Monthly Archives

January 2016

Impactful Field Audit Questions: Part 1

By | Field Audits

ImprimirWe took a step back and observed how some franchise systems were leveraging our franchise field audits app to make a substantial impact on their franchisee’s performance.

We believe that being impactful is much more important than simply ensuring compliance, which is the traditional perceived benefit of a field audit. Compliance has its place but we’ve discovered that forward-thinking franchisees share the belief that their auditors should be coaches not cops, increasing franchisee engagement and improving unit-level economics.

As such, we decided to start a series of articles tying some interesting field audit questions to their concrete impact on the bottom line. Today we launch Part 1 and will write additional articles in this series over time.  We’d be happy to hear your suggestions concerning impactful field audit questions. If you have a good story to share, please reach out!

 

  1. Are perishables used on a first in first out (FIFO) basis?
  2. Is staff suggesting an upsell or cross-sell?
  3. Is the collateral for the latest marketing campaign present?

 

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Impactful Field Audit Questions: Is the Marketing Collateral Up To Date?

By | Field Audits

Female Baker Delivering Cakes Standing In Front Of VanThis article is part of our series about impactful field audit questions. With this series, we connect the dots between individual questions in an audit and their concrete measurable impact on the franchisee’s performance. We shouldn’t forget that one of the true goals of a franchisee field audit is to improve unit-level economics. Although seemingly innocuous, these questions have a direct impact on performance.

Question: “Is the collateral for the latest marketing campaign present?”

Although many field audit questions concern the conformity to the brand standards to ensure that customers receive a consistent experience across locations, this one is of particular interest. This specific question focuses on the latest campaign and is a better indicator of how well the franchisee is executing, rather than simply making sure the contractor used the right paint colour during construction.

Ensuring that each marketing campaign is properly executed is critical to the franchisee’s performance. If the franchisees are not picking up the ball and executing, the hundreds of thousands of dollars (if not millions!) spent by the franchisor to create and broadcast a new marketing campaign or limited time offer go to waste. These campaigns are created to attract customers by offering something new or different; fail to execute and there will be no impact: the opportunity cost can be quite substantial. From the franchisee’s perspective, performance may seem normal but will slowly decrease over time because being “good enough” is no longer sufficient in today’s competitive environment.

It’s beneficial to have a second pair of eyes evaluate each location – that’s one of the core benefits of a field audit. If you see the same thing day in and day out, you might not notice these areas for improvement. This leads us to:

Related Question: “Catering brochure is available next to the cash register?”

If you’re in the location doing the same thing every single day, you might not notice that you ran out of brochures. If you’re not advertising that you offer catering services, new customers may not be aware and this revenue stream will dry up over time.

As an example, imagine that catering sales drop by 20% because of poor execution. In a location generating $500,000 per year where catering accounts for 20% of the revenue, that’s a $20,000 drop. This is more than the total annual profit, given the industry’s slim 3.5% profit margins!

Furthermore, since the average 7% royalty is based on sales, this means an average 275 location chain would end up losing $385,000 in royalty revenue over the year and may have to let go a few people. Obviously, such a large drop would imply horrible execution across the entire system. In reality, this is just one of the 50 plus elements which can potentially go awry in each location. Continuous attention to detail is key and a properly structured field audit program is definitely a big part of the solution.

Both of these issues are very visual – we recommend that users of our field audit app snap pictures when failures occur to paint an accurate portrait of the compliance issue.

 



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Impactful Field Audit Questions: Is Staff Upselling?

By | Field Audits

Fotolia_48470355_XSThis article is part of our series about impactful field audit questions.With this series, we connect the dots between individual questions in an audit and their concrete measurable impact on the franchisee’s performance. We shouldn’t forget that one of the true goals of a franchisee field audit is to improve unit-level economics. Although seemingly innocuous, these questions have a direct impact on performance.

Question: “Is staff suggesting an upsell or cross-sell?”

This is a great question to have in a field audit as it is easy to observe and has an obvious impact on the franchisee’s sales. By simply asking one extra question when customers make their purchase or place their order, staff can have a significant impact on the daily sales.

