Category

KPI

Global Franchise: KPIs in Franchising

By | KPI, News
Global Franchise Logo

We are pleased to be featured by Global Franchise Magazine to discuss KPIs in Franchising.

In today’s business environment, which is both highly competitive and data rich, KPIs (key performance indicators) in franchising are becoming a must-have to succeed worldwide. The management style connected with KPIs is especially important in franchising. You are working with entrepreneurs, not employees. An entrepreneur, worth their salt, will be motivated to succeed and will draw on the “I’ll do what it takes” mentality. This situation sets the stage perfectly for managing via KPIs.

Traditional management talks about “the carrot or the stick” as the two sides needed to lead effectively. In terms of the carrot, KPIs motivate, especially when they are displayed together with leaderboards. Having regional leaderboards in a global organization can be especially powerful.

Read more now…



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Ballard Brands Adds FranchiseBlast’s Mobile Tools to the Field as a Strong Catalyst for Growth

By | KPI, Press Release

Tools Empower Franchisees in 30 States and Three Countries

For Immediate Release: BusinessWire

Ballard Brands, whose portfolio includes PJ’s Coffee, WOW American Eats, New Orleans Roast, The Original City Diner, Boardhouse Serious Sandwiches and Ole Saint, among many others, recently signed a deal with FranchiseBlast for mobile Brand Consistency and Performance tools. The deal will impact over 155 locations.

“We are headed for rapid growth in 2020,” said Bill DiPaola, Chief Operating Officer of Ballard Brands. “Our field team will be utilizing enhanced Key Performance Indicators (KPIs) and quality assurance tools to support our growing units. We’re looking forward to duplicating our most highly successful onboarding procedures for new franchisees as they enter the system.”

It is exciting times for Ballard Brands, as franchising brands dramatically expand their existing footprint. Although growth is fantastic, naturally that also comes with challenges. Managing the scaling effort is what the Executive team at Ballard Brands is focusing on with this investment.

“Putting mobile tools in the hands of field auditors will help them leverage the processes provided by head office,” said Dean Hatzitheodosiou, Sr. Business Development Director of FranchiseBlast with a strong track record of supporting companies through growth. “Benchmarking tools also utilizes the natural spirit of competition among franchisees and helps set everyone up for success.”

Benchmarking reports, measuring top strengths and top locations, for example, helps identify and encourage top performers. Top weaknesses, help drive coaching and training initiatives so that they are evidence-based, rather than improvised.

“FranchiseBlast will be a great partner for us,” said DiPaola. “They use technology to operationalize the processes that we have great confidence in.”

Ballard Brands signed with FranchiseBlast on September 26, 2019 and plans to roll out the technology in subsequent months. FranchiseBlast’s experience with the specialized needs of brand aggregators helped differentiate them from other solutions on the market.

About FranchiseBlast: FranchiseBlast’s Scorecards and Franchisee Field Audit Apps empower franchisors to achieve brand consistency across locations. The apps can be used by the franchise business coaches during their field visits or directly by franchisees themselves via self-assessments. Their user-friendly apps are used by over 14,500 locations including Focus Brands, Liberty Tax Service and Pita Pit.

About Ballard Brands: Ballard Brands is a hospitality and food service business formed in December 2001 by brothers Paul, Steven, and Scott Ballard after success in operating retail beverage franchises, Smoothie King and PJ’s Coffee, in North Carolina and Louisiana. After starting the company with one restaurant and two coffee house franchises, the company now owns, operates, and manages restaurants and food and beverage concepts in 30 states and three countries.

Their brands collectively total nearly 155 locations in both traditional and non-traditional models and continue to grow. Ballard Brands also operates wholesale brand New Orleans Roast Coffee, which is sold in grocery stores and featured in an array of locations, including restaurants, hotels, airports and convenience stores. To learn more about Ballard Brands, visit http://www.ballardbrands.com.

Contacts

Stefania Sigurdson Forbes
ssigurdsonforbes@franchiseblast.com
647-971-7524

Emerging Franchisor Roundtables: KPIs for New Franchise Systems

By | Events, KPI

Event: Emerging Franchisor Conference
Dates: November 19-21, 2019
Location: Nashville, TN

Being an emerging franchise is an opportunity to use the latest metrics to help you grow. At this roundtable, we will discuss:

  • What KPIs franchisors are using.
  • What types of KPIs foster growth.
  • How to get KPIs from existing systems (POS, Reviews etc.)

