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FranchiseBlast

Is Franchisee POS Polling Enough to Capture Franchisor Royalties?

By | Franchise Growth, Franchise Point Of Sale

THE RESTAURANT INDUSTRY’S ADAPTATION

serverOnline menus, email marketing, mobile ordering and third-party ordering and delivery options have fundamentally changed the restaurant industry over the past several years. They have enabled restaurants to attract new customers and retain existing customers by expanding their off-premise dining revenue which includes both delivery and takeout. The National Restaurant Association reports in their 2017 Restaurant Industry Pocket Factbook:

  • 42% = Consumers who say the ability to order online would make them choose one restaurant over another
  • 30% = Consumers who say technology makes them dine out or order takeout or delivery more often
  • 20% = Consumers who say they would rather use technology than interact with restaurant staff

According to a 2016 Morgan Stanley report, Pizza Paradigm for Online Food Delivery, aggregate off-premise restaurant dining accounted for $210 billion or 42% of the industry’s revenues with $30 billion accounting for the delivery market. Of that $30 billion delivery market, $11 billion was online of which $7 billion (64%) were attributed to pizza orders. This compares to $9.6 billion worth of all pizza delivery orders or 32% of the $30 billion.

According to Pizza Today, “nearly 80 percent of U.S. pizzerias offer delivery.” PMQ Pizza Magazine claims the popularity of online ordering can be attributed as follows:

“The growing importance of online and mobile ordering cannot be overemphasized. Despite carrying their phones everywhere they go, many customers don’t want to actually talk on them—at least not to a harried pizzeria staffer who may put them on hold or botch the order. Online ordering will likely overtake phone orders by the end of the decade, and it fits hand-in-glove with delivery service.”

THE IMPACT OF THIRD-PARTY ORDERING AND DELIVERY ON FRANCHISOR ROYALTIES

The growing popularity of third-party ordering and delivery services create new challenges for franchisors as they can no longer rely on POS polling alone to capture franchisee revenue and, therefore, royalties. In fact, Grubhub, the leader in third-party restaurant ordering and delivery services currently only partners with Upserve Breadcrumb POS, Oracle Hospitality and Toast. Yet, franchisors must rely on franchisees to record these transactions in their POS systems, for example as department sales, if POS polling is uniquely relied upon to calculate and validate royalties.

How large is this challenge? According to 1010data.com, Grubhub and Seamless, who merged in 2013, accounted for 50% of third-party restaurant ordering and delivery sales for the fourth quarter of 2016. If you delve a bit into Grubhub’s financial statements, you’ll find a story of double-digit growth in transactions and revenue. The percent of revenue earned also reflects the company’s greater focus on providing an ordering platform versus a stronger mix of ordering and delivery services. They reported:

The industry continues to see new providers of the third-party restaurant ordering and delivery services. Amazon Restaurants was launched in November 2015 and recently announced its partnership with the third-party ordering service provider Olo, In 2014, Uber launched its UberFresh service and in 2016 relaunched the service under its own app, UberEATS. Although these services eliminate the need for restaurants to operate their own delivery services, they also come at what some are called a steep price to both the restauranteur and consumer. But the demand seems clear both domestically and internationally which is highlighted in Amazon’s recent need to hire Uber drivers in Singapore to meet that region’s demand.

The industry is also consolidating. Grubhub is leading the way with its Seamless merger in 2013 and recent acquisitions of competitors such as Eat24, LABite, Foodler and OrderUp.

HOW CAN FRANCHISORS BRIDGE THE GAP?

  1. new_scorecard_restaurantProactively search leading third-party delivery sites to discover franchisee partnerships.
  2. If a material number of franchisees participate in these partnerships, initiate conversations about integrating with third-party delivery services.
  3. Sync this information with your franchisee scorecards to track the impact of sales on top-line revenue growth while also considering the commissions and other costs of third-party delivery partners.
  4. Add supplier purchase data to benchmark profitability. A decrease in profitability may indicate the omission of this additional revenue.

By recognizing the impact of changes in the industry and the growing impact of third-party delivery services, franchisors should re-evaluate how they collect revenue data to ensure they are receiving the appropriate royalties. This may require collecting information from third-party sources and aggregating it into scorecards, dashboards and other monitoring tools. Taking these steps also ensures the franchisee’s performance is being measured and scored correctly to provide the coaching and training that drive unit-level economics and the growth of franchise systems.



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Franchise Growth Through Benchmarking and Scoring Mobile Order, Payment and Loyalty Programs

By | Franchise Growth

online_order_benchmarking“We delivered record shattering Mobile Order & Pay performance metrics in Q1. Rapidly accelerating customer adoption of MOP, particularly over the last three months contributed to a growing number of stores being challenged to keep up with the increased volume demands and introduced an operational challenge that Kevin will speak to in his remarks. We are now laser focused on fixing this problem, but the nature of it, too much demand, is an operational challenge we have solved before, and I can assure you we will solve again.” Howard S. Schultz, Executive Chairman, Starbucks Corp., January 2017 Investor Relations Conference Call.

