The president of Wireless Zone turned to his franchisees to figure out how to make the brand bigger and better than ever. What they ended up with was an innovative new royalty model designed to improve unit-level economics.
Nearly two years ago, the nation’s largest Verizon Wireless retail franchise, Wireless Zone, made a bold move to strengthen its management team. Promoted in late 2014, Joe Johnson, previously the company’s senior executive vice president, came on board as the newest president and chief operations officer of Wireless Zone—and he brought with him practical plans to boost business and refine operations.
Johnson’s first step in charting a fresh, new course for the brand started with listening to the needs of franchisees.
In early 2015, while attending Wireless Zone’s annual convention, Debbie Peterson, a Wireless Zone owner in Michigan, approached Johnson. She told him that she believed the brand’s current royalty structure was broken—a 27-year old model in which royalties were collected from an owner’s commission. Every time a customer was activated on the Verizon network through a Wireless Zone location, the brand was paid a commission. Wireless Zone then took a share of the commission as royalty, and the remainder of the commission was passed through to the franchisee. But while that model had been lucrative for Wireless Zone for years, the industry began to change and new challenges were presented. Peterson felt that this system had become antiquated and unfavorable to franchisees.
Johnson decided to utilize her feedback and turn it into fuel—this was an opportunity to collaborate with franchisees to create a better, more cooperative system for all parties involved.
“If it doesn’t work for what the franchisees want, then it’s not going to be successful long term. It also became very clear that just because the current agreement worked for the first 27 years, that doesn’t mean it will work for the next 27 years,” Johnson said. “I wanted our franchisees at the table from the very beginning to figure out how we could make this favorable for everyone involved. We needed to be in this together—I knew we couldn’t view it as a negotiation.”
So in early 2015, he sat down with a group of franchise advisory council members. His goal was simple—have an honest conversation about what was working and what wasn’t working. Talks began between Wireless Zone executives and key franchise advisory council members, including Peterson and Mike Sabbatini, a Wireless Zone owner in Pennsylvania. They started with a clean slate, and Johnson opened up the floor to any and all suggestions.
“I asked the franchisees, ‘If we were to start from scratch, where would you want this business to go?’ One said, ‘Let’s align our interests. Let’s share our gross profits,’” Johnson said. “So we went down that path, and together, we identified the potential benefits and risks. It started to gain momentum, and when it got to a place that we all felt good about it, we knew we were onto something big.”
Eventually, the group landed on Wireless Zone’s new gross-profit model, which was officially launched in January 2016. Under the new system, Wireless Zone simply takes a store’s revenue and subtracts the cost of goods, leaving gross profits as the remainder. The brand will now take a royalty off of that number, rather than activation commissions or product mark-ups. Under this new model, the franchisees and franchisor work together for the greater good—Wireless Zone doesn’t make money if its franchisees don’t make money.
“It was an awesome experience, listening and collaborating with the people who know Wireless Zone’s stores the best—our franchisees. By working together, we emerged with a new system that truly aligns everyone’s interests. It says, ‘We’re here for you, and we will do whatever it takes to make sure you—the franchisee—is successful,” Johnson said. To learn more about Wireless Zone, click here.