How to Use KPIs in Franchising

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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