Starbucks was challenged in 2016 with the quick adoption of the mobile ordering and payment solutions which are tied to their loyalty program. This new option created too much demand at peak hours and the result was a bottleneck in meeting order volume. The end result was a loss in business and a threat to their brand. As an early adopter of technology solutions and loyalty to drive additional revenue, they have experienced operational challenges in the past and have found solutions to the challenges of being earlier adopter of ordering, payment and loyalty solutions.

Over the past 10 years, both digital ordering and loyalty programs have matured in terms of digital technology, integration and sophistication. Over this time, digital ordering, payment and loyalty programs have also proven effective in providing a lift in dining frequency, check size and customer conversion. Restaurant are using these programs to differentiate their offering and to improve operational performance.

Franchisors are also taking advantage of these programs with mixed results. Solutions such as benchmarking and associated scorecards can aggregate and present performance metrics which provide insights into factors that may be influencing digital order, sales and loyalty purchases. The franchisor may discover through these reports that their online revenue versus total sales may vary by 20% with a median of 5%.

To understand these variances, benchmarking and scorecards provide the franchisor and franchisee with areas of focus for their operational analysis and discussions. They can quickly explore the operational reasons for the gap in performance and find possible solutions. Reasons for these gaps may include demographics such as locations that serve predominantly the 18-34 years old age group or geographic such as rural areas. They may also discover through their franchise coaches that it is a question of reluctance to adopt the solutions or a lack of training.

How Has Mobile Ordering Grown?

Mobile and online ordering now lead some restaurants revenues including Starbucks and Domino’s. According to The NDP Group, “[t]he use of mobile apps, text messages, and the internet to order food from a restaurant or other foodservice outlets grew by 18 percent last year and now accounts for 1.9 billion foodservice visits.”

How Have Loyalty Programs Matured?

The number of restaurant loyalty members has grown significantly over the past 10 years. According to the biannual Colloquy Loyalty Census, a jump in restaurant memberships occurred between 2008 and 2010. During this time, loyalty programs matured with companies such as Starbucks consolidating its two existing programs into My Starbucks Rewards in December of 2009. Currently, Starbucks reports a lift in revenue of as little as 20% for its high-spending customers to 70% for its low-spending customers. More information about Starbuck’s use of digital ordering, payment and loyalty follows.

According to Colloquy, restaurant loyalty members outpaced the average for all industries who averaged a 15% growth in 2016. Overall, restaurant membership grew from 6.7 million in 2006 to:

  • 8.4 million in 2008, an increase of 25%
  • 9.7 million in 2010, an increase of 15%
  • 26.5 million in 2012, an increase of 173%%
  • 54.8 million in 2014, an increase of 107%
  • 125.6 million in 2016, an increase of 129%

How Are Restaurants Using Mobile Ordering, Payment and Loyalty Programs?

Panera

Panera launched Panera 2.0 as they believe “technology is a differentiator in the restaurant business.” This program includes digital ordering, line busting and operational improvements. What this has produced 17% of system-wide e-commerce sales and 23% of Panera 2.0 cafes sales. This equates to 125 – 130 thousand daily e-commerce orders and $600 million in system-wide ecommerce sales.

Panera is also taking advantage of loyalty programs. At the end of 2016, 25 million customers were enrolled in their loyalty program and 51% of their transactions were associated with the MyPanera loyalty program card. They have used membership data from the program to evaluate customer preferences, adjusting their marketing message and menu design.

Dunkin’ Donuts

In 2016, Dunkin’ Donuts surpassed 6 million loyalty members (DD Perks members). In their fourth quarter of 2016, 10 percent of transactions were by loyalty members. In all, their loyalty program produced almost $1 billion in system-wide sales with more than half generated through a mobile device. This is a growth rate of nearly 70 percent year over year. The company also launched On-the-Go for DD Perks members as a line busting solution which enables members to order ahead and speed past the line in-store. “On-the-Go gives us the power to drive customer loyalty and the power to drive efficiency and speed of service in our restaurants.”

