Education
August 1, 2022

Three Biggest Challenges in Implementing Franchise Scorecards

Franchise Scorecards equip Franchisors with a complete view of franchise unit health performance, allowing them to identify trends that drive unit-level economics. 

Franchise Scorecards are implemented to reflect a set of performance targets, including financial and qualitative operational measures related to franchised units. Financial Results report the actions taken in the past and are represented as lag statistics. At the same time, Operational Performance indicators typically serve as drivers of future financial performance and are known as lead statistics. 

The ability to see the lagging and leading performance indicators is critical in any organization. It allows you to adapt to changes quickly to achieve maximum results. A lot of times, however, franchisors find it challenging to manage qualitative and quantitative performance indicators on a single scorecard. Below are the three biggest challenges franchisors face when trying to implement Franchise Scorecards within their respective Franchise Systems. 

Challenge 1: Poorly Defined Key Performance Indicators and Associated Metrics 

As a franchisor, you must identify the franchise’s key performance areas. The metrics and benchmarks need to be relevant and precise. Everyone in the franchise system needs to know the benchmark performance metrics to perform up to standards. These metrics should be readily available, easily accessed, ideally depicted with visual indicators that are easily understood, collected at the ideal frequency for making decisions and defined so that the measurement can be consistently applied across the company even if their performance targets differ. This issue can be solved if you leverage robust franchise management technology that transparent crucial performance expectations and results throughout the franchise system. 

Challenge 2: Lack of Efficient Data Collection and Reporting 

When evaluating a brand, franchisors might place too much emphasis on financial metrics. This tendency is understandable since accounting, e-commerce and point-of-sale systems are already in place to collect and report financial figures. But other critical operating parameters that reflect quality performance—such as training scores and audit results—are usually unavailable in one place. Instead, they are scattered across different platforms. As a result, to get a complete picture of a brand’s strengths and weaknesses, franchise executives must gather this data manually, which can be time-consuming and expensive. 

Franchisors can reduce the amount of manual effort required to plan, schedule and implement operations by leveraging franchise management solutions that automate these processes. Franchise management platforms like TreeAMS help franchisors monitor non-financial quality performance metrics and financial performance from a single dashboard to help them identify opportunities and gaps to streamline operational performance. Franchisors should define key performance metrics from the onset and commit resources to set up these systems to achieve successful results.  

Challenge 3: Lack of a Formal Review Structure  

Franchisees rely on franchisors to guide their franchise units’ day-to-day operations, especially when navigating them. Unfortunately, franchisors often focus on getting new franchisees up and running but don’t provide ongoing advice for franchisee success. This nurturing and guidance can impact the success and sustainability of individual franchise units. 

Franchisors should review the performance of their franchisees frequently enough to make a difference and provide the support they need. This means that more than just having a tool in place to reduce the time-consuming manual processes of implementing and collating the data, franchisors need to leverage the scorecards to conduct regular performance meetings with their franchisees. In addition, franchisees’ performance metrics should be reviewed regularly and analyzed across functions and key performance areas to understand their performance, financial and qualitative results included. This awareness can have a massive impact on their future success. 

Using technology and automation to pull specific data from significant resources and present them dynamically across functions and business units helps you provide insight that a two-dimensional excel report view cannot. A formal review format and structure in the form of automated Franchise scorecards can systemize and encourage ownership among all stakeholders, from franchise unit manager, franchise field manager, and franchisor. Successful implementation of the franchise scorecards in a growing franchise will keep the company moving forward and growing instead of constantly looking back and fighting fires.  

Conclusion: 

Franchise Scorecards are essential tools that help you implement your overarching franchise strategy and track its implementation across different outlets in different territories. When used correctly, they can help you identify issues early and take remedial actions in time. 

Franchise Scorecards are designed to drive better performance – when everyone throughout the franchise network knows how they are doing and what needs improving, they are motivated to do better. Strategically identifying the key performance drivers and a means to measure them bring about focus and drive desired actions.  

Do not let the difficulty of measuring and encoding the results from these franchise scorecards distract you from the key objective, which is to build a successful franchise business. Leveraging technology to simplify and manage the various franchise management requirements can save time and allow franchise field managers to focus on more value-added activities like coaching and encouraging franchisees to perform better! 

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