In this article we will explore a few dimensions of continuous franchise improvement, valid both for the individual franchisee locations and the franchise system as a whole. Although one can improve the franchise by focusing on a few of these individual input signals, the most significant benefits are achieved by looking at the big picture and considering all elements holistically.
1. Financial benchmarking and business planning
Franchise systems should obtain financial data (sales data from the point of sale system, P&L report, current inventory levels, etc.) from their franchisees. By comparing a franchise location with the average of the top performers, a franchise field consultant can determine areas for improvement. Additionally, thanks to the advent of web-based tools these past few years, benchmarking against industry standards (not only the franchise’s best units) has also become a more common practice in the franchise industry.
Given a bit of context as to why certain values are where they are (ex: ‘labour costs are higher than others because the store has longer opening hours’), actionable tasks can be defined (ex: ‘reduce the number of employees on Sunday and Monday evenings when the store is not as busy’) during a business planning activity. Although many franchisors perform annual reviews, best practice indicates that shorter iterations focusing on a small set of key enhancements to be made during the shorter cycle are more beneficial to the franchisee.
2. Field Audits
The franchisor sends an auditor to the franchisee’s location (in the field) to determine what can be done to improve the franchise’s performance. This is usually done by inspecting hundreds of pre-determined elements to ensure that the franchisee respects the franchisor’s recipe for success.
Field evaluations are the only way the franchisor can get professional insights into the inner workings of a particular franchise location. Indeed, there are other dimensions which help the franchisor learn about what is going on in the front of the store, but field audits are unique because they also evaluate the back-store. To accomplish this, the auditor must be trained on the franchise’s standard processes, best practices, their suppliers, etc. In essence, they not only evaluate the end result but also the recipe used to get there.
Again, the goal of the field audit is to review the franchisee’s operations and give them concrete tasks to accomplish which will help them improve. Read more about field audits in this article.
3. Customer Satisfaction
As with any business, tracking customer satisfaction levels is also very important in a franchise environment. This is usually achieved by offering an electronic feedback form (a convenient evolution from historical paper-based forms) to be completed by customers after they visit a franchisee. The most common approach is a hyperlink to a survey at the bottom of your sales receipt or on your website – although in-store interactive kiosks are currently in vogue due to their higher response rates. As with field audits, problems reported by customers should also translate into actionable tasks to improve the franchise.
Customer satisfaction results complement field audits nicely as they answer to main limitations of field audits. First, it overcomes the Observer effect (‘the act of measuring something changes the outcome’): when an auditor visits a location, staff will be extra careful to follow the established procedures. Indeed, as any customer can submit feedback at any time, they are better suited to review the actual experience customers receive. Additionally, many weeks or months can pass between audits which is a very long time in our real-time world. Customers can theoretically submit many more data points much more frequently – we’ve even seen in-store kiosks being used to correlate the timing of feedback with employee time sheets! (Engaging customers to leave feedback is still a challenge in its own right, however.)
Another modern twist on customer satisfaction is social media monitoring. After a visit to your location, many customers share their experiences online. As the volume of mentions/reviews increases, software tools which automate the monitoring process and which include sentiment analysis (determining if the statement is positive or negative automatically via software) becomes mandatory for proper analysis.
Still, even though customers are great to evaluate the output of the franchise, they are unable to evaluate the recipe as they are not trained on the franchise’s business processes. Combined with field audits, though, they paint a more complete picture of the franchise’s performance.
On a related note, mystery shoppers are another way of obtaining customer satisfaction data. In essence, customers are paid to visit a store and review their experience. We won’t go into details here as, simply stated, they are a middle-ground between field audits and customer satisfaction. The customers are lightly trained on what they need to look for and the store personnel don’t know they are being monitored. Mystery shoppers complement other practices nicely, but in our opinion, should never be the exclusive input for continuous franchise improvement. Why? They may initially appear as the best of both worlds but, in fact, they are potentially the worst of both worlds. They are not as authentic as regular customers, they’re not as trained as auditors, but worst of all they do not help engage the franchisee. Franchisee engagement is the only way suggested changes will be acted upon – which is the only way the franchise can improve.
Continuous franchise improvement obviously includes many additional dimensions and this article is not an exhaustive guide. In some franchise systems, such as restaurants (quick-service and full-service), monitoring governmental health inspection results is a non-negligible task. In others, such as retail franchises, competitor price monitoring is a critical aspect of the business.
Furthermore, we haven’t even mentioned employee performance! Monitoring and improving employee satisfaction is a sure-fire way to improve the productivity of your franchise as employees are the lifeblood of your franchise.
The primary way which a franchise can improve itself is to monitor the various dimensions described here holistically and iteratively course-correct. More explicitly, concrete actionable tasks must be defined and performed on a continuous basis. Many of these tasks will be simple and direct such as ‘clean your windows’ or ‘replace your front sign’. These tasks will help improve individual franchise units.
However, systemic issues are not as easily addressed with simple tasks. These types of issues should in fact be addressed by taking a step back, understanding the core issues and implementing new processes or training programs to solve these core issues. It’s the franchisor’s responsibility to always have an open mind and look at the broad picture to solve the correct core issues instead of simply patching the symptoms.