All Posts By

Jason Kealey

Franchise Operations: Are You Ready for Virtual Visits?

By | Self-Assessments, Virtual Visits

The global pandemic has affected franchise operations heavily. How does a franchisor pivot into a new world where travel restrictions limit or even prohibit onsite visits? The answer is the virtual visit.

Franchisors have long sent Franchise Business Consultants (FBCs) to visit their franchisees, both to ensure operational compliance and also to coach. The FBC would have a conversation with the franchisee and talk about their priorities and how the franchisor can help achieve their goals. The most common output of these visits is a field audit report indicating a few areas of improvement.

Since the COVID-19 pandemic, the key to operating is to shift focus from compliance to coaching. The good news is that franchising has been moving in this direction for the past few years.

In this article, we highlight the three stages of this transition and how you can implement them in your franchise.

As a coach, the simplest way you can execute a virtual visit is to set up a scheduled call with your franchisee on one of the many communications platforms available such as Zoom, Google Meet, Apple Facetime or Microsoft Teams. Then, you can see both the location (for compliance) and the franchisee (for coaching).

Seeing the location gives you the opportunity to review certain elements remotely. You could theoretically go through your previous compliance checklist this way, but this would be counter-productive. Reviewing every single standard from your long compliance checklists is not only demotivating for the franchisee, it’s also ineffective as the visit is announced. Instead, gaining visibility in a few key elements which were historically problematic (and a few spot checks outside of those areas) would drive better conversations while saving time.

For compliance, the key is to introduce self-assessments they can fill out on their own. Compliance is about protecting everyone’s investment: it should not be neglected. Request picture proof from franchisees on a few critical standards and make this a part of the work you request from them. You can equip franchisees (and their store managers) with the right tools to give you enough insights about their operations. At FranchiseBlast, we include tools to improve the accountability of this process via polling or self-assessments.

For coaching, seeing the person lets you have a deeper connection with the individual, which is required to build enough trust to impact their performance. In your coaching session, you should ask them questions like:

  • What’s keeping you up at night?
  • What areas would you like to improve?
  • How can I help you achieve your goals?

In the conversation related to the last question, you can talk about initiatives they could be doing to achieve their goals.

One challenge VPs of Operations will face is that they will have little to no visibility about the coaching sessions. Sure, they could be recorded and stored, but that’s hardly actionable and they have no way to keep the coaches accountable.

The solution is to request that FBCs document these interactions. This opens the opportunity to use the same tools previously used for audits, but with a new questionnaire tailored for these coaching interactions. Questions should guide the FBCs in touching the key areas of the business you’d expect them to talk about such as the following:

  • marketing
  • food costs
  • labor
  • training

For each area, a few notes can be taken about the current situation, the objectives for the next quarter and what initiatives will be put in place to reach those goals. Because all their interactions with their franchisees, the VP of Operations can gain holistic insights about how the franchisor is helping each franchisee.

To sum up, virtual visits can be achieved very simply with communication tools and recorded with a mix of audits, self-assessments and franchisee polls. Franchisors gain visibility into unit-level operations plus introduce some accountability for the coaches by forcing them to document their interactions.

The process then becomes:

  1. Franchisees and FBCs connect on a recurring basis with visual communication tools
  2. Franchisees fill out self-assessments for compliance
  3. FBCs document their interactions, with the most important one being the coaching session

Stage 2: Moving to data-driven coaching sessions

The process described in Stage 1 is the beginning of the shift from compliance to coaching. It is very simple and easy to implement in any franchise. However, its simplicity does potentially add some inconsistencies across coaches.  The conversations and plans the franchisee is making with their coach are heavily impacted by their gut feelings and the data that they gathered was ad-hoc in nature.

It is in this stage that franchisors invest in putting processes and technologies in place to generate a Franchisee Scorecard. Scorecards aggregate information from various sources (Sales, Marketing, Loyalty, Controllable Expenses, Audits, etc.) into a single document which is reviewed by both the franchisee and their coach. The great thing about a scorecard is that it benchmarks each unit with the group, highlighting the areas of opportunity.

Most FBCs already look at data with the franchisees, but a scorecard streamlines the process to make their work simpler. It also standardizes which metrics are observed by all coaches, and for which specific action plans can be developed. As an example, one may observe sales are fairly average, but the average transaction amount is lower than everyone else, indicating an opportunity to coach on upselling.

Once the franchisor puts in place the processes to ensure the scorecard is always accessible and updated in a timely manner, the collaborative process looks like this:

  1. Franchisee fills out a self-assessment indicating what they’d like to discuss in their next coaching call. This lets them voice their concerns ahead of time, and the FBC can be prepare adequately.
  2. On the coaching call, the scorecard is the conversation piece. If a weakness is observed in one area, such as Customer Satisfaction, both can drill down into specific online reviews to learn more about the area of opportunity.
  3. The action plan is developed and recorded by the FBC for accountability purposes, much like in Stage 1.

Stage 3: Rolling Out More Formalized Business Planning

Once franchisors are comfortable in Stage 2, they seek a way to more actively drive change. Stage 2 helps document the action plans, but these are simply snapshots of a conversation. There rarely is any direct follow-up on these plans between interactions.  This is where business planning comes into play.

A business plan is a living document that gets continuously updated through a period, such as a quarter or a year. It includes the objectives that were collaboratively defined; these are motivational targets. For example, they could be to reach a level of performance so strong that the franchisee is ready to open a second unit or decrease variable costs so that the franchisee can afford to pay for their kids’ college education.

Objectives are broken down into key results which are measurable. Key results are metrics that you can measure but you cannot directly control. For example, a key result could be to increase the average transaction size to $15.00. Another could be ensuring labor costs are less than 25% of sales.  By defining a set of specific metrics, the success or failure to meet the objective becomes clear.