Domino’s

Domino’s reported in its 2016 Annual Report and 2017 Investor Day presentations:

● Over 60% of U.S. sales were through digital channels in 2016 compared to 50% in 2015 with 25% growth year over year

● Estimated $5.6 billion in annual global digital sales in 2016 compared to $4.7 billion in 2015

● In late 2015, they launched Piece of the Pie Rewards, a digital loyalty program

● They expanded their AnyWare digital ordering platform which now includes: Samsung Smart TV®, Twitter, and text message using a pizza emoji as well as Apple Watch, Facebook Messenger, Zero-Click ordering via mobile, “Alexa” on Amazon Echo and the Google Home platform

Starbucks

Starbucks has been an early adopter of mobile order and pay options (MOP). These options are part of the company’s Digital Flywheel Program. MOP was originally designed to be a line busting technology but created too much demand as highlighted at the beginning and originally reported in January 2017 by the Howard S. Schultz, Executive Chairman, Starbucks Corp. and explained further by Kevin R. Johnson, chief executive officer, Starbucks Corp.

[T]he success of Mobile Order & Pay has also created a new operational challenge that has been building in lock step with volume growth, and it’s most pronounced in our highest volume stores at peak, significant congestion at the handoff plane. This congestion resulted in some number of customers who either entered the store or considered visiting a Starbucks store and then did not complete a transaction. Adam Brotman is already driving action in our top 1,000 highest volume Mobile Order & Pay stores to address this issue, including introducing new in-store procedures and tools, adding new roles and resources to specifically support Mobile Order & Pay, and the testing of new digital enhancements, including text message notifications when a mobile order is ready for pickup.”

 

To test how to solve this problem, Reuters reported in March 2017 that Starbucks will open a Mobile ordering and payment-only store at its Seattle headquarter which only serves employees. This location is one of its top three store in the United States for mobile ordering. The headquarter houses two stores that serve over 5,000 employees. The store will offer with a large pick-up window to try an offer the same in-store experience which includes the ability to view the order preparation by baristas. If the tests lead to more of the new format, this would create member-only stores or Starbucks will have to rethink its program.

Some mobile ordering and payments statistics are highlighted in the Goldman Sachs Global Retailing Conference presentation by Scott Maw, CFO, Starbucks in September 2016. The velocity of MOP adoption and bottleneck issues were already becoming clear:

  • Mobile Payments represented 25% of U.S. transactions, 30% at the end of Q3 2017
  • Mobile Order and Payment represented 5% of all U.S. transactions, 9% at the end of Q3 2017
  • 10% of all transactions at peak times in 2,700+ stores
  • 20% of all transactions at peak times in several hundred stores

Overall success of Starbucks’ mobile order, payment and loyalty programs are reported in the presentation by Matt Ryan, EVP, Global Chief Strategy Officer and Gerri Martin-Flickinger, Chief Technology Officer, Starbucks growth of rewards + mobile order and payment technology for 2016 compared to 2013 , the company’s 2017 Annual Meeting of Shareholders presentation and the company’s Q3 2017 financial press release:

  • Rewards members grew from 5 million to 12 million (FY 16 vs FY 13), 13.3 million at the end of Q3 2017
  • Rewards members equaled 1/6 of all Starbucks customers (Oct 2016)
  • Starbucks Rewards represented 36% of U.S. company-operated sales (Q3 2017)
  • Mobile Pay grew from 10% to approximately 25% (FY 16 vs FY 13), 30% of U.S. company-operated sales at the end of Q3 2017
  • Mobile Pay member equaled 8 million, 66% of rewards members (Oct 2016)
  • Mobile Order and Pay members 2.5 Million, 33% mobile paying customers (Oct 2016)
  • Mobile Order and Pay 0% to approximately 5% (FY 16 vs FY 13), and to 9% of transaction at the end of Q3 2017
  • Mobile Order and Pay member grew to 0 to 2.5 million of loyalty members ((FY 16 vs FY 13)
  • Spend Lift After Joining Rewards (Oct 2016)
    • High-spending customers increased their spend by 20%
    • Medium-spend customers increased their spend by 30%
    • Lower-spend customers increased their spend by 70%

Regardless of the stage of mobile ordering, payment or loyalty program maturity, a franchise system will face challenges in franchisee adoption and reporting. This is compounded as the amount of revenue and top-line growth in revenue is attributed to these options and programs. Franchisors can address these issues by implementing, calibrating and analyzing their unit performance with benchmarking and scoring.



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Pita Pit Customer Video Testimonial

By | Customer Testimonial, Video

Video Transcript

“My name is Daun Costa. I’m the IT Program Manager for Pita Pit and I look after all of our franchisee and consumer-facing applications.

Life before FranchiseBlast was all paper-based and email communications, nothing dynamic. There were challenges when it came to collaborating on projects or initiatives or managing locations. There was no information continuity. FranchiseBlast’s software is very streamlined. The interface is so user-friendly and very easy to learn.

The field audits app was the feature that sold us on the service the most as well as the action plans. We used the action plans very heavily with store opening procedures so it’s a huge component for the development team.