Join us at this unique session to learn how to grow effectively. Learn more about Emerging Franchisor Conference now.

How to Use KPIs in Franchising

By | Franchisee Scorecard, KPI
KPIs in Franchising

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

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

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

How to determine KPIs in Franchising

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

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

Sample KPIs

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

Restaurant Franchise KPIs

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

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

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

Salon and Spa KPIs

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

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

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

Gym and Fitness KPIs

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

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

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

Automotive KPIs

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

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

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

Education KPIs

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

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

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

Types of Franchise KPIs

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

KPI Best Practices

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

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

Parting Thoughts

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



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8 Important Automotive KPIs

By | Automotive, KPI
automotive kpi

According to Franchise Direct, there’s almost 32,000 auto franchise units among over 100 concepts currently operating in the United States. These concepts include aftermarket parts and accessories, maintenance and repair and cosmetic and paint. We took a look at the most important KPIs in this segment of the franchise community.

Sales and Marketing

Star Rating

87% of consumers will not consider working with a business with only 1-2 stars, according to SearchEngineLand. Franchisees who don’t stay on top of reviews could pay a heavy price. Tracking their star rating on Google, Yelp and similar sites is a key marketing metric.

Quote Capture Rate

Quote capture rate helps you track what percent of people are buying after they are quoted. If this number is too low, dig into sales or do some competitive analysis on what is happening in the local market.

Quote Capture Rate = Total Sales ÷ Total Quotes

Customer Acquisition Rate

A strong automotive business has a combination of new customers and retained customers. The customer acquisition rate, as a ratio, tells you how good the business is at sales. In the world of “hunters vs. farmers”, these are the hunters.

Customer Acquisition Rate = New Customers ÷ Total Customers

Operations

Customer Retention Rate

As a complement to the sales metric above, the customer retention rate tracks how well your service team is performing. Automotive businesses rely on repeat customers, so you want to keep this KPI strong.

Customer Retention Rate = Repeat Customers ÷ Total Customers (a complement to customer acquisition rate)

Productivity

Productivity measures how much free time your technicians have. If this is low, it shows there is not enough work to support the staff that you have.

Productivity = Hours Clocked ÷ Hours Available

Efficiency %

If a tech takes 4 hours to complete a 5 hour repair, his efficiency is 125%. This number tells you about the systems you have in place, the accuracy of quotes and your team performance as a whole.

Efficiency % = Sold Hours ÷ Worked Hours x 100

Sales Mix %

As a franchisor, you may see advantages of franchisees performing one service over another. Usually these services are higher-margin and can enhance the profitability of the business overall.

Sales Mix % = Revenue from X Service ÷ Total Revenue x 100

Cycle Time

Cycle time can be measured in many ways, but the most practical one according to experts is from time from drop-off to delivery. This can be measured based on the POS or other operational systems.

 



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10 Important KPIs for Education

By | Education, KPI

In education, tutoring and children’s services, you want to have your students to have good habits. But sometimes it is worthwhile to take a look at your own habits. Is your business getting an A+? Also, what habits will predict success? After years of experience and looking at dozens of franchised businesses, we compiled the list of KPIs below.

Sales and Marketing

Cost/Lead

Cost/Lead is an important metric for any small business and is best done both overall, and by marketing method that are popular in education such as Pay Per Click (PPC), Social, Direct Mail, Events etc. Start by tracking it overall, and the buckets can be added on over time. The Home Office should set cost/lead depending on the economics of the business and the franchisees can follow. This is a great way to benefit from the “network effect” in the franchise model. When counting leads, you want to focus on the qualified one, not ones with incomplete information or ones that are vendors trying to sell you something. It should only be people who want to buy your services.

Cost/Lead =(Total Marketing Cost)/(Total Qualified Leads)

Leads

This simple metric reflects the overall health of the business. Year Over Year (YOY) comparisons are useful in education businesses, since they are seasonal depending on the school year and standardized tests.

