Brendon Dennewill sits down with Brian Schnell, Partner and Chair of the Franchise Practice at Faegre Drinker, to examine the operational and relational architecture that separates franchise systems built to last from those that plateau, fracture, or quietly erode the trust of the very people driving their growth. With nearly four decades advising emerging brands and enterprise-scale franchise networks, and rare firsthand experience as both a COO and Chief Legal Officer inside a major franchise system, Brian brings a perspective that most franchise attorneys simply cannot: he has sat on both sides of the table, and he knows exactly where the system breaks down.
The conversation goes deep into the hidden costs of command-and-control leadership, why franchisors who deny their franchisees a voice are building a system that requires perfection to function, and how the breakdown in communication, not strategy, not capital, not technology, is the origin point of nearly every franchise dispute Brian has witnessed across his career. Brian and Brendon connect this directly to the Revenue Operations challenge facing scaling franchise brands: the gap between when a problem surfaces at the unit level and when leadership finally has the data and context to act on it. The brands closing that gap are the ones investing in the right people, the right processes, and the right systems in that order, and using AI and integrated technology to accelerate human judgment rather than replace the relationships that make franchising work.
This episode is essential listening for franchise executives, RevOps leaders, and operators who want to understand what responsible franchising actually looks like in practice, and build the kind of collaborative, data-informed leadership infrastructure that scales without breaking the people and relationships inside it.
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Brian Schnell | Partner and Chair of the Franchise Practice at Faegre Drinker
Brian Schnell brings nearly 40 years of legal and operational expertise to the franchise industry. What sets him apart is his rare dual perspective, having served as both COO and Chief Legal Officer for a major healthcare franchisor. This cross-functional background allows Brian to bridge the gap between compliance and field operations. He helps executives move beyond command-and-control leadership to engineer franchise systems built on mutual trust, unit-level profitability, and scalable revenue architecture. |
Brendon Dennewill: Brian, you spent nearly four decades in franchising. What separates the franchise systems, brands, and networks that thrive over the long term from those that struggle to sustain growth?
Brian Schnell: There are a number of attributes that I think separate what I refer to as highly successful franchise systems. A system includes the franchisor and the franchisee. You have to have both being successful in order to have a successful and sustainable brand.
It really comes down to a couple of areas, and a lot of other franchise voices talk about this, so this isn't groundbreaking. But it really is franchisee unit level profitability, and it is having a franchisor who views its franchisees as key stakeholders in the brand. That's something more than just a party to a contract or a party to a relationship. It's really how a franchisor designs and implements its franchise relationship with its franchisees.
That is a feature that holds a lot of brands back, especially emerging franchisors. When you're an emerging franchisor, you haven't lived through all the different issues that come up in a franchise system and with franchisees. It is easier to grow a system and a lot more difficult to sustain and get that system to the next level. That really speaks to the nuances, the nitty-gritty of franchising.
A franchise relationship is unlike, in my view, any other commercial relationship out there. It isn't just the X's and O's. It's the trust, it's the culture. If you don't have that within all the different layers of a franchise system, you're not going to have that kind of success and sustainability.
Let me give you one example. Bill Killian, who's now retired, and I developed a presentation years ago called The Five Habits of the Highly Successful Franchise System. One of those habits, and it's the very first one, is that all stakeholders have an undying devotion to the brand and the brand promise.
Think about that in a franchise context. The people who impact the brand for consumers are often the franchisees' employees. It's that unit level interaction. Do they even know what the brand stands for? It is easy for the CEO and leadership team to say, "Here's our brand promise." But if you don't have that from the franchisor executive team and their support team to the franchisees, and from the franchisees to their employees, that makes it that much more challenging to have that devotion, that passion for the brand.
We know that as customers. We value that kind of service in any interaction we have, whether it's eating, a hotel, service with our pets, anything. It's a difference maker.
