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Franchise Best Practices

Is Franchisee POS Polling Enough to Capture Franchisor Royalties?

By | Franchise Best Practices

THE RESTAURANT INDUSTRY’S ADAPTATION

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

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

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

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

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

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

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

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

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

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

HOW CAN FRANCHISORS BRIDGE THE GAP?

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

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



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

By | Franchise Best Practices

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

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

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

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

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

How Has Mobile Ordering Grown?

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

How Have Loyalty Programs Matured?

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

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

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

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

Panera

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

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

Dunkin’ Donuts

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

Domino’s

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

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

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

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

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

Starbucks

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

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

 

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

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

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

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

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

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



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The 7 stages of franchise coaching

By | Franchise Best Practices

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

Here are the seven stages:

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

Let’s now drill down into these stages!

Stage 1: Reactive

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

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

Stage 2: Recurring conversations

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

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

Stage 3: Recurring structured conversations

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

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

Stage 4: Guided conversations

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

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

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

Stage 5: Benchmarking

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

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

Stage 6: Operational efficiency

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

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

Stage 7: Predictive analytics

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

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

Conclusion

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

 



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5 best practices to drive growth in a restaurant chain

By | Franchise Best Practices, Restaurant

Fotolia_55831988_XSIt happens. You load up your latest sales report and see that sales have stagnated over the last quarter. Again. Things could be worse: you’re glad that you are not that restaurant chain which got people sick last month. Time to cheer yourself up by procrastinating on your iPad and reading the news. Surprisingly, you notice an article about your employer in one of the opinion pieces. Looks like the author didn’t have the best customer experience and started a rant about how your menu hasn’t changed in a decade. At first, you chalk up the negativity to the less-than-perfect experience but, now that you think of it, maybe menu fatigue is the root cause behind your stagnation. The author is right: you have kept your menu relatively unchanged and purposefully simple over the past decade.

Anyone with a bit of restaurant industry experience knows that food costs are one of the two biggest controllable costs in a restaurant (along with labour costs). Your menu simplicity is actually one of your strengths: it has helped your profitability and made new employee training easy over the years. Perhaps these new competitors offering similar products have slowly eroded your differentiator without you realizing it?

Time to get the R&D department involved. Yeah, that means Joe. Joe’s the whole department. Maybe this is proof that you haven’t been doing that much innovation these past few years. You meet with Joe and brainstorm together. You come up with crazy ideas involving lobster or pulled pork. Beth walks by and says she’s a big fan of this new thing from Canada called poutine. You leave the project with Joe and he does more research, more development, more experimentation. He comes back with a few interesting options: they all taste great. You’re determined that you should add these to the menu. But you can’t add them all. Not at the same time. What do you do?

Best Practice #1: Involve the franchisees and/or store managers

In a franchising environment, increasing franchisee engagement should always be a priority. Franchisees aren’t just there to do what you tell them to; they are independent business owners who want to be involved. They’re a part of the brand as much as you are and they are the ones out there executing the brand promise every single day. Your decisions affect their bottom line. The happier they are, the less churn you will see and more new units you will open. The managers and/or chefs are also important stakeholders in this process. They know what takes too long to make during rush hour, they know what customers are asking for.

But how do you collect feedback from distributed individuals? Isn’t it like herding cats? It is a lot of work to do manually, but FranchiseBlast offers a franchisee polling app which lets you blast off a survey to all franchisees and store managers to collect feedback. You can thus send over the details of the three main options R&D prepared, with pictures, and ask for people to give you their thoughts. You can even ask them to try to prepare the recipes themselves and get feedback from the rest of the store staff.

What you discover is that some franchisees are concerned about the price of lobster and the risk that it would spoil and food costs would rise. Others comment about how pulled pork would be a poor choice in their demographics due to religion. Finally, one of your first franchisees would be severely disappointed if you went forward with poutine. Isn’t one of your core values to serve healthy options? It would turn off a large portion of your clientele.

There’s no easy answer. It’s normal for a group to have diverging opinions. The greater the group, the more divergence. As a franchisor, you can’t just always listen to the loudest group but it is in your best interest to bring up the subject with your franchisee advisory council, if you have one.

End Result: You’re moving forward with lobster.