The process when we were onboarding with FranchiseBlast was very supported and very quick to implement. We had a lot of paper-based information, a lot of Excel forms and a lot of stagnant data even that we were pulling from a very very old intranet. We took all of that information gave it to the FranchiseBlast team and they imported it in very short order to get us up and running into the CRM.

What exceeded and continues to exceed our expectations with FranchiseBlast is the level of support and service and innovation. Anytime that we have a support requirement, the FranchiseBlast team is immediately responsive. Anytime we are looking at new ways to use the system or we have business objectives or challenges that we are looking to meet, we can always discuss it with the FranchiseBlast team and they help us find solutions.

FranchiseBlast is our central core system. It is the central repository for all of our information pertaining to our franchisees.”

 

ABOUT PITA PIT®:
Founded in 1995 in Kingston, Ontario near Queen’s University, Pita Pit® is an innovative fast casual restaurant with a unique mindset that challenges consumers to Refuse to Settle™ for anything less than quality, healthy, freshly grilled food. After rapidly earning a loyal following in its home market, franchising began across Canada in 1997 and, in 1999, the brand expanded to the United States. Now boasting more than 650 stores across North America and internationally across 13 countries, Pita Pit offers its customers millions of ridiculously delicious, customizable flavour combinations of grilled meats, fresh vegetables, and zesty sauces all rolled into a unique and convenient pita package. For more information about Pita Pit, visit www.pitapit.ca or www.facebook.com/pitapitcanada.



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3 Signs it’s Time for Field Operations to Ditch the Spreadsheets

By | Field Audits, Franchise Operations

Every franchise relies on spreadsheets or printed forms, to some extent, to help manage its field operations. For example, to track field audit scores, benchmark franchisee performance, or collaborate on a store opening. Relying on spreadsheets during the early stages of a franchise system makes sense when it predominantly operates using simple spreadsheets being managed by small, tight-knit teams. As a franchise system matures, by adding new locations, its field audit team and reporting will grow in complexity.

As it grows, field operations will record and exchange more information to continually improve franchisee performance. No matter the stage of maturity of the franchise, the limitations that crop up because of the use of spreadsheets become warning signs to be addressed.

What are these limitations, and what do franchise systems need to consider?

Sign #1: Reduced data integrity and availability

 While spreadsheets provide an easy way to template and collect information during field audits, one of the major signs it’s time to move away from the use of spreadsheets is when the information is unreliable or hard to access. Even if only a few people complete, edit, and use this information, there is still room for error. With an increase in the use of Microsoft Excel alone from 30 million users in 1996 to over 750 million users in 2015, the impact of those errors touches businesses no matter how large or small.

The impact of those errors has been studied for over a decade by a leading researcher named Raymond Panko. He has studied the impact and reasons for errors using financial field audits in his studies. He details his conclusion in the 2015 research paper, “What We Don’t Know About Spreadsheet Errors Today: The Facts, Why We Don’t Believe Them, and What We Need to Do”.

Three main outcomes from the research were:

  • At least one incorrect bottom-line value is very likely to be present
  • Errors are extremely difficult to detect and correct
  • Spreadsheet developers and corporations are highly overconfident in the accuracy of their spreadsheets

The main reasons for these errors include rushing, inexperience, complexity, and stress. The higher the stress, the more likely the errors. The research found that even with a high level of experience, stress can increase errors five-fold.

What was found to decrease errors is software.  Task-specific software, designed to achieve desired business objectives by eliminating manual steps.

Also, as a franchise system grows, so does the use and complexity of financial, operations, and supply chain systems. These separate systems create information silos, which limit the availability and exchange of information between departments. For example, by making field audit information available to development teams, they can spot their top and bottom-level performers within a territory. Development teams can also use field audit information to easily identify candidates for multi-unit franchisees based on their past performance and dedication to protecting the brand.

The ability to leverage information across a company has also become the norm. Financial, operations, and supply chain Information are aggregated into dashboard reports instead of repetitively copying and pasting information from several different systems into a single spreadsheet. This allows franchise systems to gain additional insights. For example, by comparing these additional types of information, beyond field audits, new opportunities can surface from financial information, mystery shopper scores, customer satisfaction data, online review sentiment analysis, and other third-party data sources.

If a franchise system is experiencing data integrity or availability issues, it should consider moving away from using spreadsheets. The software to automate manual processes and create franchise dashboard software is available. They can reduce errors and aggregate information from your franchise’s core data sources, and automatically present it in an easy-to-understand manner to both the franchisor and the franchisees.

Although perhaps this is the most important reason to move away from spreadsheets, once the franchisor knows its data can be relied upon, the franchise system can look to additional benefits of moving away from spreadsheets, which include recording and tracking accountability, as well as increasing engagement.