How you instill that in your franchise system is more than just a product or a service. Those systems and networks that get that are successful and sustainable. Those that struggle with it get bogged down. They get bogged down in things that result more in confrontation rather than collaboration.
That's probably five minutes on one example of what separates, after close to 40 years of working with a lot of different brands, those franchisors that are highly successful and sustainable from the rest.
Brendon Dennewill: Right. So in summary, it's really that symbiotic relationship without which a franchise brand just won't be successful. That symbiotic relationship between the franchisor and the franchisees includes the franchisee teams, because it ultimately serves the customer.
Brian Schnell: Right. If you have a fair number of franchisees who are frustrated, disgruntled, unhappy, who feel like they've been oversold and under-delivered, do you think that mindset won't impact their employees? Their employees are going to see some of that.
But if you have franchisees who are all in, who believe in the brand and the mission and see a path forward to making money and achieving their goals, that impacts employees positively. If it's the alternative, that makes it that much more challenging at the level of the guest and customer interaction.
Collaboration vs. Command and Control
Brian Schnell: Ryan Gardner, a leading franchisee lawyer, and I do a lot of presentations together. We see things a bit differently in a lot of areas, but we both believe in the power of collaboration. Franchisors who have a culture of collaboration and a collaborative leadership style, we view that as a much more successful formula than what I call command and control.
Command and control is: I'm the franchisor, you're the franchisee, I'm going to tell you what to do, how to do it, when to do it, what happens if you don't, and how much you're going to pay. And when the franchisee asks why, the franchisor says, "Because Section 6.A of the franchise agreement permits me to do that." That's command and control.
I understand that in some instances a franchisor needs to make a command and control decision, on a promotion, on a crisis situation. I'm not saying everything is one way. But if your franchisees don't feel like they have a voice, that's the problem. They don't want to vote. They know it's not a democracy. They want a voice.
If your franchisees don't have a voice and you don't listen to that voice, then you have to get it right every single time. But if you include them actively, listen to them, take everything all your stakeholders are sharing into account, and then make the decision and explain it, you know what? If you don't get that one right, they'll say, "We were in on that. Let's move on."
That's where too often conflict can slow down, disrupt, and stagnate everything. Conflict isn't necessarily bad, but how do we move from people having differing views to collaborating on the solution rather than proving we're right and you're wrong?
Brendon Dennewill: Which of course is the difference between having a voice versus a vote. Brian, is there anything else there? You talk about how too many franchisors still approach system changes with that command and control mindset. What other distinction can you make?
Brian Schnell: I think it comes down to how franchisors design things. Franchisors are really good at designing how to offer products to customers, the operations side, marketing, technology. But we don't necessarily have systems in place for how to communicate, how to establish a franchise relationship, how to be clear on the roles and responsibilities of both parties.
We should have a section of the operations manual that addresses the relationship: system change, how we're going to gather input from franchise owners and other stakeholders. The operations manual is a living, breathing document, so that can evolve over time. But if we don't give real thought and intention to it, it happens haphazardly. And when things happen haphazardly, we don't get the outcome we want. It's not scalable.
Organizations that are successful get input from people with different perspectives. That's part of leadership, being able to distill all of that. The really, really good leaders master that. And it isn't something that happens without experience. Good leaders will have mentors, coaches, people helping them get better at it, because it ain't easy.
When the tough stuff happens and we try to retreat and prove we're right, or double down because we're the franchisor, that creates more roadblocks. Franchise disputes typically arise because of a breakdown in communication. It usually isn't massive fraud. It's a breakdown in communication. That goes back to the roles of the franchisor and the franchisee and how we're going to design and implement this relationship.
There are ups and downs, but the less time you spend on friction and the faster you work through it, that's when you start having more trust. It's easy to trust when nothing goes wrong. Can you maintain trust when things get hard? And they will get hard.
