Monthly Archives

August 2019

How Port City Java Made a Strong Comeback into Franchising

By | Battle Tested Strategies, Customer Testimonial

Port City Java, founded in Wilmington, North Carolina in 1995 is known for their strong coffee, and now they’ve made a strong comeback as well. In the 90s, they started expanding throughout the Wilmington market with just corporate locations and started franchising in 2003 with 100 agreements signed at the peak.

According to Sarah Meriam, Director of Franchise Operations, in their initial execution of franchising, they made a few common mistakes which halted their growth temporarily. Using these mistakes as learning opportunities, the brand was able to recognize the crucial gaps in their system and made the decision to take a step back and restructure. Around 2007, they put a pause on traditional franchising so that they could refocus and reboot the system.

Port City Java franchising officially relaunched in summer of 2018 and the company started getting back into traditional franchise growth. With 12 corporate and 15 franchise stores they are choosing the right franchisees and being more data-driven than they were before. We sat down with Sarah to learn what changed and how she sees the future.

What would you say is the biggest thing that you’re doing differently as you’ve reemerged?

Sarah: “We’re really focusing on the type of operator that we want in our system and being able to support our brand partners effectively. To do this, we are not reemerging with the goal of becoming a national brand but instead committing to controlled, regional growth for now.

“From my point of view, as an operations person, that’s one of the biggest mistakes that we made initially. We had no way of supporting a store in California from here. Making sure that we’re not growing beyond our means and truly supporting the franchises is key.”

What sets Port City Java apart from the competition?

Sarah: “Competition for us is many different forms from the big-name brands to local coffee shops to convenience stores. To stand out, we focus on product quality and guest experience. During our initial onboarding and training of employees at any level in the company, we make the distinction between ‘service’ and ‘hospitality’ a primary message.  Service, as we say, can be transactional but hospitality is going above and beyond and truly creating an experience for the guest. Ideally, this keeps them coming back.

“On the product side of things, we have an in-house roasting operation at our corporate headquarters in Wilmington and with our team’s hands-on approach, we take a lot of pride in delivering the highest quality coffee to our guests and café operators.  At the café level, we are constantly evaluating our operations and training so that all staff members uphold the same level of quality throughout.”

When did you implement FranchiseBlast, and what was the reason?

Sarah: “We started in 2017 and our primary reason was for the auditing software. Before then, we were on the pen-and-paper audits that were ineffective. We had no efficient way of collating and assessing results for one unit, let alone our entire system.

“When we were first introduced to the FranchiseBlast tool, the timing was perfect because we were behind on the technology aspect of things. Getting upgraded to this kind of software was a primary focus of mine to make significant improvements to our auditing process. With the technology in hand, we can be vastly more efficient with our units before, during and after completing café audits.

“The auto-generated report is sent to operators and management staff immediately upon approval, but we also include a follow-up email, based on a template our Franchise Business Consultants (FBCs) have created, to highlight key areas of opportunity as well as positives. We build in as much redundancy as possible. FBCs are trained to take as many notes and pictures as possible during the audit, which is another big advantage.

“Even if the operator is not in the store during the audit, they know exactly what we’re talking about without needing a full explanation or time-consuming follow-up about what needs to be corrected or improved.”

What would you say the biggest strength is of FranchiseBlast?

Sarah:  “Definitely the software’s ease of use and support team behind the scenes. Everything is straightforward, simple and effective for our use of it. If there are ever any questions that arise or anything that we might need further coaching or explanation on, we go to the support team. Everyone is incredibly responsive and helpful, and the team is always willing to take feedback.”

In your day-to-day, what feature helps you the most as you manage your FBCs?

Sarah: “Being able to look at the audit reports from multiple viewpoints has definitely been the most beneficial aspect. We organize our system into various categories within the software so that we can isolate reports in the most effective way. I can view reports from the system as a whole, franchise versus corporate, drive thru versus non-drive thru, or even broken down by FBC territory, just to name a few.

“Having the ability to see audit results from all of these angles helps to assess issues that may be happening across the board versus metrics in specific locations. It gives our team perspective when adjusting action plans or coaching the FBC and helping them come up with a plan to correct that behavior or issue. It also gives us the ability to look at and use historical data from previous audits reports to better document ongoing or repeat issues that may require escalation.