Finally, once your targets have been defined you can develop an action plan to reach those targets: these are initiatives. These are activities or tasks that you know you can perform for example:

  • roll-out touchless payments
  • build a cashflow model
  • train staff on upselling procedures
  • hiring a new manager

These initiatives represent your best guess about what you can actually do to reach your objectives.

franchisee comeback plans 3

Building the plan collaboratively with the franchisee is key in this context, as they must agree with the objectives, believe the plan is achievable and align with how to measure success. Of course, franchisors can and should bring a standard plan to the table and tweak it to fit each franchisee, but it’s key that the franchisee buy into the plan. It should focus on what is most important, helping elevate their thinking from working in the business to working on the business.

The next step is to perform recurring check-ins on the plan. By doing so, you can knock off initiatives which are completed and perhaps add new ones if the key results aren’t moving in the right direction. Check-ins are important to keep the plan alive and to highlight what’s important instead of always focusing on the day-to-day emergencies.

Once the franchisor has as standard business plan template aligned with their own strategic objectives, the process thus becomes:

  • Franchisees fill out a self-assessment indicating their desired conversation topics
  • A coaching session occurs where the business plan is developed collaboratively
    • Some key results may come directly from the scorecard
    • Some initiatives may be to get staff to fill out self-assessments on a recurring basis
  • Recurring (such as monthly) check-ins occur (likely collaboratively, but perhaps franchisee-driven)
  • At the end of the period, a post-mortem is created to review the progress made and build the next plan.

The Virtual Visit Ladder: What Heights Do You Want to Achieve?

As you can see, each stage here builds on the successes of its predecessor.

  • Stage 1 augments the toolkit to include self-assessments in addition to classic audits.
  • Stage 2 weaves in data-driven insights via franchisee scorecards.
  • Stage 3 moves from snapshots to a full-blown business planning to drive growth.

To get started with virtual visits, it’s time to move away from doing pure audits. Your first task is to begin documenting all types of interactions you’re having with franchisees. Then, you can slowly roll-out self-assessments in order to equip your franchisees with tools to improve themselves.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

Virtual Visits in Franchising

By | Video, Virtual Visits
Virtual Visits in Franchising

FranchiseBlast works with over 100 franchisors, and many are facing the same dilemma:

  • Franchise Business Coaches (FBCs) Can no longer travel due to governmental restrictions.
  • Fewer FBCs to support the network overall.

Virtual visits have been helping franchisors meet this challenge. In this post, we will go through some options for the virtual visit, and how it can benefit your franchise system.

Rethinking the Field Audit

FranchiseBlast is known as a tool for field audits across the franchising community.  With this app, coaches go through the compliance checklist that you’ve developed.  With this powerful system in place, one thing you can do is identify what your system-wide weaknesses are.

You can also discover activities that are a weakness across the system, such as “suggesting promo items”, for example. As a result, you will coach your network more effectively as a whole and train them on upselling skills to address the global weakness.

In the new environment, these compliance checklists may not apply as directly.  As a result, franchisors are creating questionnaires that are coaching-driven and are easily executed remotely. For example, franchisors can have a check to see if franchisees have completed a specific training or are following through on a specific marketing campaigns.  With this kind of audit, the coaches do not need to be in the field and, if applicable, franchisees can upload relevant pictures.

Franchisee-Driven Actions

For compliance specifically, franchisors are training franchisees on self-assessments – which is a way for a franchisee to audit themselves. If the franchisee uploads pictures, such as signage around physical distancing, franchisors can easily browse photos all at once to save time using the picture feed feature.

The challenge with self-assessments, is that they are passive in nature in that the franchisor is waiting on individual units to launch an audit. Conversely, with polling, you can say:

“Have this questionnaire filled out by everybody.”

The system then pushes out the survey. The franchisees and crew don’t need to be logged into the platform to fill it out and you can track who’s filled it out and who has not.

Data-Based Decisions

The information above helps with the compliance aspect of the FBC’s work but there is an ongoing trend towards coaching. All coaches know that you need to inspect what you expect. The franchisee scorecard, helps franchisees make data-driven decisions.  You can measure elements such as:

  • Sales
  • Percentage of online orders,
  • NPS scores
  • Google Reviews
  • Labor costs
  • Food costs

Franchisors define these indicators and can develop leaderboards, and coach franchisees where they are struggling.  By looking at this dashboard of the holistic view of the health of that unit, you can develop an action plan.

Adapting to the New Operating Environment

To pivot to the new operating environment, some franchisors are creating business plans. Imagine that you want to define a plan with the franchisees to adjust, including the goal:

“You need to keep your labor costs under 20%”.

Together, you define relevant initiatives at the start of the quarter, or start of the year. On your future calls, or on those virtual visits, go in and perform a check-in. This brings back up that plan to say:

“Okay, we need to pivot to the new operating environment.  Here are the things we said you would do, did you implement the new workflows?”

This is a straightforward example, but it an be as simple or sophisticated as you want it to be.

Conclusion

So overall, FranchiseBlast has a suite of tools that help with both compliance and coaching while performing the virtual visit.  The FranchiseBlast team is happy to discuss the best set of modules for you and your unique environment.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

Which Tool is Right for your Franchisee Comeback Plan?

By | Franchise Audits, Franchise Coaching

Much of the franchising world went on lockdown in the Spring of 2020. As franchisors set their sights on reopening the economy, we received a few requests on which of our modules (field audits, self-assessments, polls, projects, business plans, etc.) are the best to use for their scenarios in the new world.

