Managing a franchise business is a complex challenge that involves many parameters across many franchisees and countries. Most business owners recognize that traditional financial accounting results like return on investment and earnings-per-share provide essential information about what has already happened. Therefore, measuring franchise network performance based on financial results is always tempting.
However, post-pandemic times have shown that businesses that depended on financial metrics to gauge success were less agile in responding to unexpected environmental and economic threats.
Financial performance measures work retrospectively and are not adequate measures for ongoing improvement. Therefore, other non-financial performance measures like customer satisfaction, operational success, quality, cycle time, and employee motivation are more critical measures of future performance.
Savvy Franchisors know they need a clear, single view of both financial and operational performance. So, they now rely on technology solutions to help them measure and manage both aspects to successfully navigate their businesses toward growth.
Franchise scorecards are designed to encapsulate all these critical decision-making data points in various key performance areas. Franchise unit owners and franchisors can rely on aggregate data from significant resources. The information provided in historical and franchise business performance context can propel them into acting more promptly than depending on financial performance alone.
Franchise Scorecards compile information about Franchise unit performance from field visits, POS systems, loyalty programs, surveys, and self-assessments. These Scorecards allow Franchise Managers to identify areas of concern and opportunity quickly.
When a Franchise Scorecard is implemented on a technology platform, franchise managers can compare key performance metrics in different key performance areas against the average of their peers, utilizing actional insights to support the ongoing coaching conversation.
Having optimized franchise scorecards also means it needs to be developed with a balanced view covering different perspectives of the franchise business.
Let’s discuss three perspectives Franchisors need to consider when developing an optimized franchise scorecard:
The Customer Perspective
Customers’ concerns tend to fall into four categories: quality, cost, time (required to meet customers’ needs), and lastly, performance and service (how the products/services create value for customers).
To put the Franchise scorecard to work, Franchisors should articulate goals for time, quality, performance and service and then translate these goals into specific measures to serve as performance benchmarks. These benchmarks should be clearly stated in the Standard Operating manuals and Training implementation to ensure follow-through.
Once these measures are in place, an audit plan should be designed and implemented consistently. Unfortunately, this can often prove daunting for franchise managers, and audits often become neglected when daily operations overwhelm them. The great news is that today, a lot of the manual work of scheduling, collating results, and turning them into reports can be removed by simply implementing these audits through franchise management technology. With the help of technology, the outcome of these audits becomes automatically collated onto the individual outlet Franchise Scorecards. This allows franchise managers to execute these much-needed audits quickly and focus on what is essential: Managing their franchisees.
Good management of performance benchmarks from the Customer perspective means customers enjoy a reliable brand experience.
Engagement, Learning, and Compliance Perspective
The franchise scorecards for each Franchisee allow opportunities for Franchise managers to have insightful and engaging conversations to help franchisees improve. Where a franchisee is performing very well, the franchise scorecard serves as an opportunity to encourage and reward. Conversely, where a franchisee is not performing as well as it could, the results on the franchise scorecard allow the franchise manager an unbiased approach to discussing avenues for improvement and a means to monitor progress over time.
As global competition becomes more intense, franchisors must continuously improve and innovate their existing products, services, and how they engage their customers. Franchise scorecards show the overall performance of the franchise network from the unit, territory, country, and brand levels. Where trends are detected, either of consistent upswings or underperformance, these are all opportunities for the Franchisor to analyze, strategize and devise new services and products or reorganize internally.
A Franchisor’s ability to innovate, improve, and learn impacts the overall value of the franchise organization. That is, only through the ability to ensure franchise units are operating at their best, constantly creating more value for customers, and improving operating efficiencies can the franchise business continue to sustain and grow.
Successful franchising depends heavily on the ability of the Franchisor to implement overall brand and quality consistency across the units, regardless of whether the outlets are franchised or not. Therefore, franchise scorecards should also contain benchmarks that relate to the Franchisee’s ability to observe compliance in critical areas that involve legal, Health and Safety, brand-specific, human resource, and tax-related issues.
Financial performance measures indicate whether the Franchisor’s strategy, implementation, and execution contribute to bottom-line improvement. In a franchise organization, this starts at the franchise unit level. At the franchised unit level, specific financial goals involve revenue, cost of goods, and profitability. At the Franchisor level, while profitability is essential, it is also paramount. It is important to note that solid financials do not always indicate strong underpinning performance, and strong operations may not also translate directly or immediately into financial success.
A well-balanced Franchise scorecard can help the Franchisor and Franchisee achieve their goals. For the Franchisor, the franchise scorecard serves to help to align both the Financial and Qualitative performance of each franchised unit. For the Franchisee, these franchise scorecards serve to help them understand their strength and opportunities as well as help them improve even more for growth. The key to successfully implementing a franchise scorecard is in the Franchisor’s conviction in the benefits of:
- Consistently executing performance measurement initiatives.
- Providing value-added data and reports to create engaging conversations with their Franchisees using the franchise scorecards with franchise management solutions.
- Improving the whole franchise management system when necessary.
- Leveraging technology, so all stakeholders can access one single truth source.
Today, franchise management software like TreeAMS can combine the power of a robust franchise quality operations management suite with powerful API Integration capabilities. This provides you with franchise-centric features. For example, you can access the ONE platform to manage your franchise organization effectively and access key performance indicators like unit Franchise sales, EBITDA, Royalty calculations, SOP, Various processes, Audits, Online Training, and assessments. Leveraging technology like this allows you to implement your operations as a Smart Franchise.