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How a Franchise Consultant Can Help You Identify the Right KPIs

Most emerging franchisors have a general idea of what they want to accomplish through franchising. But, they may not be aware of the most effective key performance indicators (KPI) to use to track their progress.

KPIs are a basic part of business planning and are instrumental in franchise development. They are made up of a few select metrics used for gauging the success of your franchise on a daily basis. But, these metrics, when put together, become the strategic yardsticks for franchise growth and success. KPIs can also be used to remedy shortcomings in your franchise system.

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While there are some KPIs that apply to all franchises, there are also industry-specific KPIs. For example, some restaurant KPIs may include food costs, labor costs, sales and average order per customer. Retail, on the other hand, may want to measure sales increases, gross margins, inventory turnover and repeat customers.

Once developed, your KPIs should be shared and understood throughout the company, from top executives, corporate staff, and the newest franchisee. KPIs should be used regularly throughout all departments of your business to measure progress toward your franchise company’s goals in operational, financial, customer relations and growth performance. If you find the KPIs are not helping move the franchise system forward, adjust them.

However, developing the most appropriate KPIs is a meticulous and time-consuming process. A franchise consulting firm can help you create them for growth or corrective action.

Here are examples of some general KPIs emerging franchisors should establish in order to track the progress of their franchise system:

Sales Conversion

Are you awarding the number of franchises in a year you had planned on?

Keeping track of the number of franchisee candidates who become full-fledged franchisees is necessary to measuring your brand’s growth. KPIs for franchisee sales conversion will help you evaluate the effectiveness of your marketing campaigns and franchise development team. Sales conversion is necessary for driving profitability. Determining the cost per franchisee lead and cost per deal are important KPIs. These costs will help determine budgeting and planning for future years.

Franchisee and Customer Retention

Are you doing all you can to keep your franchisees happy and in the system? Or are you seeing franchises close and franchisees not renewing their agreements? Developing KPIs for franchisee retention can prevent the latter from happening and keep your brand on the growth track.

Entrepreneur at the cash register in his restaurant

Similarly, are your franchisees doing what they should to keep their customers coming back? Or are you seeing those customers migrate to your competitors? KPIs will help you measure how you’re marketing to consumers and how well you’re training franchisees on operations and customer service. Determining KPIs for your marketing tactics will help you decide which ones work the best for your concept.

Revenue Growth

Are you seeing customer growth at each location?

You should be measuring how effective your brand is at bringing in new customers to your franchise locations.

You want to make sure your franchisees are profitable year after year since the franchisor’s success depends of the success of its franchisees. Because revenue from existing franchisees is based on royalties, system-wide revenue growth depends largely on the financial well-being of each franchise. Therefore, you will want to implement KPIs that ensure each location is running efficiently and doing what’s needed to attract, convert and retain customers.

How a Franchise Consultant Can Help

While using KPIs sounds straightforward enough, identifying and/or creating the right ones can be cumbersome whether you’re just starting out in franchising or have been operating for a few years. It takes time and resources – such as the help provided by a qualified franchise consultant with experience in your industry as well as in franchising. A franchise consultant can also help you identify and track progress on your specific KPIs.

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For example, you will need different KPIs for the following scenarios, which means you’ll need to use different metrics for developing those KPIs:

  • Sales are increasing, but the franchise company’s profits are not substantial enough to grow
  • The franchise company is profitable, but it is not growing at the rate you would like

A franchise consultant can also perform a thorough review of your franchise system to flesh out the most meaningful KPIs and weed out the ones that don’t have a significant impact on business outcomes.

With 30 years of franchising experience and more than 800 franchise owners representing over 1,200 locations for five brands, Winmark Franchise Partners can help emerging and established franchisors develop the right KPIs for growth or corrective action. Contact us here or at (844) 452-4600.