Overview

Coach Interactions

If the coaches are driving a short interaction, call, audit or review with a franchisee, you should use a field audit. This is the baseline tool for coach-driven scenarios.

The exception is if you want to record an interaction and keep it confidential – meaning you do not want the franchisee to see it. In that case, you would use a comment in the info depot or on the franchisee’s record within your system. 

Franchisee Interactions

If the franchisee is the one who is initiating the interaction, then the baseline is a self-assessment – an audit where the franchisee is empowered to fill it out themselves.

Conversely, if the interaction is critically important and the franchisor needs to have visibility into the result for risk mitigation or other legal purposes, and you will be requiring all units to fill it out, you should launch the a poll. This adds accountability that everyone fills it out. It is especially helpful if there is an expectation to fill it out on a recurring basis.

Mixed Interactions

If you are doing an interaction that involves many stakeholders over a process that takes several months with a guaranteed outcome (such as a grand reopening), you should be doing a Project that creates tasks for accountability.

If the coach is defining a strategy collaboratively with the franchisee, and you can setup a process to review how they are doing versus this strategy over several months, you should use a Business Plan.

Sample Mini Case Studies

Protective Gear Installation

Problem: We want to make sure franchisees have installed new plexiglass and signage for reopening procedures. We are 100% sure that the franchisees can follow through with this.

Solution: A self-assessment if franchisees are self-starters and a poll if accountability is a top concern.

Operational Changes

Problem: I want to make sure franchisees are ready to follow the new operational procedures for online ordering and delivery.

Solution: A self-assessment if franchisees are self-starters and a poll if accountability is a top concern.

Remodelling to Support Online Ordering and Pick-up

Problem: Each unit will need to be remodelled to support online ordering.
Solutions: Self-assessment if your goal is check the completion of it. It could also be a Project if it is a lengthy complex process involving many teams.

Business Continuity

Problem: I want to make sure my franchisees survive the crisis. As a way to support them, we’ll be talking on a monthly basis.
Solution: If you just want to record the interactions and take the pulse of the franchisee, use a Field Audit. If you are willing to get more involved and formal, Business Plans are appropriate. The latter is a living document that is evolved as you progress through the various initiatives defined in the plan.

Last Word

Supporting franchisors and franchisees with different scenarios around opening in each system, and across region requires agility and flexibility. If this post has been supportive to your efforts, feel free to post on Social Media.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

Franchisee Comeback Plans

By | Franchise Business Plans, Franchise Engagement, Video
Are you preparing to help franchisees make a big comeback once the lockdown ends? We work with over 100 franchise brands and this gives us a unique perspective on what different franchisors are doing to help position their franchisees to thrive as the economy slowly returns to normal. Using these ideas, you can overcome the hardships brought forth by the COVID-19 pandemic.

Comeback Plan Overview

We’ve prepared a generic franchisee comeback plan to serve as a basis for your own efforts.  Let’s go through the plan together to explain the various elements and complement the work you’ve already done. To put some structure around this comeback plan, let’s think of it like a standard business plan a coach would collaboratively define with their franchisees.
To come back from this crisis, there are 4 key objectives that we define here in this comeback plan:
  • You need to be able to weather the storm financially
  • You must pivot to the new operating environment
  • You aim to keep your employees and customers safe
  • You want to bounce back rapidly via sales and marketing initiatives
To do this, we are using the Objectives and Key Results (OKR) methodology. We don’t need to go deep in the terminology to explain our plan, but let’s at least explain these concepts.
  • An OBJECTIVE is your goal and aligns everyone in simple terms
  • KEY RESULTS are how you measure your success; you can’t control this outcome
  • INITIATIVES are activities trying to achieve objectives, which you can control 100%

Objective #1:
Weathering the Storm Financially 

When we are talking about weathering the storm financially – the goal of the franchisee is to stay in business. The pandemic brings a lot of uncertainty, making cashflow management difficult. This will likely be the main conversation topic between the coach and the franchisee. When you look at this, it begs the question “how do you measure if you weathered the storm after the quarter”? The pandemic brings a lot of uncertainty, making cashflow management very difficult. All of the following Key Results are samples only, and the values themselves should be customized for your business.
  1. Maintain 12-months of runway – meaning you have enough cash to pay your rent and employees. If you don’t you need to put something in place today – which will be a loan, gov grant, subsidy, or any other type of relief.
  2. Measure having an EBITDA that is not losing 20% of your sales or more. If you are beyond that ratio, maybe the business should shut down completely and take a financial hit for the rent, but not operating.
  3. Reach a debt-to equity ratio under 0.75. The goal is to make sure that you will have enough cash in the future to pay off the debts that you incur today.

Although we touch on cash flow, profitability and balance sheet with these three indicators, most franchisors are focused exclusively on cashflow in the short term. Profitability and debt service aren’t as much of a focus right now (other than thinking of them while you figure out your cashflow issues), but they will become critical over the next few months.

In terms of initiatives, these are things that you can do concretely:
  1. Develop cashflow model with three scenarios (optimistic, pessimistic, realistic)
  2. Perform weekly cashflow review
  3. Apply for government relief
  4. Negotiate relief with landlord, suppliers and lenders
  5. Negotiate with bank to assist with cash flow by increasing the line of credit
  6. Develop strategy for worst case scenario (equity investment from a new partner, divestment to multi-unit operator or shutdown)
These activities are within your span of influence. You may not have 100% control over whether or not you will get government relief but you know that you can apply. If that initiative fails, then you may need to revisit your plan and see what other initiatives you can do to stabilize your cashflow situation.