Trials

Many education businesses focus on trials giving potential customers a “taste” through one free class or a trial. Having a goal for trials for your franchisee is a fantastic way to encourage them to keep momentum within the business. Seasonally, they will wax and wane but there is always opportunity for momentum.

Trial Conversion

Trial conversion measures a few things. It looks at the experience of the trial – did you have the best coach work with that student, and did they get a good outcome? It also measures the sales process after the trial is done. Trial conversion can vary widely depending on the individuals in your organization, so it is definitely worth studying. Some organizations also choose to do deeper qualitative research on former trials.

Trial Conversion = (New Students for Period)/(Trials for the Period) 

Students Created

Having a regular flow of students keeps the environment vibrant and lively. Benchmarking these across franchises can also create a healthy sense of competition.

Operations

Attendance %

While some see low attendance as a good thing – since students are paying but not attending means facilities are not used as much yet the business is still making revenue. But this attitude is outdated. Having students attend regularly means they will come back, instead of losing interest in the program. Also – parents will leave more positive reviews.

Attendance %=(Total Attended)/(total Scheduled)

Churn %

Churn rate, also known as the rate of attrition, is the percentage of users who stop using your services within a given period. In these competitive times where customers have a myriad of options, it is good to watch this number closely.

Churn %=((Students at Beginning)-(Students at End))/(Students at Beginning)

Net Promoter Score (NPS)

NPS is a customer loyalty metric which rates customers as a Promoter, Detractor or Neutral depending on their answer to the following question: “How likely would you be to recommend us to a friend or family member?” on a 10-point scale. Promoters are 9-10, Neutrals are 7-8 and Detractors are 0-6. It can be calculated as follows:

NPS =  (%Promoters)-(%Detractors)

CSAT is also a popular way to measure customer satisfaction

Coaches or Tutors

Hours Taught

Hours taught tracks the operational side of the business, and does not depend on payment plans etc. This is another metric that varies with the seasons and is better to be compared YOY.

NPS/Coach

Tracking NPS/coach helps you determine which coaches are stronger. It then stands to reason that your overall NPS will get higher if you put those popular coaches on more shifts. To calculate, attribute the NPS to each individual coach. You may need to extend the period if there are a lower number of survey responses.

Get More Educated

Looking for more KPIs for your Franchise? Look at our post on how to use KPIs in Franchising.



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15 Important Restaurant KPIs

By | Franchisee Scorecard, KPI, Restaurants
Restaurant KPIs

The majority of restaurants are franchised. The 2012 US Economic Census numbers say: “the estimated 122,042 limited-service franchise restaurants (NAICS 722513) make up approximately 54 percent of all fast-food restaurants in the United States, nearly 70 percent of the sales of fast-food restaurants ($185.4 billion), and about 73 percent of the employment of fast-food restaurants (3.6 million).”

So – how do you effectively manage a restaurant in terms of Key Performance Indicators (KPIs) in the franchising environment. See our list of 15 helpful KPIs below.

Sales and Marketing

Average Online Rating

With 91% of 18-34 year olds trusting online reviews as much as a personal recommendation, and consumers willing to pay 31% more on a business with positive reviews, there is a great reason why this should top the list for restaurant KPIs. The average star rating, along with the number of ratings within the last month or quarter is the right place to start.

Net Promoter Score (NPS)

NPS is a customer loyalty metric which rates customers as a Promoter, Detractor or Neutral depending on their answer to the following question: “How likely would you be to recommend us to a friend or family member?” on a 10-point scale. Promoters are 9-10, Neutrals are 7-8 and Detractors are 0-6. It can be calculated as follows:

NPS =  (%Promoters)-(%Detractors)

CSAT is also a popular way to measure customer satisfaction.

Number of Transactions

Number of transactions is a way to assess customer count. This can typically be retrieved from your Point of Sale (POS) system.

Average Check Size

Some restaurants prefer looking at this simple metric over worrying about upsell metrics. Essentially, a strong average check size shows that the location is getting more from each of their customers. It can be calculated as follows:

Average Check Size=(Total Sales)/(Total Transactions)

Number of New Loyalty Program Members or App Downloads

Loyalty programs and apps matter in the restaurant space, since increasing retention by just 5% through customer loyalty programs can boost revenue by 25 to 95%. Measuring this helps keep the franchisee’s eye on the ball when it comes to this vital activity. Another way to look at this is % of transactions using the loyalty app.