“Being able to categorize and review all of audit reports helps us isolate the root cause of the issues. We can assess ‘Is this a specific café problem? Is this a problem for all drive thru or University cafes? Is this a system-wide issue?’ Answering these questions with concrete data determines the necessary action that we, as the franchisor, might need to take whether it be coaching one operator or a broader change to training/educational resources. Being able to have some flexibility with the different types of reports that we can pull and assessing that data from a lot of different angles is invaluable.”

What’s the overall impact of FranchiseBlast on Port City Java?

Sarah: “One of the obvious impacts has definitely been improving our unit compliance.  For example, we’ve seen almond milk utensil and pitcher handling jump from 38% compliance in 2017 to 98% compliance in 2019. We fortunately never had any allergy reports, but without FranchiseBlast in place, we would not have had the data to show the gaps in training to ensure everyone staff were always following proper protocol .

“That said, I also feel like we’ve been able to show our operators the value of audits as a coaching tool to help them, and ourselves, make improvements instead of just focusing on a compliance score. We’re very transparent about how we use these results to score ourselves as the franchisor. This is not only in the audits that are completed in our corporate stores but around system-wide weaknesses which reflect gaps and opportunities for improvement in our training initiatives.

“Aside from raising compliance scores with the almond milk procedures we first noticed, we can look at two additional metrics from our system as great examples of how we have used the collected data to improve our training initiatives:  espresso quality and suggestive selling. Within the first few months of adopting the FranchiseBlast software, we noticed that the majority of our cafes were consistently scoring very low in espresso quality.

“With our coffee quality being of the utmost importance to us as a brand, we used the information gathered from the audits to assess where we had gaps in our training materials that would result in quality issues.  We were able to add to and improve those materials to ensure cafes had the best tools and resources to maintain the standards we want to achieve.  Since then, we have seen consistent improvements in scores and, even more importantly, the quality of products being produced.

“These areas of opportunity tied nicely into our overall goals for 2017. In preparation for relaunching the franchise, we wanted to ensure our brand was differentiated in terms of hospitality and product quality, but more specifically we wanted to improve the unit-level economics of our cafés. FranchiseBlast highlighted that we had an area of opportunity around increase average check sizes via suggestive selling. We decided to address this opportunity first, as it appeared like lower hanging fruit than increasing customer counts.

“As a result, in the second quarter of 2017, our FBCs focused on the topic of suggestive selling during their conversations with franchisees and store managers while our training department built supporting materials. Around the third quarter of 2017, we started making these training materials widely available for consumption. We promoted them even further in 2018 and still today in 2019.

“We are always looking for opportunities to make improvements but by including assessments of suggestive selling in our two primary audits and providing cafes with further training and feedback, we had a nice impact on our average check size.

Check Size Chart

“That first quarter, when we ramped up with the software, we saw the average check size increase by an average of 2.3%. The second quarter showed an average increase of 3.52% over 2016 while third and fourth quarters accelerated the upwards trend with 5.16% and 5.96% increases respectively. Although not shown here, we saw continued increases throughout 2018 until the unfortunate events of Hurricane Florence impacted our area cafes. We’ve now recovered and are growing strongly once again.

“Obviously, there are numerous factors at play and while we’re not claiming FranchiseBlast is solely responsible for our continued improvements with these metrics, the timing lines up with our brand’s desire to make more data-driven decisions and conscientiously work towards advancing our system overall.

“From my perspective as a coach, it’s great that our efforts are reflected in the results, but I don’t want to be stuck looking at numbers on a spreadsheet all day! The data helps us make more informed decisions about our processes and priorities, but it is still up to our frontline staff to get it done. Having these tools available improves the level of support we are able to offer to build their confidence as operators and show them how what they do on a daily basis adds up!”

What advice would you give to someone trying to do your job?

Sarah: “I always advise people that the two biggest lessons I learned after getting into franchising were: always celebrate the small victories and recognize the value of answering the question, ‘why?’ before it even gets asked. Having grown up with the PCJ brand in Corporate Operations, I came to our Franchise Department with an unrealistic ideal of what it was going to be like working with franchisees.