Objective #2:
Pivot to the New Operating Environment

The world has changed, so we have to take an honest look at how the world is today, and you are going to have to adapt. Restaurants are letting customers order ahead, or arranging curbside deliveries. Service franchisors are doing remote meetings instead of face-to-face. Some stores are changing their layouts to accommodate new practices such as having a new cooler for meals while they wait to get picked up. No matter what your business, it has to adapt since this is a new world.
Key results associated with this include:
  1. All employees have completed the franchisor’s new training course – checking that everyone is aligned with your new operational processes
  2. Keep labor costs under 33% of sales – the actual ratio will vary based on your cash flow targets, but your staffing plans will likely have changed
  3. Keep COGS under 33% of sales – you may need to change how you operate to reach this goal
Initiatives connected to these Key Results include:
  1. Attend franchisor webinars / watch franchisor videos
  2. Implement franchisor’s new workflows to be aligned with the new environment
  3. Define new work schedules based on cashflow scenarios (reduced hours/staff, etc.)
  4. Define reduced product offering to minimize inventory carry
  5. Update product availability across all online platforms
  6. Consider grocery staples and produce baskets additions to meet supplier minimums
  7. Perform daily sales/inventory reviews and compare to cash flow models to be more efficient on inventory ordering
Although there are some businesses, such as those in pizza, who are not losing a lot of business, most have to adapt to the new situation. Think about what changed in your business and how you can determine if a franchisee is ready for the new world.

Objective #3:
Keep your Employees and Customers Safe 

Third objective is about keeping people safe – that is key. At the highest level, if you don’t do this, you are going to get in trouble. People are posting on social media about businesses that are laggards in this regard. This damages the brands reputation, even if it is just a matter of one or two franchisees. On top of that, there are lawyers driving around looking for employers to sue, since employees do not feel safe. This is a risky environment for business people.
Key results that could help you measure the objective include:
  1. No employees or customers are contaminated at your place of business – hard because maybe they get infected at the grocery store, but nice key result to aim towards
  2. Have all employees perform new COVID-19 training material – specific procedures related to sanitization and such
Initiatives that support keeping everyone safe include:
  1. Install new recommended signage / protective barriers / sanitizing stations
  2. Train staff on new COVID-19 procedures (cleaning, disinfecting, social distancing,  recognizing symptoms, etc.)
  3. Perform check-ins with staff to ensure they feel safe at work
  4. Monitor your franchisor’s communications daily to stay abreast of best practices
  5. Communicate with local health to learn about local regulations which apply
Keeping people safe is challenging for franchisors as they aren’t necessarily able to visit the units during the lockdown. They must influence franchisees who actually execute these best practices to keep people safe. Fortunately, most franchisees are welcoming of these initiatives and see value in their franchisor helping them implement best practices.

Objective #4:
Bounce Back Rapidly Via Sales and Marketing Initiatives

Overall, we are going to go through a recession. As a result, people will be strapped for cash and some businesses are going to be in trouble. It has been proven that doing marketing during a recession or a downturn helps during the recession and after. There are lingering results of consistent and effective sales and marketing. That market share that you can capture will be important. Although businesses want to control variable costs, the cost-cutting should not occur in the marketing area.
That being said, you want to be delicate. You want to make sure that your marketing initiatives are in tune with the demands in the marketplace. You cannot be tone-deaf or too aggressive and you have to operate with tact.
Key results associated with this include:
  1. Achieve 250 marketing campaign conversions – measuring the success of whatever pandemic-aware campaign you are running
  2. Add 250 new customers to our loyalty mailing list – a bigger list you can market to on a continuous basis
  3. Receive 250 new downloads of our app – expanding the list of people you can reach with promotional offers
  4. Increase average transaction size to $20.00. Online transactions are great but they can create a lot of busy work. If you can tack on upsells like grocery staples, it can benefit you.
Initiatives that support the Sales and Marketing objectives include:
  1. Review tone and messaging of the franchisor’s proposed marketing campaigns
  2. Perform one community engagement campaign. There are a bunch of franchises like sponsor a meal for front-line workers, where the franchisee delivers that food but gets paid for by a member of the community – it is a paying it forward. It also helps them achieve the minimums they need to keep to order from certain suppliers
  3. Perform a marketing campaign on social media
  4. Perform a direct mail campaign
  5. Perform a PR campaign; contact 3 local media outlets to pitch them the story.
  6. Perform an email blast campaign to loyalty/app members
  7. Perform weekly marketing ROI analysis and course correct if needed

Operationalizing Your Plan

Overall, the franchise comeback plan is defining the key results, the initiatives and objectives that you will be reviewing on a recurring basis as a franchisee and a coach. Typically we are creating annual and quarterly business plans. Here is what the comeback plan looks like in FranchiseBlast:
franchiseblast comeback plan 1

Here, you can see a summary of the objectives, along with a chart showing whether or not they are on track.

franchisee business plan 2

They Key Results and Initiatives are also seen, aligned with their relevant objective.

franchisee comeback plans 3

On each key result, you have an opportunity to check in, show whether or not you are on track, and put in a note for future reference.

With FranchiseBlast’s Business Plan module you are able to collaboratively define the comeback plan and, more importantly to avoid it sitting on a shelf and going stale, come back to it on a recurring basis.

You can also choose to implement your comeback plan as a self-assessment which would be more in line with a simple checklist. By sending out the self-assessment on a recurring basis, it stays top of mind. The individual questions would be formulated a bit differently (Did you perform your weekly cashflow review? Do you have enough cash for the next 3 months in a pessimistic scenario? etc). This model is a better fit for franchises where franchisee engagement is not currently optimal and/or franchisors who have had to furlough a large portion of their teams. In both of these cases, it is difficult or impossible to setup coaching sessions to review the comeback plan.

Download the Comeback Plan Now!