Service

Speed of Service

This is a great one for increasingly time-starved customers, and it does not require any new data points. Measure this automatically from time the customer walks in or drives up to your restaurant through the  POS, to the time when the food is delivered to them based on your kitchen display system. Some compare this to NPS as well.

Speed of Service=(Food Order Time)-(Food Delivery Time)

Customer Retention Rate (CRR)

Customer retention rates vary greatly depending on the location and the size of the restaurant. For example, you would expect the CRR at a location at the airport to be low, given the audience in transition. This metric can be measured using the following formula:

CRR=((#of customers at the end of the period)-(# of new customers for that period))/(# of customers at the start of the period)

RevPASH (Revenue per available seat per hour)

If your franchisees have empty seats, their profitability is likely suffering. If you watch this metric hour by hour, you can make adjustments to improve the bottom line.

RevPASH=(Revenue/hour)/((Available Seats)/(hour))

% Online Orders

With Off Premise sales becoming such a major part of franchising, this is a great metric to start with. The only caution is that you don’t want to punish those that are growing their revenue in the traditional business. Online orders also tend to have a bigger check size.

% Online Orders = (Online Order Sales)/(Total Sales)

Expenses

% Labor Costs

You may want to split your hourly staff wages versus your manager wages. Some owners-operator franchisees pay themselves a salary. Others pay themselves a dividend out of the profits for tax purposes. By carving out hourly wages into a separate entry, values become more comparable when benchmarked against the system.

% Hourly Labor Costs = (Hourly Labor Costs)/(Total Revenue)

% Food Costs

You should have the actual cost of the items you sold in that period so that you’re properly evaluating profitability. However, some systems don’t have this data easily on hand and they make an approximation using ‘purchases’ during that period. These two numbers don’t necessarily align, so be careful. Make sure you use consistent information for each unit.

% Food Costs = (Purchases)/(Total Revenue)

% of a Strategic Category

Some franchise systems have a very successful category with great profitability, such as soft drinks. Selling a bigger percentage of soft drinks, or whichever that category is within your system is a great start.

% of a Strategic Category = (Category Sales)/(Total Sales)

Food Cost Variance

A metric a lot of franchisors are talking about today is the actual cost of food compared to the planned cost. Tracking this helps track forecasting and handling fluctuations in certain costs such as beef in the future.

Food Cost Variance = (Actual Food Cost)/(Planned Food Cost)

Employees

Employee Turnover Rate (ETR)

Every industry has to deal with turnover, and it is a good idea to determine what is an “acceptable” number in your system.

ETR= (# of employees who left in that period)/((# of employees at the beginning) + (# of employees at the end))/2

eNPS

Similar to Net Promoter Score for customers, above, the Employee Net Promoter score can help you understand how happy your team is. Though some franchisees are hesitant about measuring employees this way, it can add insight – and happy front-line employees mean happy customers.

Ready to Go Further?

Looking for more KPIs for your Franchise? Look at our post on how to use KPIs in Franchising. If you are ready to go one step further, check out our eBook: Ultimate Guide to Franchisee Scorecards.



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Important KPIs for Spas and Salon Franchises

By | KPI, Spa and Salon

While many Spa and Salon businesses recognize the need to measure KPIs, the truth is many rely more on intuition than analyzing the numbers. While creating an atmosphere, happy clients and happy employees takes fantastic soft skills, “knowing your numbers” will help your spa or salon find its place in the market.

Think of a KPI indicator as a map. You have a destination point, and you have your path, with a giant “you are here” sticker as well showing where you currently stand. You talk to your clients about balance, and the numbers are a big part of the balancing act for any business. Here is a helpful list of the top KPIs for spas and salons.

1.    Cost Per Lead (CPL)

Every marketing effort should be tracked, since what gets measured, gets improved. It helps you understand how much you are spending on leads, and if you should continue to invest. For example, if you are getting $25/lead off of Google, and a bunch of traffic off of Facebook, but 0 leads, you should reconsider the time, money and energy you are investing in Social.

