5 Ways to Use Data in Your Franchise Business Plan

According to the Harvard Business Review, “Recent studies show that only about 15% of decisions made by doctors are evidence based. For the most part, here’s what doctors rely on instead: obsolete knowledge gained in school, long-standing but never proven traditions, patterns gleaned from experience, the methods they believe in and are most skilled in applying, and information from hordes of vendors with products and services to sell.” If only 15% of doctor’s use evidence, it is extremely likely that franchisees use data in their decisions even less. This means smart franchisees using data will win a competitive advantage over those who do not.

In our recent post on franchise business plans, we discussed a step-by-step approach. Now we want to do a deep dive into data for the franchisor audience.  Using data is a fantastic way to uncover problems which can be valuable in that first part of the planning cycle of “identifying the issue” and then uncovering if the issue identified is actually a real business problem.

Rank

When referring to “rank” that is the franchisees ordered from best to worst, compared to the system or a sub-group, such as region or training class. The first few metrics include benchmarks, a vital metric for franchisees.

Why it’s important

Rank is important because you can see where the franchisee is compared to others in the system. It is like the “you are here” symbol on the map – orienting them as to where they stand in the system in terms of performance. While not everyone needs to be in the top 10, understanding rank can help them get a realistic view about what is truly going on in their business compared to their peers. Seeing the performance of like franchisees also helps them get inspired, and maybe curious about what is giving others ‘the edge’ such as off-premise sales or a neat new promotion.

Trend

Understanding how the franchisee is doing compared to previous months helps you see where they are going. In fact, some in the Private Equity world consider the trends to be more important than the numbers themselves.

Why It’s Important

Comparing to previous performance encourages self-directed competition, rather than looking to others. Franchisees can find this metric more motivating, since it is not externally driven; they find the motivation within themselves. This also helps get away from the “my market is unique” objection.

Example

In this example, imagine that % of online orders is something that you focused on strongly with the franchisee. Looking at the trend column, you can see that Sales and Checks are going down, even though online orders are going up. This could indicate a greater focus on the new online orders, resulting in neglect on the side of the traditional business. According to the book Measure What Matters, when a new goal is set, you want to look at the balancing metrics as well.

For example, when sales to up, you don’t want quality to go down. When a new product line is introduced, you don’t want the old product line to suffer. Setting two goals instead of one, such as keeping traditional sales consistent while increasing online sales, is a good practice.

Questions to Improve

This list shows the places where the franchise can get better in terms of being an operator. This serves as a starting point for the planning cycle. When you identify an issue, it may not get resolved right away. Instead of it getting forgotten the moment you step onto the plane on the way home from your franchise visit, you can have a plan and keep track of it so it will be resolved in the future.

Why It’s Important

Keeping the “questions to improve” top of mind helps crystallize what the most important action is based on the audit. After all, it is one thing to do an audit, but it is quite another to act on it.

Example

Above, you can see a number of failed questions on the audit. After a quick review, all of the questions are regarding cleanliness and food safety. In terms of planning a straightforward idea would be to group them together and create a plan around this issue.

Top Store Weaknesses

A franchise system is only as strong as its weakest link. When looking into weaknesses, it gives you a picture of the potential vulnerability of the franchisee, and what actions can be done to resolve it.

Why It’s Important

Having a weakness with a label of severity based on the franchise system helps the franchisee understand the seriousness of a potential issue. This then makes future discussions, and potential escalations simpler when there is a clear audit trail.

Example

In the example above, you can see this data at work. Important elements are marked as “critical”, such as Net Sales and Gross Sales – with a serious shrinkage of over 15% each. Smartphone usage is considered less important and is marked that way.

Bird’s Eye View

Pulling the focus back from individual questions, looking at the big picture helps you coach and plan appropriately.

Why It’s Important

An audit is a lengthy process, and it can be difficult to see the forest for the trees. Seeing the overall picture shows if the franchisee is failing on full sections, helping identify areas of staff concern or training needs.

Example

In the heat map above, you can see that the areas of failure are marked in red. In the next section up, you can see groupings of questions which were highlighted. Although this example does not show a full grouping failure, there are a few “collections” of 3-4 adjacent questions which are marked in red. Exploring those questions and finding a big-picture resolution in terms of training, equipment purchase or staff change, for example, could be transformed into a goal.

The Last Word

Are you ready to deep dive into data, for various parts of the audit? Take a look at our Franchise Scorecard eBook -full of metrics, KPIs and samples from a variety of verticals.



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