The Right People, the Right Conversations, at the Right Time
Brendon Dennewill: Yes. And like we talk about a lot on this show: if the goal is to grow, growth requires change. Your processes are changing, your people are changing. A brand with 30 units will need more people to support 100 units or 300 units. We see this all the time when we're building technology systems for franchise brands. They sometimes think the CRM we're going to build will fix their leadership issues. Of course, that's not going to happen.
Brian Schnell: Well, AI is a big topic in franchising today, in any business really.
Brendon Dennewill: Let's go there, because you mentioned the franchise summit coming up in August, which I'm very excited to sponsor. Tell us what's on the agenda for this year's summit. What are the biggest challenges and opportunities in the franchise space right now?
Brian Schnell: Our summit this year is August 18th and 19th here in Minneapolis, the best time of year to be there. What we try to do is bring together what I view as the best of the best: franchisors, franchisees, and suppliers from a national audience. Last year we had folks from 26 states and Canada.
We want to have conversations about what's keeping franchisors and franchisees up at night. Every single panel we have includes a multi-unit franchisee, because we just talked about the importance of their voice.
I'm excited about our keynote speaker this year. It's Ricky Kelman. I work with Katrina Mitchell at Franchise Speakers every year to find someone who's going to make a difference. Ricky's main theme is mindset. We just talked about this. You have to have the right mindset to accomplish what you really want. A lot of human beings don't like change. We kind of like doing things the way we've done them. But you can't do that in today's world if you want to grow.
Ricky's going to talk about the mindset not only of organizations but of each of us, because we are the organization. And then we're going to talk about AI.
What I think is really cool about our summit is that it isn't a legal conference, but our Faegre lawyers are very commercial. We get franchising. We have subject matter experts working on AI-related issues and solutions for our clients. We're going to talk about the challenges AI presents and how we solve for those in a meaningful way, given today's environment. AI tools and technology can help us in so many ways. They can replace some of what we do. But they can't replace the relationship. That's personal.
We're also going to have national leaders talking about what they're doing from a brand marketing presence perspective. As we grow, how do we continue to develop our brand through customer marketing, FranDev marketing, and brand presence with all the technology that's available?
Here's the challenge. Franchisees want and need the franchisor to do that, because they're too busy working day in and day out in their business. I always talk about the key in finding solutions to anything: you have to have the right people having the right conversations at the right time. That ain't rocket science. But how often does that not happen?
The right people having the right conversations at the right time. If we do that, I think we can accomplish anything. When we don't, we make it infinitely more difficult to get to the next level.
Technology, Data, and Revenue Operations in Franchising
Brendon Dennewill: Right. That's the model we use: the revenue operations model for building an integrated revenue engine. It's a four-pillar model starting with people, then process, data, and technology. That order is deliberate.
When a franchise brand comes to us because they've outgrown their technology, the AI conversation is now part of it too. HubSpot is the CRM we implement, and we integrate other systems they're using. Each of those systems already has AI built in. If additional AI is needed, we'll add that. But coming back to what you said about having the right people having the right conversations at the right time: if you want to scale, you need systems and tools. Whether you're in FranDev or you're a multi-unit franchisee managing a team, the more efficient you can make their day, the more efficient and profitable everybody's going to be.
Brian Schnell: Absolutely. When we're having those conversations, it isn't necessarily about flying in and meeting every owner face to face. Franchisors should still do that, but the question is how do we design those conversations in an effective and efficient manner? Technology is a huge part of that.
Brendon Dennewill: Right. But it always starts with leadership. And I want to come back to what you were saying about Ricky's keynote. The way we see it with the brands we work with that are most successful: they know that if they're growing, things are going to break. That is 50% of the battle won right there. If they don't have that mindset, the other half of the battle is never going to happen, because they're going to be stuck trying to do everything themselves.
Two obvious examples: a founder-led franchise brand can sometimes get to 100 units, but that doesn't happen very often. They typically stall at 30 unless they start bringing in other people. Then they'll have to do the same thing again once they hit 100 if they want to get to 300. They'll need to change their leadership, their processes, and their systems.