Best Practice #2: Leverage limited time offers (LTOs) to experiment

To the best of your knowledge, adding lobster is the best option. You’re concerned about the food costs, especially since the price skyrockets during the off season. You’re pretty much forced to launch the item as a Limited Time Offer (LTO) because of this, but it would be a best practice regardless of what menu item you picked. You could run a test in a handful of locations and see what happens (and potentially still should), but a localized test doesn’t produce statistically significant results and can easily be skewed by local preferences. It’s time to do a nationwide LTO and get marketing involved to make sure it’s a hit. If menu fatigue is one of the root causes of your stagnation, a good campaign will help bring back previous customers or win new ones. It does also get your brand in front of more people so you’ll stay top of mind in your loyal customer base even if they’re not attracted by the LTO.

Marketing produces a brilliant campaign with stellar messaging. You love it. Time to shoot off an announcement to all locations about the upcoming campaign. FranchiseBlast offers a franchise news function for this purpose. You can also upload the digital files for your marketing collateral in our document repository for franchisees to download and print locally. Alternately, you can sell off preprinted goods in our franchise marketplace or just ship them off directly to the franchisees at no cost to them (paid out of the ad fund).

Best Practice #3: Systemize complex roll-outs

image
Some rollouts are fairly simple. Perhaps you already use the base ingredients in other recipes and you just need to install a few posters. Perhaps, you’re past the pilot or LTO stages and want to integrate the menu item to your permanent menu. In some cases, new pieces of machinery need to be installed gradually over time in all locations. An easy example would be a new toaster oven, but in our story we’re selling lobster and management has decided to install live lobster tanks in every location. (This is a horrible idea, please don’t do this and blame us if it fails!).

The best practice, however, for complex roll-outs is to systemize the whole project. Build a standard project plan which lists who (franchisee, franchisor, etc.) needs to do what (order machinery, get quotes for installation, have it installed, etc.) by when (days before the grand launch). Once your project plan is systemized, you can execute the project in the context of every store. In FranchiseBlast, we call these Action Plans. During the whole process, franchisees may voice questions or concerns via each individual Task or via the Support Desk if they need assistance.

By systemizing the project, you ensure fewer tasks fall between the cracks and you and your regional managers can centrally track the progress of the full roll-out.

Best Practice #4: Review the roll-out.

In best practices #1 and #2 above, we were focusing more on “are we doing the right thing?”. In this best practice, we focus on “are we doing the thing right?”.

From a marketing standpoint, if you’re spending hundreds of thousands or even millions of dollars on nationwide marketing campaigns, it is in your best interest to ensure that all stores have rolled out the LTO banners and other collateral. To drive  consistency, some users of FranchiseBlast leverage our franchisee polling app and shoot off a self-assessment to all franchisees. The self-assessment will request that they snap a picture of the campaign using their mobile phone to prove it has been properly rolled out. This is a very affordable way to ensure consistent branding across all locations.

A more expensive yet more powerful technique is to leverage your franchise business coaches to go out in the field and review how the staff is actually preparing the limited time offers using our franchisee field audits app. Reviewing LTOs should be a staple of any field audit questionnaire because it has a direct impact on sales, just like making sure staff are upselling during a transaction.

To the best of your knowledge, this campaign is what will drive results. If half the stores aren’t offering it, then you obviously won’t see the expected results. If you are ultimately responsible for the whole process, your job may be on the line here even if the LTO fails at the execution level, not the strategy level.

Best Practice #5: Evaluate the impact. Make data-driven decisions.


Alright, buddy. The limited time offer is over. Time to look at some numbers and evaluate how it performed. Franchisors often utilize our benchmarking app to compare and contrast performance over time and drill down into certain key performance metrics. By monitoring gross LTO sales and food costs (both $ values and % of sales), you can effectively determine if the campaign had a positive impact on both sales and, more importantly for your franchisee, profitability.

image

If the campaign is a resounding success, time to analyze why it was a success – perhaps your gut assumptions are wrong. If it was a total failure, time to learn from your mistakes and try something new in the future. The most likely outcome is you’ll end up with a mixed bag of results with some locations performing better and some performing worse for a variety of reasons. Your job isn’t easy, but having the technology at your fingertips to make data-driven decisions is key.

As a final note, a post-mortem analysis is obviously a good idea – but you’re in a much better place if you have the tools at hand to make real-time performance reviews while the campaign is running.

