalty fee of an undisclosed size that franchisees have to pay on top of the actual royalty fee.

We at Dodo Pizza believe this system leads to a conflict of interest.

Every extra buck made on the supply chain by a franchise decreases the chances of success for its franchisees, which in turn undermines the future of the whole company.

So we don’t do it, and we keep our books open to our partners so they can see it.

 

We don’t sell you our IT

We have invested millions in Dodo IS, our internal IT system, which is now a complex product that provides our partners with modern tools for managing their business—from order tracking and staff scheduling to our modern website and state-of-the-art mobile app.

Those who have paid extra for every third-party IT solution they had to install in their restaurants might be surprised to learn that we don’t charge our partners any extra for Dodo IS.

It’s an integral part of our franchise and comes with the brand for free.

 

We’re interested in your long-term success

This might not be true for the top franchises, but it is definitely the case with some less established brands: they rarely care about your long-term success.

Such brands often demand hefty initial fees while offering moderate future royalties. It’s a no-brainer that in this case, their primary intention is to extract upfront payments from new partners. Expecting real support from the brand afterwards would be naive.

The deal is done, dude, and you’re on your own—with a thick manual filled with outdated or irrelevant guidelines and know-how that doesn’t help when things turn sour.

We want our partners to succeed in the long run—so we provide ongoing support for our franchisees and our financial model is more balanced.

 

We openly discuss our decisions

Brands are powerful. Their franchisees are powerless. So usually management simply imposes made-behind-closed-doors decisions on them.

Legacy brands have been operating like this for decades.

We prefer to discuss important issues with our franchisees. We foster open and direct communication and encourage constructive, negative feedback from our partners. We sometimes even choose to take a vote if the issue is sensitive but critical.

Last year, we wanted to increase our marketing budget from 1% to 3% in Russia to invest more in nationwide advertising, so our team argued its case to the partners and moved forward only after the majority (90%) voted in favor of the decision.

 

We build a community

Let’s admit it: most brands don’t want their partners to collaborate, because the more they are united, the more power they gain, and the more insecure the brand’s management feel.

We regard this approach as outdated—people now live in a world of instant and never-ending communication, after all. And partners should stay with a brand because there is much to gain from the partnership—not because they can’t leave.

Luckily, our financial transparency enables and inspires collaboration, benchmarking, and knowledge exchange among our franchisees.

We see Dodo Pizza as a community of entrepreneurs united by shared goals and values.

Want to talk about it? Send me a message on LinkedIn.

 

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