From the September 2010 issue of Startups

When you buy a McDonald's, you can't paint the golden arches blue or rename the signature dish the Small Mac. If you own a Supercuts and want to sell tacos to your waiting clientele, you'd better get corporate approval first. And should your Jiffy Lube frequently take three hours to fix a car, well, you're violating a contract and you'll soon lose your business.

Yes, franchises come with a lot of well-tested rules and operations geared to providing consumers a uniform experience from one outlet to another. Familiarity, for the most part, breeds content.

"Franchises try to operate with a very pure business system," says Doug Schadle, CEO of Rhino 7 Franchise Development Corp., based in Apex, N.C., which works with franchisors and prospective franchisors to help mold their business model to be more appealing and profitable. "The customers are following the brand, not the individual unit. It's a way of assuring that the quality remains high." Another way to look at it: If you've invested, say, several hundred thousand dollars in a Dunkin' Donuts, and some other franchise owner in a neighboring town is serving stale bagels and weak coffee, you become guilty by association and that contamination will cost you customers.

But it may reassure you to know that owning and operating a franchise still require plenty of creative thinking. Franchisees can push back and go beyond the blueprint to do some customization geared to their local market and to their own tastes. And often such entrepreneurial innovation and adaptation is encouraged--and even applauded--by the front office. It also can make the difference between an exceptionally well-run and profitable enterprise with sizzle and one that merely plods along. So if you're thinking of buying into a franchise, know that you don't have to become an entrepreneurial automaton.

In fact, business history is full of examples of creative franchise owners who changed the course of the entire franchise--for the better. One of the most notable instances of coloring outside the lines involved three unrelated McDonald's franchise owners, who separately invented the Filet-O-Fish (1963), the Big Mac (1967), and the Egg McMuffin (1972).

Fitting In (But Not Too Much)

Okay, you're interested in a franchise and you like and want a system of rules. But you also need to know that if you're suddenly struck with a flash of genius, you'll be given a chance to try out your idea. Here are some tips to finding that perfect blend:

Ask the franchise director how the company accepts new ideas from franchise owners. Listen carefully. Determine if you like what you hear.

Contact current franchise owners directly, letting them know you're considering buying into the system and asking if they're happy with how their suggestions are received

Check to see if the company has creative participation built into its system. For instance, La Quinta, the hotel chain, has a Brand Council, which allows franchise owners to have direct strategic input into the future direction of their brand.

Remember that innovation is a two-way street and can have a downside. James Sinclair, who owns Los Angeles-based OnSite Consulting, which provides sales and marketing services for the hospitality industry, observes that sometimes it's management that wants to push beyond the blueprint, and it's the franchisee who'd rather not rock the boat. "When a new team comes in, full of ideas for growth," says Sinclair, "the franchisee is thinking, 'Why am I taking the risk to see if this works? I have to re-train my staff, buy new products, get new marketing collateral and disrupt my system. Because a new boss in corporate is looking for a bonus?' "

Understand that a certain level of disagreement is built into the system. Says Sinclair, the conflict between a franchisor and the franchisee is part of the natural order of things and "it's up to both to make it work." --G.W.

While that may seem like ancient fast food history and something that could never happen today, consider Subway and its $5 foot-long sandwich. That was the brainchild of a Miami-based franchise owner who in 2008 decided on his own one weekend to start offering sandwiches for $5. It proved to be such a hit with customers that idea turned into a marketing campaign for the entire corporation. (You're probably humming their tune right now.)

"All of the good franchisors never stifle innovation from franchise owners," maintains Schadle. "They get a bad rap in that sense. Why would a franchisor, which is an innovator, try to discourage innovation? They just want you to talk to corporate first."

But Subway notwithstanding, it is conventional wisdom that the more mature your franchisor is the less innovation potential there is. The reason is simple. The older a franchise operation, the more wrinkles the company already has ironed out. But that shouldn't deter you because chances are you won't be able to buy into many established companies anyway; most already have their principal locations set and are only expanding to the farthest corners of the Earth. As Schadle says to potential owners,"Franchising isn't really about buying a McDonald's. It's about finding the next McDonald's." And by the same token, franchisors know that they become the next McDonald's only by accepting and embracing the fresh, bold ideas from their franchise-owner brain trust.

Perhaps that's one big reason why the top brass at Tossed listen to Lou Palermo. Not long after Palermo, 38, opened a restaurant in Boston for this franchise operation, which specializes in serving salads, he decided to give a breakfast menu a go. "Seeing that we were already making our whole wheat, fat-free crepe wraps for our regular menu, we created breakfast crepe wraps like our Southwest Scramble," recalls Palermo, who adds that he worked closely with the corporate office to do this three years ago. The breakfast menu is now offered at all six Tossed outlets around the country and has added 10 percent to the bottom line.

Tossed could have easily passed on this idea. After all, says Palermo, "it has 12 years of a proven business model with systems in place, brand recognition, extensive training and support to name a few." Why mess with a good thing? But Palermo says they're not the kind of company that tells an ambitious entrepreneur with an intriguing idea, "You can't do that."

And even though it might be tougher to innovate when you're part of a more established powerhouse brand, there's still room for inspired tinkering, says George Ebinger, who on his own added specials, like Steak Diane and chicken parmesan, to the menu at his three International House of Pancakes franchises in New Jersey. He concedes that 25 years ago, when he first started working at IHOP, "It was run differently than it is today, and then you could truly be even innovative."

In large part, says Ebinger, that's because after breakfast, IHOP wasn't really concentrating about lunches and dinners in the early days, and "no one knew what you were doing then." Now, he says, there's greater monitoring from the front office and "being a franchise owner, you're not allowed to bring new elements into the restaurant unless you get an okay beforehand. It all has to do with stuff like food safety and lines of supply." But as long as Ebinger uses approved ingredients, he can have his chef come up with their own unique recipes to use as specials, even if they're not on the regular IHOP menus. While these additions have not yet significantly affected revenue, they obviously give customers another choice and allow Ebinger a small but creative outlet. Looking at the bigger picture, though, he quickly adds that when it comes to marketing his restaurants, "The sky is the limit." And that's good business.