I’ll hope that the lobster campaign was such a success that you’re making the lobster your new official mascot. If so, you should get a costume made for Joe to wear during your next annual convention.

 



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Franchise Success Factor – #2 Engage your franchisees

By | Franchise Best Practices

Fotolia_91011529_XS
As the franchise system grows, the challenge of keeping franchisees engaged and connected multiplies and should become a key priority of the franchisor to ensure a sustainable growth.  To help maintain a strong connection between the franchisees and the corporate office, the management team must foster a culture of transparency and trust, at all levels of the system.  

Now the million dollar question: As a franchisor, how do you engage your franchisees in the system and support them to succeed?

Tip 1: Set up a newsboard

Communicate, communicate, communicate!  There can never be too much communication with the franchisees to help them feel connected with the system and close the geographic gap.   From new openings, to personal news, successful franchisors constantly share information with their franchisees to keep them informed of what’s going throughout the system.

Share pertinent information on a digital newsboard your franchisees will be able to access anytime from anywhere.  Entertain your audience by adding photos and videos to your posts and reply to comments to create an engaging conversation.

Tip 2: Run a franchisee satisfaction survey

Listen, listen, listen!  Your franchisees are running the business day-to-day and they have experiences to share.  The more you listen, the more engaged and supported they will feel; and the more they will contribute back to the system.  From your field visit to your annual conference, successful franchisors create space for the franchisees to share their input.

Learn what your franchisees really think about the franchise by running a quarterly satisfaction survey.  Not only you will be able to offer a channel from your franchisees to express their thoughts, you will also be able to monitor the overall level of satisfaction of your franchisees.

Tip 3: Reward top performing franchisees

Recognize, recognize, recognize! As business owners, your franchisees will appreciate when you recognize their effort and demonstrate that you care.  The rewards do not have to be monetary, from a simple email from the CEO to the Franchise of the Year award, successful franchisors understand that rewards create loyalty and engagement towards the system.

Reward people demonstrating the right behaviour at every level within every franchise.  Leveraging your performance management system, on top of the constructive feedback mentioned in the previous tip, capture what the franchisees are doing well and find a way to reward them when they do something excellent.

FranchiseBlast Proposition

We help answer the following questions:

  • At what level are your franchisees engaged in the system?
  • Do you know what needs to be improved?
  • Do you know who your ambassadors franchisees are?

Book a demo to learn how we can help you achieve a consistent brand experience.



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Franchise Success Factors – #1 Deliver a Consistent Brand Experience

By | Franchise Best Practices

Fotolia_91011529_XSWhen it comes to building a successful franchise system, the ability of a franchisor to deliver a consistent brand across all locations demonstrates the maturity of the system and how well it is managed. On one hand, customers will develop a high level of trust towards a consistent brand and they will keep coming back; on the other hand, prospective franchisees will know the concept has been proven and will not hesitate to invest their money in the brand.  

Now the million dollar question: As a franchisor, how do you ensure your franchisees understand the brand elements and consistently deliver them in their daily interactions with customers?

Tip 1: Create a brand checklist

Delivering a consistent customer experience every time at every location requires a carefully outlined set of guidelines; from the way a location is laid out to how team members are dressed, successful franchisors have sets of checklists that describe all elements of how the brand is to be delivered.  

Develop checklists that will become the brand’s “secret sauce” and the recipe for success. Make it easy for franchisees and their teams to have the checklists top of mind all the time and to constantly refer back to them to ensure perfect execution.

Tip 2: Promote positive behaviours

Having a consistent brand starts with the focus that gets put on the corporate culture and how well the values are understood and respected across the management team, the staff at headquarters, the franchisees and their teams.  From training to field support, successful franchisors lead by example and their behaviour is aligned with the brand’s values.

Promote the behaviours that are contributing to the brand’s success and set them as the “golden standards”.  Through your monthly newsletter, online newsboard and frequent interactions with franchisees, publish exemplary behaviours to influence and guide the entire system.

Tip 3: Assess locations frequently

Executing perfectly against the brand’s standards sets the high performing franchisees apart from the rest and ensures their success as business owners.  Successful franchisors are supporting their franchisees in their daily operations and are able to identify actions they can take to maximize their performance.