Sign #2: Reduced accountability

“Unless commitment is made, there are only promises and hopes; but no plans.”
Peter F. Drucker

Another additional benefit of moving away from spreadsheets and towards software when it pertains to field reviews and audits is to help build action plans and collect feedback from franchisees. Spreadsheets can be useful tools for field coaches to capture information during their visits. Franchise operations can then use the captured information to create action plans, which in turn can be used by franchisees to improve on their historical performance. Although spreadsheets can be used to report and collaborate to a certain extent, they cannot provide a reliable way to track and validate action plan follow-through or accountability.

If a franchisor cannot pinpoint and validate why things are falling through the cracks with its franchisee action plan follow-through or performance, it should consider moving away from spreadsheets. Solutions to facilitate the task creation and corrective action plans to address a franchisee`s weaknesses are available, and should be used to increase accountability.

Sign #3: Reduced engagement

“When people talk, listen completely”
Ernest Hemingway

Franchise systems today understand that growth relies on each franchisee’s financial success and how franchisees promote the system to other potential franchisees. Without their success and willingness to promote the brand, the franchise system quickly becomes undervalued or simply undesirable as an investment opportunity. Since field operations are at the front line with the franchisees, discovering what needs improvement, they can understand both the franchisee and franchisor’s perspectives.

Franchise systems rely on franchise business coaches and operations to collect, analyze, and communicate improvement plans to franchisees. This communication may be as simple as correcting compliance issues that affect the brand and customer experience or become more complex with personalized business and operational guidance. The support offered by a franchise system can help foster how a franchisee views the brand. Franchisors can deliver secure and easy-to-access personalized training, support, and franchisee resources.

To deliver this information in a way that can be tracked and acknowledged, a franchisor should not rely on spreadsheets and email. An email exchange with stale spreadsheets between two parties can quickly fall through the cracks due to overflowing inboxes which not only skew the importance (prioritization) of a message but also delays responses and actions from franchisees. Valuable feedback is also not contextualized or accessible by all stakeholders. Although email creates a paper trail, it can be cumbersome and difficult to assemble if needed at a future date.

If a franchisor is experiencing franchisee disengagement, it should consider moving away from spreadsheets. Both franchise collaboration and training software improve the bi-directional dialogue between the parties, and can sometimes even lead to healthy competition between peers.

The alternatives to spreadsheets

Today’s technology fills the gap for franchise systems who need a solution to spreadsheets and email systems when communicating with franchisees and others across franchise systems. Technology can give back time to operations by automating and streamlining workflows while ensuring that operational guidelines are followed. It can ensure that data remains reliable and that information is collected, aggregated, and reported in a timely way.

Field operations can use field audit and performance software to become and stay organized by scheduling their field visits, tracking tasks, centralizing files, and recording actions taken by the franchisor and franchisee. The franchise system can also organize its data through the use of dashboards, where operational, marketing, sales, and loyalty information can be aggregated to discover those new opportunities for customer upselling and franchise expansion.

Regardless of the solution, leveraging technology should ideally help a franchise through its growth challenges, as well as help align or even realign franchisor and franchisee goals for continual system-wide improvement.

Explore and discover more reasons why spreadsheets, as they increase in use, are exposing their limitations and risks. Read more about EuSpRIG’s Horror Stories, and consider what you might be overlooking in your own operation.

 



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FranchiseBlast Honored with a Prix MercadOr de l’Outaouais

By | Awards, News, Video

On June 7, Phone Loops, Allied Scientific Pro, FranchiseBlast, Ideal Protein and Jack’s Soda were each honored with a MercadOr award which recognizes business export achievements. Per Export Outaouais, “over the years the Mercador awards have come to be widely recognized as the entrepreneurial award in the province.”

Awards by Category

Phone Loops

award accepted by Jean-Philippe Brousseau
Nouvel exportateur [New Exporter]

Allied Scientific Pro

award accepted by Steeve Lavoie
Développement de marché [Market Development]

Franchise Blast

award accepted by Jason Kealey
Stratégie numérique à l’international [International Digital Strategy]

Idéal Protein

award accepted by Rui Perdigao
Leader à l’export [Export Leader]

Jack’s Soda

award accepted by Joël Beaupré and Mathieu Guillemette
Coup de coeur [Favorite]

You can view the award presentations and other clips from the evening of June 7 which took place at Zibi’s in Gatineau.



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Restaurant Field Coaching Trends [Infographic]

By | Field Audits, Franchise Coaching, Infographic

How Does Your QSR, Fast Casual, or Full-service Restaurant Measure Up? Find out about field coaching trends including audit pass rates, coach to franchisee ratios and visit durations.

This data was collected by FranchiseBlast.