It is obvious that this behaviour is desirable, but changing the behaviour of under-performing franchisees can be challenging. A good field audit program will aggregate data from all visits and allow the franchisor to segment their results based on certain groups. By leveraging this data, one can easily see that the top performers upsell more often (and thus are more often in compliance with this question) than the system’s under-performers. Another way to evaluate a location’s effectiveness in upselling is to compare the average check size between locations: this eliminates discrepancies due to some units being in higher-traffic sites.

This analysis is powerful because it extracts key insights from field visits and gives the franchisor strong arguments to ensure compliance to all standards.

In full-service restaurants, you’ll also find this:

Related question is “Are servers offering another beverage to customers during their meals?”

By paying extra attention to customers and being proactive, one increases the likelihood of additional sales. Furthermore, non-compliance to this question can be a symptom of under-staffing. Yes, understaffing reduces the labour costs but it comes at the expense of the customer experience. Consistently exceptional customer service is key to the long term viability of the business.

Concrete examples are very franchise specific, but assume a location generating $450,000 in sales with an average transaction value of $15.00. This translates to 30,000 transactions per year. Should staff be able to upsell an additional $5.00 item (one extra drink, etc.) to one out of every 5 customers, this adds $30,000 to the top line, a 6.67% increase which is substantial given the slim profit margins in today’s economy.

Moreover, should this improvement be applicable to the whole network, an average franchise system of 275 locations would receive $577,500 more in royalties that year, assuming a 7% royalty rate. That’s equivalent to adding over 18 new units! Additionally, because the locations are now more profitable, a virtuous cycle is created and new units are easier to sell. Inciting front-line staff being a tiny bit more proactive can have a dramatic impact.

 



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Impactful Field Audit Questions: First In First Out

By | Field Audits

Fotolia_96296978_XS

This article is part of our series about impactful field audit questions. With this series, we connect the dots between individual questions in an audit and their concrete measurable impact on the franchisee’s performance. We shouldn’t forget that one of the true goals of a franchisee field audit is to improve unit-level economics. Although seemingly innocuous, these questions have a direct impact on performance.

Question: “Are perishables used on a first in first out (FIFO) basis?”

If you have two loaves of bread with different expiry dates, you’d first use the one with the closest expiry date. Otherwise, you could end up in a situation where you’re throwing out one loaf of bread and buying more to compensate.

In a restaurant, tracking conformity to a FIFO process is a great element to evaluate not only because it helps reduce waste, which has a direct impact on the bottom line, but it is also easy to evaluate during a field visit.

Related Question: “Are employees labelling [a certain item] with its expiry date?”

Some products come with best before dates whereas others must be labelled by staff, after being thawed for example. Obviously, one cannot follow a FIFO process if dates are unknown. Furthermore, forgetting to track dates could cause food safety issues should the perishable item spoil. It’s best to catch these things quickly, before they become costly liabilities.

These two questions are interesting because they are both easily measurable, and measurability is a key component of great field audit questions. Quickly peeking at expiry dates and how produce is used during an audit can complement more complex inventory systems to paint a broader picture of produce waste and ensure optimal processes are in place to minimize waste and thus maximize profits.

It is well known that restaurants have extremely thin profit margins and that food costs are one of the main expenditures that can be controlled.

As a concrete example, let’s look at a restaurant generating $500,000 in gross sales. Let’s assume that the total profit is only $15,000 which equates to 3% of gross sales. Assuming average food costs of 32%, approximately $160,000 is spent on food. Should a 10% reduction in food costs ( 28.8% instead of 32%) be achieved by properly following a FIFO process (and other waste reduction techniques) the restaurant could add $16,000 to its bottom line, more than doubling its profits to $31,000. Admittedly such an improvement would be hard to achieve in an already profitable restaurant; it is more likely that this waste reduction could move an inefficient restaurant from red to black.

Within a few months of using our franchise audits app, one of our clients more than doubled their FIFO compliance rate making a substantial impact on their franchisee’s bottom line.



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