We are pleased to offer the Franchise Comeback plan in PDF form below, to help you with this effort.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

How COVID-19 Shot Franchising Three Years into the Future

By | Artificial Intelligence, Franchise Coaching

Before the world was hit by a pandemic, I had been thinking about how franchising will evolve over the next five to ten years. In particular, I had been thinking about the evolution of the role of the Franchise Business Consultant (FBC), given how over 100 franchise brands rely on our technology for their franchisee coaching. 

In chatting with some franchise family, I realized that franchising had been shot three years into the future, figuratively speaking. I think the pandemic will accelerate certain trends and wanted to share these thoughts with you. That being said, I encourage you to challenge my ideas and help refine this projection of the future of franchising.  

Dynamic #1: Weaker Businesses Are Going to Close 

It is sad to say, but several businesses will not make it through the current quarantine. I’m an optimist with regards to what will come after this pause, but short term I am a realist that several businesses are just not strong enough to survive due to weak margins and poor cash flow management. This is especially true in the restaurant space, where over 11% of restaurant operators expect to permanently closed within the next 30 days 

However, with the government interventions, I believe this will be stretched out over a longer period. Several businesses will survive the quarantine, but the wheels will have been set in motion to force their closure within a year or so. Businesses that will be so strapped for cash will be unable to market or maintain operations to a decent level, gradually eroding their business. Not only will consumers be more cautious about their expenses (thus fewer customers to service), the ones which remain will visit the businesses marketing more aggressively.  

Dynamic #2: The Rise of the Multi-Unit Operator 

Multi-unit operators have been growing for years and now own more than half of all franchise units. Economies of scale help make them sustainable businesses even with lower unit-level margins. Well-capitalized operators will scoop up the units that are having trouble staying afloat but still have potential to turn a profit. This will accelerate. This is perhaps the most profound trend with regards to the future of franchise coaching. 

Cash will continue to be cheap with very low interest rates continuing to facilitate their expansion. Post quarantine, many entrepreneurs will be looking for an out and they will be acquired at greatly reduced multiples.  

For the franchising business model, the combination of dynamics #1 and #2 will be a positive as larger systems will be better equipped to assist their operators in surviving than the regular “mom and pop shop” down the street. The overall diversity in the ecosystem will be reduced, but out of all the units that weather the storm, the overall proportion of franchised and corporate chains will be increased.  

Dynamic #3: Changes in the Talent Pool and Discretionary Income  

Overall, with all these units shuttering, franchise businesses should see a return to equilibrium with regards to the current labor shortage. This will help them put better staff in place, should reduce employee turnover and thus improve margins due to less time spent retraining.  

However, over the next 12 to 24 months, higher unemployment means that there will be less discretionary income to spend and that may negatively affect certain franchise verticals. This impacts the strategies business owners will need to put in place to attract customers.  

Dynamic #4: Increased Focus on Operational Efficiency 

Businesses will be put under greater pressure to maintain profitability. They will look at ways to run a tighter ship by simplifying their operations, investing in technology and cutting costs where possible. The ability to secure loans at low cost will accelerate the transition to new technologies.  

As an example, the pandemic will speed up the migration to order ahead in the restaurant space. The consumer will have had increased exposure to the technology during the quarantine. Furthermore, ordering on one’s device is much safer in the context of a pandemic than utilizing self-serve kiosks such as the ones installed by brands such as McDonald’s over the past few years, while offering up the same reductions in labor costs.  

Overall, this is good news for suppliers in the franchise space who focus on operational efficiency. The next few months will be tough for everyone in franchising, but there is light at the end of the tunnel. 

What Should a Franchisor do over the Next Two Years? 

A franchisor should align their Franchise Development teams towards conversions and resales. There will be many struggling single-unit operators looking for a way out (both in your franchise and outside). Prepare yourself to be more appealing for multi-unit operators. In certain verticals where your typical franchisee was laid off from corporate America, then you may see growth in greenfield locations but otherwise net new development may be reduced.  

Franchise marketing should focus on being there for their franchisees with a big push once the quarantine ends. It is counter-intuitive but it has been demonstrated that those who market aggressively during a recession not only outperform their competitors during the recession, but also afterwards thanks to the market share they have gained. With all these unit closures, it’s your chance to capture the audience who cannot remain at status quo.  

Franchise operations will unfortunately be taking a big hit in the short term. The C-Suite will want utilize whatever funds that are available to keep the development and marketing engines purring for the long-term viability of the company, and ask operations to take a bigger share of the cost cutting initiatives.  Overall, we will expand on this further in this article but we’ll see some operations teams abruptly cut in half whereas others will want to utilize technology to cut travel costs and make their coaches more impactful. 

What will Happen to the Role of the FBC over the Next 5 to 10 Years? 

The role of the FBC today is twofold. First, the coach ensures operational compliance. Second, they help the franchisees to improve performance. A decade ago, most FBCs were simply auditors. Today, every franchise is on a spectrum from cop to coach. Over the next decade, we believe the cop part of the job will have been automated and drastically streamlined. 

Compliance is important to protect everyone’s investment (especially in an age where social media can instantaneously kill your brand), but franchisors realized that their long-term viability required franchisees to be profitable, not just growing top-line revenue.  

Additionally, it is interesting to note that the average FBC works with 30 franchisees; and that is franchisees, not units, because an FBC maintains relationships. In a system with a higher density of multi-unit operators, you will find the average FBC oversees a greater number of actual units. The more sophisticated the operator, the higher-level the conversations. They are not asking an owner who runs 50 restaurants to change a lightbulb, they are talking about talent development for his next 5 units.  

Where does that lead us over the next 5 to 10 years? 