Restaurant Field Coaching Trends Infographic - FranchiseBlast



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Field Audit Questionnaires: Service Franchises

By | Field Audits

Our franchise field audit app is used by a franchise’s field support team (commonly called franchise business coaches) to ensure brand consistency and coach their franchisees on improving performance. This article is an overview of what service franchises (mobile and brick & mortar) focus on during their field visits or remote performance assessments. These are not specific questions used in a field audit but rather generalizations of the subjects that are covered.

Service:

  • The friendliness of the staff
  • The speed of the processes
  • The accuracy in which the service is provided
  • Respect of the franchise’s methodology, both customer-facing and back-end processes
  • Respecting the brand promise with regards to greeting customers

Brand consistency:

  • All marketing collateral given to customers is up to date
  • Standard uniforms in use
  • The vehicle wraps and signage are aligned with the brand standards at time of opening
  • Vehicles are not damaged

Franchisee coaching:

  • Focus on growing top-line sales
  • The standard sales process, reviewing if benchmarks are achieved (# of calls, closing ratios)
  • Listening in on sales calls
  • Review local marketing spend in comparison to benchmarks
  • Review cash flow, especially when the franchise manages inventory (The Profit Mastery series by Steve LeFever addresses this nicely – and gives CFE credits!)

Legal compliance:

  • Insurance in place
  • Training/certifications up to date
  • Privacy laws are respected
  • Information is security stored
  • Employee background checks are properly completed
  • Employee drug tests (when applicable) are up to date

Mobile service franchises focus their efforts in a coaching conversation with their franchisee rather than via a site visit. Mobile service-based franchises almost exclusively focus on improving performance during coaching sessions. This is partially because there isn’t a store to visit, per say. Some review their franchisees by jumping in a truck and accompanying them on a standard day but it isn’t as common in this space. More importantly, due to the average unit-level economics of many service franchises, it is not always cost effective to send people out in the field to visit franchisees on a recurring basis.

From our perspective, observing how a service franchise addresses coaching paints a clearer picture of the different coaching stages within any franchise because it’s almost their only focus. They’ll spend more time with the franchisee talking about the sales process and supporting tools because it has the biggest impact on the franchisee’s economics.

The other elements we typically see evaluated in a mobile service franchise is around compliance. They will request that the franchisee sends them proof of insurance, proof that they are respecting privacy laws, quotes & invoices for a few recently performed jobs, etc. Most of this compliance work is typically done via franchisee self-assessments.

 



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Field Audit Questionnaires: Restaurants

By | Field Audits

Our franchise field audit app is used by a franchise’s field support team (commonly called franchise business coaches) to ensure brand consistency and coach their franchisees on improving performance. This article is an overview of what restaurants (full service, fast casual or quick service restaurants) focus on during their field visits. These are not specific questions used in a field audit but rather generalizations of the subjects that are covered.

Quality:

  • Freshness and appeal of the ingredients
  • The ingredients have been properly prepared/cut/stored
  • The standard portions are respected
  • Ingredients are labeled with opening dates to ensure first-in first-out product usage (FIFO)

Service:

  • The friendliness of the staff
  • The speed of the processes
  • The accuracy of orders
  • Respecting the brand promise with regards to greeting guests
  • Suggesting upsells

Cleanliness:

  • Cleanliness of the front of the house
  • Cleanliness of the back of the house

Brand consistency:

  • All marketing collateral is up to date
  • Standard uniforms in use
  • The decor is aligned with the brand standards at time of opening
  • Lighting (exterior/interior) working and in good repair
  • No hand-written signage visible

Food Safety:

  • Food is stored at adequate temperatures, fridge/freezer gaskets in good condition
  • Stale food is discarded
  • Food is properly dated
  • Food safety logs are in place and adequately used
  • Proper hand washing procedures in place
  • Proper sanitizing procedures in place

Franchisee coaching:

  • Cost of goods is inline with the franchise benchmarks
  • Labour costs are inline with the franchise benchmarks
  • Local marketing spend is adequate

When people think of field audits in the context of a restaurant, they first think of food safety. In fact, many franchises not only have their own coaches to evaluate food safety, but they also hire additional third party food safety auditors. That being said, food safety is baseline. The franchise coach has a wider view and is much more impactful on the financial performance of a location than a third party auditor.

Traditionally, franchises structured their audit questionnaire to group questions about Quality, Service and Cleanliness (even calling their visits QSC audits). However, to make the process more efficient for the field coach, many franchises today order the flow of questions in a field visit to start with the outside of the store, then the front of house, then the back of house and finally franchisee coaching. This more natural flow saves the coach steps and gives them more time to actually coach.

 



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Franchise Field Audit Benchmarks

By | Field Audits, FranchiseBlast, Infographic

Franchise Field Audit Benchmarks

We’ve previously discussed how our franchise field audit app is a massive improvement over using paper or spreadsheets to perform franchisee field audits. We’ve seen hundreds of franchise field audit questionnaires and have been able to establish certain benchmarks:

Frequency: On average, the coach visits franchisees once a quarter.

