By focusing on these six recommendations, you’ll drive franchisee performance, achieve franchisee satisfaction, ensure franchisee compliance and create engagement and alignment.
As many franchise executives are in the midst of planning for next year’s success, below are six key points to consider in order to improve the visibility of your brand’s results, gain insights into franchisee behavior, and improve processes to drive efficiency into 2021.
1. Proactively reach out to every franchisee before the end of the year
You’ll find that the activity of having your executive management team personally check-in on franchisees between now and through the end-of-the-year won’t take much time and will provide you with the greatest ROI of almost any investment or activity that you can undertake. The insights that you’ll receive are critical for the budgeting process, and a simple call will go a long way in showing your level of commitment and conveying how valued your franchisees are.
Additionally, this shouldn’t be a time to inform your franchisees about all the great things you’re doing on their behalf, but rather a time for your franchisees to share their hopes and dreams, highs and lows, and ultimately share how they are doing in their personal operations. Though you likely have franchise business consultants (FBCs) that are having these conversations on a frequent basis, the key differentiator is that these calls are coming from the executive management team. We all remember those episodes of Undercover Boss where an executive of the company would go disguised into multiple locations in order to really learn what’s going on in the field. While doing this can be an expensive and unscalable endeavor, by establishing these same touchpoints, your franchisees will be genuinely moved that you cared enough to take the time to hear how they are doing. You’ll find yourself in the unique position to offer advice and to ensure that they receive the additional training and support that they will need to move forward in times of uncertainty. And most importantly, you’ll come away with a SWOT analysis that will help you construct your 2021 budget based on systemic needs – while your COO/VP of ops/FBCs will have the basis for coaching your franchisees in those situational instances where there is a financial or performance delta to be bridged.
Another effective way to capture these invaluable insights can be achieved by using third-party companies, such as Franchise Business Review and Franchise Research Institute, which are able to turn the voice of the franchisees into actionable data. Again, the key is to get objective feedback on the health of your franchise culture. By doing so, you’ll be able to determine if your franchisees are recommending your franchise, and if not, why not? It will also provide you with feedback on the performance of your franchise support managers, which resources and services you provide are most and least valued by your franchisees, measure franchisee intentions to sell their business so the impact can be minimized, and much more.
2. Engage your franchisees in budgeting for success with a playbook
In surveys we conducted with franchisors in early 2020, 80 per cent identified that their biggest challenge in helping their franchisees improve their performance was a lack of business and/or marketing plans. At the end of the day, franchise recruiting, satisfaction, and retention all are contingent upon franchisee profitability. With so much uncertainty in the days ahead, franchisors must lay the foundation for success in 2021 through leadership in the budgeting process to help franchisees actively engage in situational budgeting – the engagement is critical. In a study conducted by InGage Consulting and Franchise Business Review, those franchisees that were engaged were 3.7 times more profitable than non-engaged franchisees.
“Technology fees have become the standard for ensuring a franchising organization can keep up with a rapidly evolving competitive environment”
Every franchise system has franchisees performing at different levels across the spectrum when it comes to their areas of strengths, weaknesses, time in business, and store types.
But despite the performance of franchisees no matter where they fall in the ‘franchisee lifecycle’, you can have a defined process that you and your support team can use to address the varied results from location to location, and region to region.
Whether you’re going for the completion of a sales plan, marketing plan, margin plan or overhead plan, you’re going to need to go through an evaluation process as laid out in Item 1, along with a comprehensive review of the top 10 key performance indicators (KPIs) needed to drive success on a franchisee-by-franchisee basis.
By ensuring that franchisees are able to monitor their trends, what they are doing differently, what they are doing well, and where they are out of balance, is key to improving performance. To that end, we are big advocates of having a process-driven playbook to know what to look for, and where to find it.
Your playbook should include where and how to identify KPIs that are specific to the areas in which your process is to be focused; whether cost of goods sold, revenue and cost structures that are out of balance such as those franchisees that are underspending in their local marketing efforts. These will be needed in developing franchisee sales plans, marketing plans and margin plans, and incorporate those in the construct of your budget.
The whole point of the budget is to identify and mutually agree on what the priorities are, where they want to make changes on and what do they want to fix. You’ll need to have your franchisees describe the change they desire and how they’re going to do it. The most important step is that the franchisee needs to acknowledge and agree in each of these areas before any budget can be finalized. This is applicable to all franchise industry types and segment sizes to create engagement with franchisees throughout the budgeting process.
3. Initiate or adjust your franchisee technology fees
Start planning today for funding technology additions or upgrades that are most useful to your franchisees business. FranConnect has undertaken a comprehensive review of 2,191 Franchise Disclosure Documents over a three-year period to fully understand the types of fees franchisors are using. We have found that 61 per cent of franchisors now collect technology fees in which they are charging their franchisees a monthly recurring flat fee. Technology fees are franchisee costs paid to a franchisor to add, update, or upgrade required business tools and systems.