Here is what the automation of the cop part of the role will look like so that coaches can focus on relationships:    

  • Why bother going to visit a unit to check temperatures of various equipment? IoT devices already exist that broadcast all of this information into a central cloud and alert you when a refrigerator goes down and can automate your line checks.  
  • You don`t need to visit to see proper marketing campaign roll-out or cleanliness in a unit as self-assessments and webcams solve this problem. 
  • Artificial Intelligence is already used to ensure restaurant quality, ensuring things like portion control and adherence to recipes with picture taking, especially in the pizza category  
  • You won’t be monitoring cashier transactions as much, as the orders will flow through the consumer’s devices – but those non digital transactions can still be monitored by a microphone and some AI to compliance to upselling procedures  

Overall, it is not far fetched to think you can automate the most important base compliance aspects of a franchise.  

The coach part of job will remain, and will be more impactful than ever before in the following ways:   

  • The emotional connection of an owner with their coach will heighten in importance. The coach will understand the deep underlying motivations of the franchisees on a personal level. 
  • Travel will remain for that personal connection, but will be greatly reduced and replaced with technology such as Skype or Zoom meetings.   
  • Less travel time implies more coaching time, which implies more franchisees per coach. Tack on the impact of multi-unit operator and you’ll end up with more units per coach overall.   
  • Coaching requires lots of data analysis to figure out the primary areas of opportunity. The good news is technology will have streamlined and integrated lots of these data signals into a single platform to make it easier to digest.  
  • Some new platforms will be born out of the merger of many point-solutions in use today (the POS company will handle your POS, your digital menu boards, your order ahead, your marketing campaigns, etc. ) to make it easier for the coach to gain access to metrics in a timely manner.   
  • Artificial intelligence will analyze each franchisee`s weaknesses and provide insights about action plans to help address those weaknesses based on effectiveness of past suggestions by other coaches for these same issues. In essence, this will bake in the franchise system’s best practices into an actionable platform.  
  • There will be a rise in specialists at the franchisor level to assist generalist coaches. The coach will be able to tap into franchisor resources that are specialized in certain things (marketing or finance for example). The overall complexity of these tasks has increased so much over the years that the job is better executed centrally by a pro than distributed onto franchisees who are running their businesses. Additionally, it simplifies the unit-level operations and improves margins to shift these responsibilities.   

What do you think the future will look like? 

The pandemic will have a profound impact on our lives. That said, I personally don’t believe doomsday thinkers that think that people will suddenly stop going to restaurants or out for snacks. I think fundamental currents that were already under way will be accelerated due to the pause everyone will see in revenues for a few months.  However, I humbly admit that this is just one point of view and look forward to hearing your opinions and counter-arguments.  



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

Is your Franchisee Audit Too Generous?

By | Field Audits, Franchise Coaching

Over the years, we have seen hundreds of franchise field audit questionnaires. They come in all shapes and sizes and cover many different aspects – in fact we wrote a field audit benchmarks article comprising of just this.

A number of systems have approached us and asked us for ways to improve their audit questionnaire, which they thought was too generous. More specifically, they were seeing all of their franchisees receive 90%+ scores when in fact they sensed that the system average should be more around a 70% or 80%. In fact, the average across all franchise systems we work with is 80% of audits pass and 20% fail.

John Doerr, author of bestseller Measure What Matters famously said “if you always hit 100% of your goals, you are not shooting high enough.” Conversely, if you’re hitting too few of them, you get demotivated. If it is at around 80%, and the goals are meaningful, people will sit up and take notice of those initiatives, and the people in charge of them.

Franchisors have told us that the problem with such high scores is that franchisees who receive them tend to ignore the recommendations that are made because they’re already doing exceptionally well.  This article lists out a collection of strategies you can employ to balance out your audit scoring.

Ineffective Strategy: Changing Question Weights

The natural first first reflex is to change the number of points allocated to each question. A critical question will be given more weight than a low impact one. At it’s base, this is a sound strategy when used appropriately.

Imagine you had a questionnaire with 100 questions, worth one point each. If a franchisee fails a critical question due to having rats taking over the kitchen, then they still end up having 99%. Sure, maybe the whole audit fails due to severity rules around such critical questions but when seeing that score, they’ll think they still did very well, and will be popping the champagne bottles, when in reality, the brand would be in grave danger. 

When faced with this, the reflex is to increase the point value of this question. Let’s say we make it 10 points. The questionnaire total is now 109, having moved that question from 1 to 10 points. Fail that question and you get 99 out of 109, or just under 91%. That’s a big jump and you’re making progress on being less generous.

The problem with this strategy is you can’t do it too often. If you do, then you end up with a similar problem because the critical questions rarely fail. As an example, imagine that you want the top ten questions to be worth ten points, and you leave the other 90 questions at their standard one-point value. Your total point value is now 190. Fail one critical and you’re back to almost 95%. In other words, you just halved your gains in the context of improving the questionnaire to be less generous.

Additionally, because your critical questions rarely fail, you’ve made things worse for the other regular questions. Fail a regular question and now you have 99.5% instead of 99%.  As you can see, this drives average audit scores up and reduces failure rates.

Don’t misinterpret the comments above as saying you should never change question weights. We believe questions should be weighted based on their importance. The lesson we are communicating here is that it isn’t typically the solution to this particular problem.

Strategy #1: Calibrate Your Coaches

Before making any changes to your questionnaire, you need to make sure that your coaches are evaluating the questions properly according to the same guidelines. This may imply having a meeting with the whole team and defining much more specific documentation about each question to quantify the criteria for a passing value. 

If you balance this with real data, you can ask people if they think that it’s normal that a certain question is passing 95% of the time. Perhaps the team will discover that certain standards were simply too easy to attain, and the bar can be moved up.  

A simple conversation with the team to be stricter may be a very easy way to get started on this problem.