  • The frequency decreases as the average revenue per franchisee decreases, regardless of the type of unit. Restaurant snack kiosks and smaller brick & mortar retail/service visit once a year. Mobile service brands visit once ever 1-3 years, if at all (and do remote audits instead).
  • The frequency increases if the stores have geographic density. If a coach can easily drive to all locations, they may visit monthly.
  • Multi-unit operators (franchisees) who also utilize our software visit more frequently, sometimes weekly.

Franchisee ratio: On average, each FBC coaches 30 franchisees.

  • This often means 30 units but the better way to describe it is 30 relationships. In systems with a high density of multi-unit franchisees, the coach can oversee a larger set of units.
  • Unit-level economics can also impact this benchmark. If the coach visits once a year because it’s the only financially viable option, the ratio will often jump to 60 or even 100 franchisees per coach. The coach is effectively spending less time with each franchisee.
  • Multi-unit operators (franchisees) typically have their district managers be responsible for 6 locations.

Questionnaire count: On average, each franchise uses six audit questionnaires, not two.

  • Most franchises believe that they have a long form audit questionnaire, performed once a year, and a short form performed during every other visit. However, the average FranchiseBlast user has six active questionnaires, indicating that they find new uses for our app after they have begun using it.
  • The other audits are typically store opening checklists or specific audits around the most recent marketing campaign or food safety.

Percentage passing: On average, 80% of audits pass

  • Our data shows exactly 79.25%. For a franchise coaching process, this is a good ratio of difficulty without being discouraging.
  • We have restructured the questionnaires of franchises with a very high ratio of passed audits to bring them closer to reality. No one is perfect and when 95% pass, the bar is too low.
  • Only 61% of food safety audits pass, even though the average score is over 90%. Being flawless in food safety is very difficult. The criticality of issues generates a higher ratio of failures.

Duration: On average, two thirds of long form audits are completed within 3 hours.

  • 48.5% of the audits completed on our system are done within an hour, but these include short form audits
  • 85% of long form audits completed on the same day are finished within 5 hours.

We hope you found the aforementioned benchmarks interesting. If you have a specific question, please don’t hesitate to reach out!



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The 7 stages of franchise coaching

By | Field Audits, Franchise Coaching

Fotolia_124621642_M_1200x628Over the years, thanks to our franchisee field audit app, we have seen how countless franchises manage the franchisee coaching process. This article will give you some perspective on how you compare to other franchises and some actionable insights to get to the next level.

Here are the seven stages:

  1. Reactive
  2. Recurring conversations
  3. Recurring structured conversations
  4. Guided conversations
  5. Benchmarking
  6. Operational efficiency
  7. Predictive analytics

Let’s now drill down into these stages!

Stage 1: Reactive

Franchises typically start out in a reactive mode, simply waiting for franchisees to reach out when they have issues.

  • This is most common: in emerging franchises or legacy franchises
  • Areas of improvement: being reactive is indicative of giving poor support to your franchisees, negatively impacting unit-level economics, franchisee engagement and, worst of all, brand consistency. Franchisees typically call when it’s too late to act.
  • Actionable insight: you must be proactive in today’s franchise market. Start by scheduling quarterly calls or visits with your franchisees to begin conversations about what you can do to help.

Stage 2: Recurring conversations

Franchises naturally evolve into recurring field visits and/or calls with their franchisees. At this stage, the conversations are often unstructured and guided by the franchisee. The conversations may be brief and in-person visits may focus more on compliance than coaching.

  • This is most common: in mobile service franchises, other systems with lower average unit sales, emerging franchises
  • Areas of improvement: while the franchisee is given the opportunity to speak up on a recurring basis, franchisees are typically stuck in operations and haven’t had time to properly think through where they need help. The topics will often revolve around symptoms instead of root causes. Some may even choose to avoid talking about certain harder topics.
  • Actionable insight: after having had enough of these conversations, you’ll have an idea of the common subjects. Start by creating a checklist of all the subjects you want to discuss during a visit, painting a holistic picture of the franchisee’s business (sales, operations, finance, HR, etc.) and breaking these down into subtopics (local store marketing spend, etc.)

Stage 3: Recurring structured conversations

Once a structured checklist of topics is put on paper, it becomes the driver of the conversation. All subjects are discussed and the feedback given to the franchisee becomes more meaningful.