Assess frequently how each location is applying the brand’s guidelines in their operation and provide franchisees with clear actions to help them meet the brand’s promise.  Provide each franchisee with a brand execution scorecard that will help them understand their performance and aim for excellence.  

How FranchiseBlast can help

We help answer the following questions:

  • Is your brand consistently delivered across all locations?

  • Do you know what needs to be improved?

  • Do you know who your exemplary franchisees are?

Book a demo to learn how we can help you achieve a consistent brand experience.



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Modern franchises focus on unit-level profitability

By | Franchise Best Practices, Franchise Trends

Are you profitable? We’ve been building franchise management software for almost a decade. We’ve worked with hundreds of franchise systems and have noticed a trend: best-in-class franchisors are putting more emphasis on continuous franchise improvement. By this we mean working hand-in-hand with their franchisees to improve their unit-level economics; not only their top level sales but also their bottom line. If you’re not doing this today, you will have trouble selling franchises in the future.

Common business knowledge tells us that you can’t improve what you don’t measure. Thus, franchisors need access to data to help their franchisees continuously improve. What data? Sales, cost of goods sold, labour, customer satisfaction scores, field audit scores, number of proposal sent out last month, territory information, etc. The basic premise to continuous franchise improvement is that you can take a snapshot of these key performance metrics in one unit and compare them to not only past results but also the franchise average (or any comparable segment of stores within the franchise). These comparisons give you tremendous insights into the nitty-gritty of your business, allowing you to iteratively address your weaknesses and continuously improve.

Although ingrained in the culture of newer franchise systems, many established franchise systems have never shared much data from the franchisee to the franchisor. “I charge royalties on sales, not profits”, they’ll claim. “The franchisor and the franchisee are distinct businesses”, they’ll argue. “If I get too involved, new and upcoming legislation will negatively impact us”, they’ll fear.

There’s a grain of truth in these elements, but the fact is that all these statements are ways to put your head in the sand, continue with the status quo and miss the profound change that is under way in the franchise world. Indeed, we’ve seen many concrete examples of franchises that have continuous franchise improvement at heart that are seeing tremendous year-over-year growth and are greatly surpassing the competition in their category.

Today, franchisors who work to improve individual unit-level profitability do more than what is expected of them. They also reap the benefits of their hard work as their system outperforms others and their franchisees are more engaged. In turn, this helps them sell more franchise units – a perfect example of a virtuous cycle. After a few years of small improvements which compound to have dramatic impacts, it will become obvious to prospective franchisees which franchise is the best fit for them.



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How forward-thinking franchises coach their franchisees

By | Franchise Best Practices

Congrats. You’ve just signed a new franchisee. Now the hard work begins. You need to train them. You need to transform them into stellar franchisees. You need to imbue them with your unique culture. But you’re only face-to-face for a few short days or weeks. After that short period, they will be on their own in their assigned territory. How do you ensure they succeed?

Alternately, maybe you’re an established franchise that is stagnating. You’ve known this for a while now but you’ve just recently decided on your strategy to improve. But how do you assist your franchisees during this endeavour when most are resistant to change and set in their own ways? Your brilliant plan will fail if not properly executed.

In both of these scenarios, the franchisees must learn new things. If you’re serious about continuous franchise improvement, it is important to note that this won’t happen overnight. This will require constant efforts over a long period of time.

We’ve worked with a number of franchises over the years and have come to be firm believers in the power of the self-assessment.

Have your franchisees help themselves via self-assessments

Self AssessmentWhat are self-assessments? Simply put, they are questionnaires filled out by the franchisee and/or their store manager(s) on a recurring basis. The questions themselves vary significantly per franchise.

Some see self-assessments as a copy or subset of the field audit questionnaire that is simply filled out by the franchisee instead of the franchise business consultant. Because geography is not an issue, the franchisee can assess themselves on a frequent basis (weekly or monthly) and make sure they’re on track. Let’s call these operational self-assessments because they mainly track operational information (temperatures, order times, cleanliness, etc.).

Others see self-assessments as a way to change higher-level, longer term behaviour. They ask questions that guide the franchisee into working on the business instead of in the business. For example, “Have you reached out to a leader in your community this week?” or “Have you sponsored any charity events in the past month?”. The actual answer to the question is not important, but if you’re answering these on a weekly or monthly basis, you understand what’s expected of you if your goal is to be a stellar franchisee. If you are engaged and serious about your business, you will want to surpass your past results. The purpose of these questions is to engrain a certain mindset over time – to transform behaviour based on the company’s culture and values. Let’s call these transformative self-assessments.