“I took for granted the fact that I was now working with business owners, not just other managers, and I had to justify every decision that was being made and answer as many questions as I could think of before they were asked. As a department, our mantra is, “front load everything.” While it was frustrating at first, I quickly learned there is tremendous value in doing this. By answering the ‘why,’ and offering that level of transparency, we continue to build trust with our franchisees. “



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How to Use KPIs in Franchising

By | Franchisee Scorecard, KPI
KPIs in Franchising

Most franchisors are aware of KPIs and management. but going from “idea” to “roll-out” can be too big a chasm for many franchisors to overcome. But in today’s world, which is both highly competitive and data rich, KPIs in franchising are becoming a must-have to succeed.

The management style connected with KPIs is especially important in franchising. You are working with entrepreneurs, not employees. Franchisees are more independent and have to be convinced about initiatives rather than being led. This can turn many with a corporate background into a state of frustration.  But this challenge, to the right mind, can be seen as a strength. An entrepreneur, worth their salt, will be motivated to succeed and will draw on the “I’ll do what it takes” mentality. This situation sets the stage perfectly for managing via KPIs in franchising.

  • KPIs motivate: Traditional management talks about “the carrot or the stick” as the two sides needed to manage effectively. In terms of the carrot, KPIs motivate, especially when they are displayed together with leaderboards.
  • KPIs monitor: In terms of the stick, KPIs help make clear what the expectations are for a franchise. After all, a franchisee is granted the right to operate the franchisor’s brand, thus there are obligations associated with this right.

How to determine KPIs in Franchising

Your KPIs are as unique as your business. As a result, determining your KPIs can come from the following sources:

  • Industry experts: whether your franchise operates in restaurant, automotive or health and fitness, you will typically be able to find an effective, numbers-oriented expert in the space. These folks will typically come from a management background, but they can also be found with on an engineering, software or financial career-track. Look for them at your industry conferences or publications.
  • Franchisees: As people familiar with the day-to-day of the operation, franchisees can be a rich source of input into KPIs. Getting them involved also facilitates compliance and alignment down the road. Look to your Franchise Advisory Board as a starting point.
  • Internal team: Your internal team can be a valuable ally when it comes to KPIs. Your Franchise Consultants are a first stop on the road to KPIs, but you may want to check in with Marketing, HR and Training teams as well.

Sample KPIs

As discussed, KPIs are unique to every business. But sometimes seeing samples of KPIs in franchising can spark discussion and build intelligence. Due to popular request, we have sample KPIs in the following areas. To get statistics for this post, we relied heavily on the Franchise Business Outlook published by the International Franchise Association (IFA).

Restaurant Franchise KPIs

Numbers: According to the IFA, there were 226,699 Fast Food, Quick Serve and Full Serve restaurant establishments combined in January 0f 2018. This means that out of the 759,236 franchise establishments, restaurants were 55.5% of all franchises. It stands to reason that restaurants are still going strong in franchising.

Trends: The biggest change to hit restaurants are off-premise sales. Delivery, led by the pizza world is taking a bite out of the industry as a whole.

KPI Samples: Speed of Service, RevPASH, and % of Online Orders are indicators found across establishments. See our full list of Restaurant KPIs here.

Salon and Spa KPIs

Percent: Personal service, which includes Salon and Spas, represents 113, 536 establishments, representing 15.1% of franchised businesses. In 2015, the global wellness industry was valued at 3.7 trillion dollars.

Trends: Digital disruption is affecting salons and spas, with businesses offering apps and online appointment setting. 70% of Spas, for example, offer online appointment setting.

KPI Samples: Retail Capture Rate, Repeat Guests, and GOPPATH are KPIs found in this industry. See our full list of Salon and Spa KPIs here.

Gym and Fitness KPIs

Percent: Gym and fitness is also included in the booming personal services franchise category, which, same as Salon and Spas, represents 15.1% of the franchises. Currently about 20% of Americans have a fitness membership, and that could easily double in the next 10-15 years.

Trends: Wearables sharing biometric data have emerged as a top trend in fitness today.

KPI Samples:  Active Members, Revenue/Client, and Revenue per Square Foot are KPIs seen in fitness businesses. See our full list of Fitness and Gym KPIs here.

Automotive KPIs

Percent: There are 38,065 Automotive franchise establishments in the US, representing 5.0% of franchises.

Trends: With new automotive sales on the decline, drivers of older cars are more likely to pay to keep their car running, with the average older car owner 2x more likely to pay over $1,000 to keep their car running.

KPI Samples: Productivity, Efficiency %, and Cycle Time are common in this industry. See our full list of Automotive KPIs here.