  • This is most common: in service franchises and some retail franchises
  • Areas of improvement: at this stage, one typically finds tremendous variances between franchise business coaches. Given the free-form nature of the checklist, each subject is addressed but the coaches may give wildly differing action plans to the franchisee.
  • Actionable insights: Ensure your coaches record their interactions with franchisees, specifically focusing on listing out common issues and the proposed solutions. Set up monthly alignment calls with all coaches so that they can share what they are hearing in the field and the solutions that they are proposing. Start documenting the collective insights and sharing them back with franchisees.
  • Pro-tip: Between your quarterly or annual visits, schedule calls to discuss one specific topic (ex: local store marketing) at a time. Give the franchisee time to prepare/research in order to make the call more impactful and drill deeper into the subject. Look at their key performance metrics (or have them share them) ahead of time.

Stage 4: Guided conversations

Once franchises have developed a common knowledge base with the help of their field team, they are in a position to start defining the franchise’s recommended solution for each issue. Instead of asking did you post on social media last month, they start asking (and recording) how many posts were made. It is at this stage where the field team starts validating their assumptions with data, by correlating strategies with concrete data available in P&Ls and operational systems.

  • This is most common: in restaurant franchises, in more forward-thinking service franchises
  • Areas of improvement: this is the stage where recommendations start being made based on facts and concrete data instead of opinions. However, data at this stage is sometimes limited (either in the number of metrics or the frequency of collection), not aggregated and thus harder than it should be for the coach to access timely information in order to make the biggest impact.
  • Actionable insight: invest in tools to facilitate the gathering of information from your franchisees and aggregating that data.
  • Pro-tip: automate as much of the collection as you can, but don’t go overboard. Focus on the dozen or so key metrics which are most impactful on performance. It’s okay to have some manual processes in place for some metrics.
  • Shameless plug: We have developed tools to semi-automate the collection of franchisee financials when it is impossible for you to connect to their accounting systems.

“Most franchises today are at stage 3 or 4, depending on their business model. They have integrated some benchmarking into their business, but are not necessarily fully leveraging its power to improve unit-level economics and franchisee engagement. “ 

Stage 5: Benchmarking

Once franchises have franchisee data at their fingertips, benchmarking becomes much more prevalent (and easy!). Questions become very precise: are your food costs within 1% of the franchise average? It becomes easy for the franchise business coach to focus on specific issues to drive profitability.

  • This is most common: in established restaurant franchises
  • Areas of improvement: although data is now accessible, it often becomes overwhelming. There are so many sources of data now accessible, the coach and franchisee sometimes are unsure of what to focus on. Benchmarked P&Ls are a goldmine of information, but they are not actionable for those without a background in accounting or finance.
  • Actionable insight: develop a franchisee scorecard that is simple to understand, annotated with leaderboard information (how the franchisee ranks) and make it very easy to determine which weaknesses to work on next (making it actionable)
  • Pro-tip: Try not to exceed a dozen key performance indicators in your franchisee scorecard.

Stage 6: Operational efficiency

Once information is collected, benchmarked and automatically transformed into easy to understand scorecards, franchises can begin working on improving the workflow at various levels. For example, they integrate the scorecards into the field auditing process or automate alerts up the chain when certain thresholds are not met.

  • This is most common: in sophisticated restaurant franchises
  • Areas of improvement: As the coaches’ work has been partially automated, the danger at this stage is to rely too much on automation to cut costs rather than allowing the coach to leverage this time to be more impactful with their expertise.
  • Actionable insight: find new ways to get creative insights on how to improve the franchise, outside of the rigid framework you have created.
  • Pro-tip: we have seen some systems create teams of franchisees where each franchisee visits four other ones and discusses areas of improvement. As the information comes from knowledgeable peers, franchisee engagement goes through the roof.

Stage 7: Predictive analytics

At this final stage, franchises try to predict issues before they happen by mining their data. A great example for restaurant franchises is trying to predict which stores are more likely to have a food safety issue, enabling them to allocate resources efficiently while keeping the public safe. Predicting the future is incredibly difficult; few franchisors are at this stage but the advances in artificial intelligence and big data show promise.

  • This is most common: research & development labs; not common
  • Areas of improvement: predicting the future is not always accurate, one must constantly work on improving the algorithms
  • Actionable insight: increase the granularity of your data, for example, moving from monthly sales to daily sales.
  • Pro-tip: talk to us! We’re looking to collaborate with forward-thinking franchises in our research & development on this topic.

Conclusion

Franchises should not get discouraged if they are in an earlier stage than they would like. We have observed restaurant franchises that are typically further along in the process because of the quantity of comparable data in their respective industries, driven by the availability of powerful software tools in this space. We have also found that many service franchises, although not as far along with regards to automation of the coaching process, have established better processes with regards to the franchisee-franchisor relationship. From our vantage point, we see the best of both worlds, and can appreciate how improving unit-level economics and franchisee engagement are key drivers of franchise growth.

 



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