In our mind, this latter definition of a self-assessment is more powerful than the former. Operational self-assessments are typically delegated to the store staff to monitor standards whereas transformative self-assessments ensure certain behaviour is top of mind and, as per their name, are truly transformative.

In the wild today, few franchises do mindset self-assessments on a formal basis – only the forward-thinking ones do. (And one of the reasons for this is no technology was available to make this easy – up until now.) Most of the one’s we’ve seen are in the mobile service industry – and we believe it’s because it’s much harder to perform operational assessments in their context. It’s harder to have a second pair of eyes review an individual job than it is to walk into a restaurant and start checking temperatures.

Furthermore, the mindset self-assessments that we’ve seen in most franchises are done much too infrequently (annually, in most cases). If a franchisee is only taking the time to reflect on the higher-level aspects of their business annually, they are gaining awareness of certain issues – but not necessarily changing how they behave.

The reason transformative self-assessments are so powerful in the context of a franchise is because the franchisor knows the behaviour that should be accomplished to improve performance. They’ve seen the top 20% of their franchisees operate this way and are trying to propagate this behaviour to the others. When properly aligned with the franchisee’s goals, transformative self-assessments work wonders because it helps them keep them in a mindset of continuous self-improvement.

A word of caution: franchisee engagement is obviously required for transformative self-assessments to work. Self-assessments thrive on the franchisee’s intrinsic desire to improve their condition. Apathetic franchisees won’t magically change their ways – that requires rebuilding the franchisee relationship from the ground up. We recommend you take a look at the writings of Greg Nathan for more information on the psychological aspects of this subject.

Leveraging technology to help change franchisee behaviour

To illustrate how technology can help, let’s firm up the ideal process. First, a library of self-assessments must be created with certain goals in mind (for a new franchisee, for an established one wanting to increase sales, for an established one wanting to prepare for becoming a multi-unit franchisee etc.).

We should reiterate that the transformative self-assessments should be aligned with their personal goals and ambitions for increased success. Franchisees wanting to spend more time with their family now that they’ve reached their location’s peak potential shouldn’t be focusing on the same elements as someone who wants (and can) significantly increase sales over the next year.

Second, a frequency must be established. For newer franchisees (first three months), weekly assessments are typically adequate. Once they graduate, maybe reducing the frequency to once a month and/or changing the self-assessment questionnaire may be desirable. Finally, for established franchisees, monthly self-assessments are also desirable.

Third: automation. This is where technology comes into play. Once configured in a software system, such as our franchisee polling app, the right self-assessments can be pushed out to the right franchisee at the right frequency in a fully automated fashion. Reminders can be sent out automatically when deadlines are missed. The franchise coaches can (and should) still review the results and assist the franchisees in their journey, but they don’t have to constantly ask for information from their franchisees.

Franchisors obviously benefit when their franchisees are more engaged and unit-level economics improves. But managing the self-assessment process in software also provides them the benefit of learning trends. For example, what tasks are their newest franchisees typically not performing? This may indicate that the newer franchisees are overwhelmed, not properly trained or don’t see the value these tasks.

 



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3 dimensions of continuous franchise improvement

By | Franchise Best Practices

Performance Dashboard In this article we will explore a few dimensions of continuous franchise improvement, valid both for the individual franchisee locations and the franchise system as a whole. Although one can improve the franchise by focusing on a few of these individual input signals, the most significant benefits are achieved by looking at the big picture and considering all elements holistically.

1. Financial benchmarking and business planning

Franchise systems should obtain financial data (sales data from the point of sale system, P&L report, current inventory levels, etc.) from their franchisees. By comparing a franchise location with the average of the top performers, a franchise field consultant can determine areas for improvement. Additionally, thanks to the advent of web-based tools these past few years, benchmarking against industry standards (not only the franchise’s best units) has also become a more common practice in the franchise community.Given a bit of context as to why certain values are where they are (ex: ‘labour costs are higher than others because the store has longer opening hours’), actionable tasks can be defined (ex: ‘reduce the number of employees on Sunday and Monday evenings when the store is not as busy’) during a business planning activity. Although many franchisors perform annual reviews, best practice indicates that shorter iterations focusing on a small set of key enhancements to be made during the shorter cycle are more beneficial to the franchisee.