CPL = Cost of Marketing Program/Total Number of Leads

Note when calculating, a lead has two main aspects:

  • They are actively searching for the service
  • They provide a way for you to contact them for follow up

It is a good idea to put aside a small amount of your budget, such as 10%, to experimental initiatives to make sure your marketing mix is the right one for your spa, your target market and your area.

2.    Average Treatment Rate (ATR)

You may think that because your salon or spa is busy, it is successful, but that is not necessarily true. At the end of the month, it is a good idea to get an idea about how much you are making for each treatment as well.

ATR = Total Number of Treatment Hours Sold / Total Number of Treatment Hours Available 

As you look at this metric, one thing to take into account is that some treatments take longer than others. So – a 2-hour treatment of $180 is less efficient than a 1-hour $100 treatment.

3.    Spa Productivity or Occupancy

With the rent or mortgage costs associated with the space typically being the biggest cost associated with a spa understanding the usage of treatment rooms is an important indicator of how productive your space is.

Spa Productivity = Total Number of Treatment Hours Sold / Total Number of Treatment Hours Available

4.    Capture Rate: Retail

Spa and Salon revenue comes from two sources: services and retail sales. According to Winn Claybaugh, co-founder of Paul Mitchell Schools,  “Per square footage, the footage devoted to selling products [like shampoo and hair gel] is more profitable than footage devoted to service”.

Capture Rate = Total Retail Guests/Total Spa Guests 

5.    Net Promoter Score (NPS)

Offering an exceptional experience will not only keep your guest coming back, but they will also tell their friends. Best of all, they may even take a “selfie” of them looking fabulous after their treatment! Technically a loyalty measure, the Net Promoter Score (NPS) is a fantastic way to measure this on a quarterly basis.

This measure compares your biggest fans (promoters) compared to your biggest critics (detractors). Learn more about Net Promoter here.

NPS= % Promoters-% Detractors
Your NPS can help you in your marketing efforts, by asking promoters to leave reviews or recommend to their friends and family and it can help prevent churn in terms of the detractors.

6.    Repeat Guests

Repeat guests generate a higher return on every dollar spent getting them in the door. Also – practical experience shows that repeat customers tend to spend more on subsequent visits as well. This metric is calculated through the following:

Total Number of Repeat Guests/Total Number of Guests 

7.    Employee Retention

Customers are more likely to develop a bond with their stylist or therapist than the brand itself. If you have an employee who leaves, you risk their clients moving with them. For this reason alone (even though there are many others), you want to make sure your team is happy. Employee retention is measured as follows:

Total Number of Employees that Left for a Period/Total Employees at the End of that Period 

8.   GOPPATH

This is a strong indicator of performance because it looks at how good you are at generating revenue, controlling expenses and making strong utilization of your hours.

GOPPATH = Total Spa Gross Operating Profit (GOP)/Total Treatment Hours Available.

9.    Earnings before interest, tax, depreciation and amortization (EBITDA)

EBITDA is a measure of a spa or salon’s operational effectiveness. It is a way to evaluate a company’s without having to factor in financing decisions, accounting decisions or tax environments. Although difficult to say or even fully comprehend for gym owners who have come up through the health and fitness operations side, it is a key indicator.

To calculate the adjustments needed for EBITDA, please see this article from Quickbooks.  

EBITDA shows how good your business is at generating cash thus your business is valued as multiples of this metric.

Metrics Are a Beautiful Thing

While you encourage your clients to balance mind and body, at the same time, you want to make sure your KPIs are balanced. Look at our post on how to use KPIs in Franchising.  With FranchiseBlast’s Scorecards, you can track all of your metrics in one place, and modify metrics on the fly. Learn more here…



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9 Important KPIs for Health and Fitness Franchises

By | Franchise Growth, Health and Fitness, KPI

If you are in the health and fitness industry, according to research you have two important things on your mind: the success of your clients and the contribution you are making to your community. But you cannot help your members OR your community if you are not properly tracking the health of your business.

Just like your members need to measure repetitions and step on the scale in order to succeed, you as a business owner need to measure the health of your business on a regular basis as well. Below are some recommendations on 9 Important KPIs in for health and fitness franchises.