Education KPIs

Percent: Education is also part of the broad Personal Services franchise category, weighing in at 15.1% of all franchises.

Trends: STEM Education support is a trend in education, with the Bureau of education forecasting a million new jobs created in Science, Technology, Engineering and Math between 2012 and 2022.

KPI Samples: Trial Conversion, Attendance %, and Churn % are typically found here. See our full list of Education KPIs here.

Types of Franchise KPIs

KPIs come in many different forms. See the infographic below as a guide.

KPI Best Practices

When rolling out a KPI program, it is important to remember that the program is a living and breathing organism, rather than something static. Here are some tips to keep in mind:

  • Don’t Set it and Forget it: The beauty of this program is that it helps you track your progress. That means having positive habits around review cycles is a must-have.
  • Review Consistently: As new trends come into your industry, you want to review and change what you monitor. For example, 5 years ago restaurants did not typically track % of online orders. Today it is standard.
  • Tie to Scorecards: Scorecards offer a one-page summary of what is going on with the business. This is a great user-friendly tool for franchisors and franchisees alike.

Parting Thoughts

Once you have your KPIs in place, you may want to invest in a scorecard program to make them easy and understandable. FranchiseBlast has created a comprehensive eBook on Scorecards called The Ultimate Guide to Franchisee Scorecards. Download this valuable resource now.



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Unit Level Economics for Franchise Businesses

By | Uncategorized

We have all heard that Unit Level Economics is important in franchising, but going from understanding it in theory to transforming it into action is a big step.  According to QSR Magazine, “the success or failure of a franchise concept can pivot off of how well unit economics are tracked, managed, and improved.” In this article, we will take a look at why Unit Level Economics are important in a franchise business, and how to put it in place in your organization.

Why Unit Level Economics for Franchise Businesses

Strong Unit Level Economics is the foundation upon all business success sits. Even though most franchisors get royalties from revenue, not profit, having franchisees succeed in the long run creates genuine referrals and organic growth. Those who want sustained growth for both the franchisor and franchisee pay close attention. According to Joe Matthews, strong Unit Level Economics can also help in Franchise Development as franchise candidates look for the following:

  • Does your business make money?
  • Is the business sustainable? Will it continue to make money into the foreseeable future?
  • Can I see myself in the business?

So the focus builds that franchise business from many angles.

Core Measurements

The starting point of a Unit Level Economics initiative will take the following into account:

  • Unit Profit  and Loss (P&L)
  • Break-even point
  • Payback period

Key Performance Indicators (KPIs) take center stage when it comes to any program rollout.

Sample Unit Level Economic Program Rollout

Are you ready to rollout a program? Surprisingly, we have found that sometimes more established systems are behind newer systems who may have set up strong programs  from the beginning. The best rollouts start from the top, where the Owner or CEO sets the tone and the franchisor team is full of people who care about franchise success on an emotional level.

Step 1: Determine the Key Performance Indicators (KPI)

Every business is different, so using the wrong KPIs can do more harm than good. Develop these benchmarks with input of the franchisees and industry experts. As a starting point, we have KPIs for Restaurant, Health and Fitness, Spa and Salon, Education and Automotive.

Step 2: Track and Improve KPIs

Now that you have the information that you need, you can manage your KPIs together with your franchisees. Franchisors who have a “corporate location” have more skin in the game and can experiment with the business model. Having franchise committees or forums can also help develop and share best practices. Another way to encourage performance is to have part of your franchise consultant’s salary variable based on franchisee KPIs.

Step 3: Share Information About Your KPIs 

Sharing information about KPIs is key to an organization’s success. In fact, at FranchiseBlast we have seen an increasing amount of customers tracking scorecard performance on a monthly basis as well as getting information from their POS or online reviews.

Critically Reassess the Basis of Controllable Franchisee Variable Costs

The franchise landscape changes over time. For example, off-premise has appeared in a substantial way in the past few years leading to changes in procedures, facilities and digital assets. Reviews have also taken a front-seat in  marketing, when as little as 5 years ago they were a second thought. Reassess those KPIs over time, making sure your programs are relevant.

Parting Thoughts

Overall, a strong Unit Level Economics program is alive, with participation and tracking throughout. To learn more, download our Ultimate Guide to Franchisee Scorecards.



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