Strategy #2: Add Questions that Will Fail Often

Sometimes auditors will sense that the questionnaire is dated and overlooks certain areas that would normally be failing often. In Strategy #1, you defined stricter standards; now you are expressing those standards as new questions instead of different evaluation criteria. This is a good start, though it’s not as effective as the next idea.

Strategy #3: Prune Questions

Another data-driven initiative revolves around pruning questions that never fail from your audit. If you run a report and see that a certain question has rarely failed across hundreds of audits, perhaps it’s time to consider retiring this question completely. Not only does this reduce the point total but it makes the coach’s visit faster. We are naturally driven to add more to a questionnaire, but it is good practice to review what you can remove once per year so the whole process becomes both manageable and meaningful.

This is usually easier said than done as it is very difficult to remove completely valid questions from a questionnaire. After all, questions in an audit come to symbolize the priorities of the organization such as quality and customer satisfaction.  

Strategy #4: Create Specific Questionnaires for Areas of Concern

Most franchise systems have two main questionnaires, one for a thorough annual review and a shorter one for more frequent visits. However, we’ve seen the average franchise has 6 questionnaires in our platform and that is because they have started utilizing the tool in various other use cases from store openings to limited time offer validation for the Marketing team.

In the context of our discussion, imagine a franchise has a lengthy questionnaire featuring 400 questions on quality, service, cleanliness, marketing, food safety and franchise coaching. Now imagine it has identified a large weakness or risk around food safety and their annual field audits are not helping drive the scores up, even if there are 100 questions on this specific matter in the audit questionnaire.

One initiative could be to create a new questionnaire, focused exclusively on food safety. This signals the message that food safety is so important that you’re doing audits exclusively on this matter. Additionally, because this was your main weakness, it usually implies scores will be lower. They aren’t brought back up by passing questions in other sections.

Strategy #5: Implement Penalty Scoring

There is probably no better technique to reduce scores quickly than making use of penalty scoring. It unfortunately comes with the trade-off of being more confusing to explain to the franchisees, especially when they are accustomed to receiving high scores.

The way penalty scoring works is as follows: Imagine you have a questionnaire or a section that has 100 questions worth 1 point each. Instead of subtracting failures from the maximum total of points (100), remove them from an arbitrary other number, such as 50.  If you fail one question worth one point, you get 98% (49/50). You’ve just made your questionnaire 2x stricter. If you fail 10, you get 80% instead of 90%.

If you chose to deduct points from 25 instead, you’ve doubled it again. If you fail 20 questions worth one point, you lose 20 points out of 25, leaving you with 5/25 or 20%. Compare this to the original situation where failing 20 questions would leave you with 80%. If you are going to roll out such a drastic change, it must be accompanied with change management and buy in from the franchisees.

Most Important Lesson: Get your Franchisee Advisory Council (FAC) Involved

When making changes to the questionnaire like this, it’s important to get the FAC involved. They need to understand there’s a problem with the status quo and that problem can negatively impact their bottom line if it’s not addressed. If people are ignoring food safety because the audit scores are too high, they risk getting people sick and that will damage the brand.  Involve them in the questionnaire design process and do a few test runs with them to ensure you have their buy-in.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

Auditing Your Franchise Audit

By | Franchise Audits
Auditing your Franchise Audit

Leadership author John Maxwell said:

“Good leaders ask great questions that inspire others to dream more, think more, learn more, and become more”

When it comes to your franchise audit, are you asking the right questions? After over a decade in the franchising community and working with hundreds of organizations and thousands of units, we came up with the following questions to make sure that your audit is the best that it can be – or to “audit your audit”. Outlined below, you can see sample items that we check, and what they all mean. Examples are given in many cases to enhance clarity.

The elements below shouldn’t be perceived as a complete list of potential issues but rather a simple checklist for a quick review of the health of your franchise field auditing process.

#1 Audit contains superfluous questions.

Having extra questions means unnecessary work for the auditor. In addition to obvious extra questions, you’ll find more subtle questions that are simply redundant.

Example: “Audit completed by” field then where the auditor manually enters their name when that that information is automatically added by your software tool.

#2 Some questions address multiple concerns.

A question that addresses multiple concerns makes it difficult for the franchisee to understand what needs fixing.

Example: “Walls and floors are clean and don’t feature any apparent damage and the marketing posters on the wall are recent and approved.” When faced with a failure on this question, the franchisee would not be sure what to fix.

#3 Inappropriate question type used.

Question type – such as multiple-choice or text-based or yes/no should be carefully considered when building an audit.

Example: Using a yes/no question when it comes to temperature meeting a standard instead of simply recording the temperature value itself. Another more subtle example is a yes/no question followed by a free-form text question to indicate the reason for failure, or simply a yes/no question phrased in way that asks to auditor to clarify the issue in the comments section of the question. In that case, a properly designed multiple-choice question should be considered.

#4 Some questions are not Specific, Measurable, Actionable, Relevant and Time-Bound (SMART).

The questionnaire designer should review the characteristics of each question to ensure the audits are objective and impactful. If a question is vague or addresses too many concerns, it’s unclear what is evaluated. If it’s not measurable, then the audit becomes subjective. If it’s not actionable, then even if you find a problem there’s nothing you can do to fix it. If it’s not relevant, it’s extra work that isn’t impactful. Finally, questions which aren’t time-bound are unclear as to what time period is being evaluated.

Example: Using terms such as “a reasonable amount of time” instead of simply recording how quickly the franchisee should perform the service in terms of seconds or minutes.

#5 Poor spelling or grammar.

Spelling and grammar errors can cause auditors and franchisees to lose faith in the system.

#6 The questionnaire is not structured to follow the flow of the auditor.