1.    Cost Per Lead (CPL)

If you are going to only measure one metric in your marketing programs, cost/lead is the one most worth the effort. It helps you understand how much you are spending on leads, and if the methods that you are using are effective. For example, if you are getting $25/lead off of Google, and $100/lead off of your print advertising, you will want to reconsider that print ad buy in the future.

CPL=Cost of Marketing Program/Total Number of Leads

Note when calculating, a lead has two aspects:

  • They are actively searching for the service
  • They provide a way for you to contact them for follow up

Ensuring you have the above, creates a fair measure for your sales team later down the line. It is a good idea to dedicate about 10% of your budget to experimental initiatives to make sure your marketing mix continues to be the right one.

2.    Conversion Rate

Conversion rate helps you understand your gym’s ability to turn leads into members. Typically seen as a sales metric, it shows how your sales team is doing with the leads provided by marketing.

Conversion Rate=Total New Members/Total Number of Leads

If this metric is weak, it may be an indicator that your facility is not up to par – you may want to look at renovations, or a refresh of equipment.

3.    Active Members

This is a basic but necessary metric will outline your success on the most elemental level. Measuring the growth and decline of members compared to the previous year is a fantastic way to track where you are in terms of the big picture. It is calculated below:

Growth Rate = (Present-Past)/Past

If your absolute member count is low compared to benchmarks, and your growth rate isn’t high, then you need to focus on increasing your member base through marketing efforts or by reducing churn.

4.    Revenue Per Client (RPC)

This commonly-used KPI provides a sense of clarity in terms of where you are in your business.

RPC = Annual Revenue/Total Number of Clients

If this is low, look for upsell opportunities such as personal training, niche classes or supplements.

5.    Revenue Per Square Foot (RPSF)

With the rent or mortgage costs associated with the space typically being the biggest cost associated with the industry, it is healthy to look at this often-neglected metric. In a multiple-location environment, this metric tells you what spaces are working, and what ones are not working for you. Also – if your RPSF is very low, you may want to consider a smaller space unless you intend to grow rapidly.

RPSF=Annual Revenue/Total Square Footage of Facility

6.    Utilization Rate

Utilization Rate is an amazing metric in this industry because it measures how much you are actually using your resources. If you offer personal training, for example, how much is the trainer actively engaged in the process of training? If you are renting a room for 8 working hours a day, and only using it for 4, then there is an opportunity to add more classes.

Utilization Rate=Total Hours Used/Total Hours Available

7.    Net Promoter Score (NPS)

Member satisfaction is both a customer service measure and a marketing measure. Why? Increasingly, brand is a verb, and you want to make sure that the experience that people receive at your gym is one that leaves them satisfied. Technically a loyalty measure, the Net Promoter Score (NPS) is a fantastic way to measure this on a quarterly basis.

This measure compares your biggest fans (promoters) compared to your biggest critics (detractors). Learn more about Net Promoter here.

NPS= % Promoters-% Detractors
Your NPS can help you in your marketing efforts, by asking promoters to leave reviews or recommend to their friends and family and it can help prevent churn.

8.    Retention Rate

Retention rates is something that the fitness industry has struggled with for a long time and churn of members is a common conversation topic at franchise conventions. In general, having a strong retention rate means that you are keeping your brand promise. You can measure this over the course of a month, quarter or year.

Retention Rate: Existing Clients at End of Period/Existing Clients at Beginning of Period

If this is low, it is a good idea to do a root cause analysis on why people leave. Having a “leaky bucket” of customers, means that you have to spend more on marketing upfront.

9.    Earnings before interest, tax, depreciation and amortization (EBITDA)

EBITDA is a measure of a gym’s operational effectiveness. It is a way to evaluate a company’s without having to factor in financing decisions, accounting decisions or tax environments. Although difficult to say or even fully comprehend for gym owners who have come up through the health and fitness operations side, it is a key indicator.

To calculate the adjustments needed for EBITDA, please see this article from Quickbooks.  

EBITDA shows how good your business is at generating cash thus your business is valued as multiples of this metric.

Just like your clients, it is important for you to measure the right things. With these 9 metrics in place, your business will be set up for success.

KPIs Fit for Your Business

Looking for more KPIs for your Franchise? Look at our post on how to use KPIs in Franchising.



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