Brian Schnell: I've heard a lot of franchise leaders I value highly say that the leadership team that got them from point A to point B was phenomenal. But that's not necessarily the same team that's going to get them from point B to point C. Effective leaders understand that and handle it with heart and grace, rather than just saying, "We're firing everybody and changing out the leadership team."
Being a franchise leader is challenging and difficult. If you try to do it on your own, that's hard. How do you find the right folks to help you be that kind of leader? And sometimes the good ones will even say, "I'm done. It's time for someone else." Because I find it hard for someone to consistently do that for ten or more years.
Tom Curtis from Burger King, who spoke at the IFA summer board meeting, is a former Dominos executive. We're all familiar with Dominos and Patrick Doyle and how he turned that brand around. Sometimes you need the change at the CEO level too, to get things moving in a different direction. It's fluid, it's nuanced. There's no one way. Understanding it is the first step. Seek to understand, seek to clarify, seek to make that kind of difference.
Brendon Dennewill: Yes. And one of the best things you see at every franchise event, and it was so apparent at IFA in February: there are so many good people in the franchise space who are really good at getting brands from, say, 30 to 100 units. In many cases, the best thing you can do once they start outgrowing their abilities is say, "Okay, we need a new team." There are hundreds of new emerging franchise brands every year that those leaders can go help get from 30 to 100 units again.
And for any emerging franchise brand listening: it's not the end of the world if someone has to go find a place to do what they do really well somewhere else. It's actually a healthy part of the lifecycle.
Brendon Dennewill: Brian, having served as both a franchise executive and a legal advisor, how has that operational experience changed the way you advise clients today?
Brian Schnell: I realized I was a better lawyer than a COO. That was one lesson learned. [laughs]
Brendon Dennewill: That's a perfect segue from what we were just talking about. We all have our unique abilities.
Brian Schnell: We do. I've always said that operations people, and in particular franchise consultants and business consultants in the field, have the hardest job in franchising. They're working directly with owners, and owners are not one shape and size. They all have different needs. A franchise consultant has to have a varied and unique skill set.
But what shaped my view on franchising goes back further. My first opportunity in franchising was at a law firm, and my first client was Dairy Queen. I was a first and second year lawyer, so I was just observing and listening. I had an office out at Dairy Queen. The general counsel, Bill Zuko, a great mentor of mine, included me in meetings with FranDev, marketing, and operations. I'd sit and listen, even in a meeting with the CEO: just observe, listen, seek to understand.
The biggest takeaway for me was understanding this franchising relationship from the franchisor's perspective. What's the best desired outcome? To understand that commercial relationship, what it is and what it isn't, served me well. Having a more operational role later only continued to support that. I think that's what has enabled me and our practice to do what we do and do it well.
Brendon Dennewill: That's why you're seen as a very different type of advisor. Seeing how brands actually operate cross-functionally has to be incredibly valuable, both to you and to your clients.
Catching Problems Early: Data, Communication, and Proactive Leadership
Brian Schnell: And the earlier we can address things, the better. I always say this: disputes don't start here. They start here. And it's often because of a breakdown in communication. If there are stakeholders involved and we're wired to work through it together, we will find a solution to that breakdown almost every single time.
But if it's avoided, because as long as they continue to pay their royalties it seems fine, and now more franchisees are getting frustrated, and then lawyers get involved, and now it's about winning. If you're in litigation, you're doing the litigation thing. Let's deal with it now and figure it out.
What's our desired outcome? Are we having the right people having the right conversations at the right time? I always ask our clients: what's our desired outcome? They may say they're not sure yet, and that's okay. Just yesterday I had a conversation with a client where two different representatives had two different desired outcomes. That's okay. Let's just be mindful of that and see where there's some commonality. How we do things in franchising and who we do it with is as important as anything else.