Matching the audit “flow”, starting outside the front door and ending with the coaching session at the back can save time and enhance the process.

#7 Documentation needs to be added to clarify the evaluation criteria for the question.

A question that refers back to standards should include a reference to the franchise manual or online standards guide.

Example: “Scheduling appropriate to sales volume” – the guideline outlining how many employees a franchisee needs for a given sales volume should be posted.

#8 Need to tag questions with the associated back-end process.

Audit scores are often represented by top-level section scores such as “Back of house: 80%” or “Cleanliness: 75%”. This is a good way to slice the information, but additional facets can be reviewed. It is a best practice to tag specific questions with the relevant process that drives that standard. When a set of standards fail and they’re all associated to the same back-end process, you can coach for the root cause rather than each standard. Learn more about questions and processes…

franchise field audit questions

Example: A standard such as “Smiling and welcoming guests” could be categorized as “Service” but a better way would be to tag it as “Training: Going above what’s required & wowing the guest”.

#9 The audit length is inadequate. 

The audit should only be as long, or as short as it needs to be in order to achieve its goals. Most long-form format audits in FranchiseBlast contain 2oo to 400 questions.

When shorter (ex: 50 questions), it could be perceived that the coach is performing a cursory visit and not going into detail. It’s normal (and desirable) to have short-form audits, but if your longest one is only 100 questions, you likely haven’t formalized your visit/coaching process.

When longer (ex: 600 questions), it could be perceived that the coach performing busywork and spending too much time filling out forms rather than coaching franchisees.  If you drill down into the data, you’ll normally notice a large cross-section of the audit never fails. These questions are candidates to be removed.

#10 Average scores are too high to drive change.

While at first it may seem like a good thing to have strong audit scores, scores that are too high will not drive change in the organization. An average score of over 90% will lead franchisees to lose motivation in terms of corrective actions as they see themselves as performing at an A+, where the franchisor’s view may be different. Solutions to this issue are complex but include:

  • Calibrating coaches to be stricter
  • Changing the standards to be stricter
  • Shortening the audits by removing questions which always succeed
  • Changing weights of certain questions/sections/failures.
  • Adding new questions aligned with the system weaknesses you know are present but aren’t fully reflected

Learn more about generous audits…

#11 Utilize question severity where applicable. 

There are some audit questions which are so core to the brand that they should have a “critical” marking – such as using unapproved suppliers. If questions are marked with severity, additional business rules such as “the audit should fail if any critical questions fail” can be easily put into place instead of a convoluted question weighting system.

#12 Use tasks when appropriate to define the corrective action plan.

When a weakness is recognized, it is a best practice to use a corrective action to get it followed-up on by the appropriate person. It’s typical to not start using the task system immediately when adopting a platform such as FranchiseBlast as it does require a bit of change management and expectation management with the franchisees. Once established, however, leveraging tasks can increase accountability.

Having a backlog of tasks indicates a lack of process or of training – it is a good idea to discuss expectations with the franchisees and coaches.

#13 Review processes and standards related to system-wide weaknesses.

When exploring system-wide weaknesses, sometimes there is a core process that is consistently not being followed.  To solve system-wide weaknesses it sometimes makes sense to include new practices such as recurring self-assessments.

Example: A consistent failure on exterior cleanliness may require a system-wide training or process reminder, perhaps complemented by daily self-assessments where pictures are submitted.

#14 Be a coach, not a cop. 

The franchise consultant role is evolving beyond simply being a “cop” who maintains standards. It is also a “coach” who helps the franchisee achieve their goals. The questionnaire should reflect this change.

Example: Having a “coaching” section in the audit is a fantastic first step towards creating at coaching culture.

#15 Use automatic KPI collection when possible to reduce the coach’s workload.  

We sometimes see questionnaires which include various number questions which need to be punched in by the coach. For example, what were last month’s sales, labour costs, etc. Automating this collection outside of the coaches visit, via an integration with the Point of Sale or other source system, can save the coach time plus enable them to have time to research ahead of the visit and prepare a proper action plan with the franchisee.

#16 Auditors are not well calibrated. 

When reviewing average scores among auditors, you may notice dramatically different scores. One root cause of this is an inconsistent understanding of what the standards are for each auditor. Learn more about auditor calibration…

#17 Completed audits have not been approved and/or incomplete audits are pending within the system. 

Having a backlog of pending audits could mean that completed work is not being used. Make sure to have an approval “rhythm” set up within the system and the appropriate auditor manager is aware of your expectations. Alternately, some questionnaires may benefit from being automatically approved.

#18 Not visiting all locations consistently 

Having locations “fall through the cracks” could be detrimental to the brand on many levels. Ensure that your visits are up to date as an important, but sometimes forgotten, check. We’ve often seen this in contexts where a franchisor expects each coach to visit each location quarterly but doesn’t effectively make the coaches accountable to do so.

#19 Consider adding new questionnaires.

The average franchisor in FranchiseBlast has 6 different questionnaires – is the set for your franchise complete? Sample questionnaires include:

  • Quarterly or Annual Business Plan
  • Weekly/monthly phone call business check-in
  • New store opening checklist
  • Food safety audit
  • Daily store logs self-assessments (openings/closings)
  • New marketing rollout assessment
  • New product readiness self-assessment

Learn more about strategic questionnaires… 

Looking for More?

If you want to download a version of the checklist, click on the LinkedIn icon from SlideShare below.

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.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

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.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.

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.



Request a Demo

Would you like to receive a demo of FranchiseBlast? We'd be happy to give you a personalized tour based on your needs.

Sign-up for our newsletter

Interested in receiving franchise news and tips & tricks? Sign-up for our newsletter.