What’s particularly encouraging is that 50 per cent of franchisees have claimed that technology tools were amongst the top values that a franchise provides. Technology fees have become the standard for ensuring a franchising organization can keep up with a rapidly evolving competitive environment.
4. Start tracking these franchise sales KPIs today
There is a nugget of wisdom that is attributed to financial guru Warren Buffet that says: “You only find out who is swimming naked when the tide goes out”, and the pandemic has taken the proverbial tide out
about as far as the eye can see. With FranConnect’s access to over 800 franchise brands worldwide, we have found going into 2020 that there were many “naked” franchisors that are squandering their costly franchise leads. In fact, our data shows that 72 per cent of franchise leads never received a call. Another critical KPI is that of initial response time. Our data shows that 85 per cent of the leads that resulted in sales were those that were responded to within four or less hours from inquiry, proving that speed to the lead is critical.
Additional KPIs that are critical to know are those of cost per lead and cost per sale by source. Within an effective franchise sales CRM, you’ll have the ability to input your marketing spend, and the technology will generate your costs as leads populate and deals close. It’s important to know your metrics so that you can “starve the things that aren’t working so that you can feed the things that are working”.
5. Leverage your promoters
The top two sources of franchise deals in Q2 2020 were from two forms of referral sources:
1. Franchise referral consultants (brokers)
2. Organic referrals (family, friends, associates and customers).
In the FranConnect Franchise Sales Index report from the first half of 2020, we found that franchise referral consultants (brokers), were the only lead source that saw an increase above pre-COVID-19 results coming in at 5.3 per cent. This equates to an average of 20 leads per sale. The second-highest source of leads that became sales were organic referrals, with a lead-to-deal ratio of 4.9 per cent, translating to slightly over 20 leads per sale. Those franchise referral consultants produced 21 per cent of all deals, and referrals represented 17 per cent of sales, consistent with Q1.
Research has shown that referral marketing, when done well, can typically result in a 10 to 30 per cent increase in sales. Nielsen’s Global Survey of Trust in Advertising survey highlighted a notable growing trend: consumer trust in traditional advertising channels has markedly decreased, while personal recommendations among customers is far and away the most trusted advertising format. Personal recommendations didn’t just edge out all other options, they dominated with an 81 per cent vote of confidence, compared with consumer online opinions, which trailed at 58 per cent.
“By ensuring that franchisees are able to monitor their trends, what they are doing different, what they are doing well, and where they are out of balance, is key to improving performance”
Rest assured that mastering the generation of referral leads on many levels is simpler than we make it. Franchisees want their system to succeed, and we all crave respect and appreciation. Start by letting your franchisees know why referrals are so important to all franchisees – as the saying goes “a rising tide lifts all boats”. The fact is that many of your franchisees have been touched by the tireless efforts of their franchisor and would likely validate or refer if asked. And there’s never been an easier time to mobilize your franchisees in giving testimonial videos generated on high-resolution mobile phones which can be used on your website and in your marketing campaigns.
All you have to do is ask. Consider putting a referral program in place that capitalizes on giving recognition whether from the CEO in your newsletter or in the form of a ‘rain maker’ award handed out during your virtual events in front of the franchisees’ peers. When the ability and willingness to travel return, consider a special CEO event where your franchisees and significant others can join other award winners at a resort for helping your brand to grow. I’ve found that this goes a lot further than simply stoking a check which rarely drives the desired outcome.
6. It’s time to clean house of unnecessary IT clutter
Franchisees and employees are accessing more and more business applications according to a study conducted by Okta. In an article recently published by the Wall Street Journal, small to medium business enterprises jumped from an average of 53 software programs and applications to 73 in the last year. The analysis is based on login activity on Okta’s network over the past year by more than 5,600 companies worldwide.
We have grown beyond the information age – there is arguably too much data, and very little of it is being acted upon. As a result, franchisees are overwhelmed and aren’t effectively using the tools they have. This is resulting in lower levels of franchisee engagement and utilization of these tools.
This is spurring the need for many franchisors to move to a centralized franchise management platform to be able to eliminate the need to log into a disparity of systems in favor of having all of the data imported into one platform solution and readily visible on a single-pane of glass – also known as a Command Center. The Command Center keeps everyone hyper-focused and aligned around the most important elements of your business.
The best practice these days is to have all relevant data imported into a ‘persona-based’ dashboard that shows what’s most important to a franchisee and to franchisors based on their role in the organization. If you’re a CEO, you’re likely going to want to see the most important KPIs across all departments and network such as royalty collections, a role-up of the P&L, unit-level revenues, franchise sales closings.
On the other hand, someone in franchise development may just want to key in on areas such as new lead creation, response times to new leads, call activity, no-response rates, and discovery days. In many cases, you’ll create greater adoption and engagement of your technology while the costs associated with going with a platform solution will be less expensive as many applications and software solutions may be redundant.
Keith Gerson, CFE, is the president of franchise operations at FranConnect. He brings 40-plus years of executive-level expertise as a passionate and driven franchisor and franchisee with a proven track record in building rapid- growth and highly profitable franchise organizations.