Brendon Dennewill: That's really interesting, because we're actually currently working on a franchise decision matrix. What we keep seeing and hearing is a scenario like this: some franchisees were waving a red flag six weeks ago, but the franchisor only found out about it today. How does that happen? The way we explain it: there's a breakdown in process, which often means an issue with how the team is structured. If the people are all in good shape, maybe it's time to change the process.
Where we come in is realizing that many brands are working with old systems that aren't integrated. Someone has to pull reports from multiple different systems, and the decision maker at the corporate level gets the information two weeks later. By then, even if all the right cultural attributes are there, it's too late. The franchisees are already very unhappy.
And that seems unnecessary in an era when the data should be available in real time. Someone at corporate should be able to see at 8 a.m. the next morning: "There are three units in this region complaining about X, Y, and Z. There are seven units in another region. We're starting to see a trend. What are we going to do about it?"
Brian Schnell: I love that, Brendon. You need the data. Decisions need to be data driven, but not data driven alone. You need the data, and then you need the emotion and the human touch. Without the data, you're likely going to make bad decisions. It's that combination of both.
The other thing is that in franchising, we often don't need the full decision immediately. There might be a series of conversations or a series of stages. If we try to solve the big thing right away, that's hard. Can we break it down into smaller things? Build some momentum, get some agreement on a smaller issue, and build on that. Too often leaders want to solve it all at once. That makes it hard.
Brendon Dennewill: One of the consistent themes you've been talking about is the importance of the relationship, which comes back to leadership. This problem we're talking about can be resolved by good leadership, but the inefficiency and the time it takes to reactively solve these issues, when they could have been resolved proactively, is what we call the cost of inaction.
If the cost of not having the systems in place to address things six weeks ago instead of six weeks later, when everything has festered and become a bigger issue, is taken across a 250, 300, or 500 unit brand, that's a very painful and extremely costly thing. Even if good leaders ultimately figure it out, what is it costing them and the growth of the brand?
Brian Schnell: Yes. Well said.
The Future of Franchising: AI, Private Equity, and What's Next
Brendon Dennewill: Brian, I know I have another 13 questions, but we'll have to leave those for another day. I want to end by looking forward a little. What do you believe will most significantly shape the future of franchising over the next couple of years?
Brian Schnell: Certainly AI and technology will, as we discussed. But I would emphasize that doesn't mean the human element is less important. They're both vitally important. The brands that figure out how to find that balance will be successful and sustainable.
Beyond that, customer and consumer demands are going to continue to be front and center. Those brands that can make that connection in a meaningful way, attracting new customers and keeping existing ones, while continuing to focus on franchisee unit level profitability: that's the magic. How do we capture the guest and customer experience in a meaningful way, knowing that it's evolving, and yet not at the expense of unit level profitability?
And then one other thing we haven't talked about, which I believe can be a positive impact and is only going to continue to grow: private equity. How private equity is channeled and utilized in a way that achieves what we talked about, rather than just focusing on their own returns, is another dynamic that will continue to grow and evolve. We're going to talk about that at the summit. Matt Holler and Sam Ballas, the IFA leaders, will join me for a fireside chat.
As I always say, this is about giving our audience the ability to take home best practices and opportunities that'll make a difference. Not everything will fit, but there'll be something for everybody.
Brendon Dennewill: I'm so looking forward to that. I'm not sure if you know who Geoff Woods is. He wrote "The AI-Driven Leader." I had him on the show last year. He's one of the thought leaders in this space, and his message is that it's not about technology, it's about strategic leadership.
And commenting on the private equity point: I think one of the reasons you're seeing this continuous growth of PE in franchising is because good PE companies understand the combination of leadership and systems. They know when to invest in the technology that helps those systems scale with the least amount of friction. That's the reason private equity is growing so much in this space.
Brian, thanks so much for joining me. I really appreciate it and I look forward to seeing you in August at the franchise summit.
Brian Schnell: Brendon, thanks for having me. I enjoyed it.
Brendon Dennewill: Thank you, Brian.
Brian Schnell: Take care.