2. Field Audits

The franchisor sends an auditor to the franchisee’s location (in the field) to determine what can be done to improve the franchise’s performance. This is usually done by inspecting hundreds of pre-determined elements to ensure that the franchisee respects the franchisor’s recipe for success.Field evaluations are the only way the franchisor can get professional insights into the inner workings of a particular franchise location. Indeed, there are other dimensions which help the franchisor learn about what is going on in the front of the store, but field audits are unique because they also evaluate the back-store. To accomplish this, the auditor must be trained on the franchise’s standard processes, best practices, their suppliers, etc. In essence, they not only evaluate the end result but also the recipe used to get there.Again, the goal of the field audit is to review the franchisee’s operations and give them concrete tasks to accomplish which will help them improve. Read more about field audits in this article.

3. Customer Satisfaction

As with any business, tracking customer satisfaction levels is also very important in a franchise environment. This is usually achieved by offering an electronic feedback form (a convenient evolution from historical paper-based forms) to be completed by customers after they visit a franchisee. The most common approach is a hyperlink to a survey at the bottom of your sales receipt or on your website – although in-store interactive kiosks are currently in vogue due to their higher response rates. As with field audits, problems reported by customers should also translate into actionable tasks to improve the franchise.Customer satisfaction results complement field audits nicely as they answer to main limitations of field audits. First, it overcomes the Observer effect (‘the act of measuring something changes the outcome’): when an auditor visits a location, staff will be extra careful to follow the established procedures. Indeed, as any customer can submit feedback at any time, they are better suited to review the actual experience customers receive. Additionally, many weeks or months can pass between audits which is a very long time in our real-time world. Customers can theoretically submit many more data points much more frequently – we’ve even seen in-store kiosks being used to correlate the timing of feedback with employee time sheets! (Engaging customers to leave feedback is still a challenge in its own right, however.)Another modern twist on customer satisfaction is social media monitoring. After a visit to your location, many customers share their experiences online. As the volume of mentions/reviews increases, software tools which automate the monitoring process and which include sentiment analysis (determining if the statement is positive or negative automatically via software) becomes mandatory for proper analysis.Still, even though customers are great to evaluate the output of the franchise, they are unable to evaluate the recipe as they are not trained on the franchise’s business processes. Combined with field audits, though, they paint a more complete picture of the franchise’s performance.On a related note, mystery shoppers are another way of obtaining customer satisfaction data. In essence, customers are paid to visit a store and review their experience. We won’t go into details here as, simply stated, they are a middle-ground between field audits and customer satisfaction. The customers are lightly trained on what they need to look for and the store personnel don’t know they are being monitored. Mystery shoppers complement other practices nicely, but in our opinion, should never be the exclusive input for continuous franchise improvement. Why? They may initially appear as the best of both worlds but, in fact, they are potentially the worst of both worlds. They are not as authentic as regular customers, they’re not as trained as auditors, but worst of all they do not help engage the franchisee. Franchisee engagement is the only way suggested changes will be acted upon – which is the only way the franchise can improve.

Others

Continuous franchise improvement obviously includes many additional dimensions and this article is not an exhaustive guide. In some franchise systems, such as restaurants (quick-service and full-service), monitoring governmental health inspection results is a non-negligible task. In others, such as retail franchises, competitor price monitoring is a critical aspect of the business.Furthermore, we haven’t even mentioned employee performance! Monitoring and improving employee satisfaction is a sure-fire way to improve the productivity of your franchise as employees are the lifeblood of your franchise.

Next steps

The primary way which a franchise can improve itself is to monitor the various dimensions described here holistically and iteratively course-correct. More explicitly, concrete actionable tasks must be defined and performed on a continuous basis. Many of these tasks will be simple and direct such as ‘clean your windows’ or ‘replace your front sign’. These tasks will help improve individual franchise units.However, systemic issues are not as easily addressed with simple tasks. These types of issues should in fact be addressed by taking a step back, understanding the core issues and implementing new processes or training programs to solve these core issues. It’s the franchisor’s responsibility to always have an open mind and look at the broad picture to solve the correct core issues instead of simply patching the symptoms.



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