How benchmarking can help you better manage your franchise network

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What’s the current state of your franchise network? If you can’t say ‘great’, perhaps it’s time you managed your franchisees better to optimise operations.

One weak link is all it takes to affect the rest of the chain negatively, and sometimes irreparably. The importance of checking that franchisees are maintaining standards and following the system is vital for the survival of your network and for your brand to thrive. An important part of building and running a highly successful network of franchisees.

“A franchisor can gather data from all its franchisees, recording the key performance indicators over a period of time to identify how the whole network performs,” says Cathryn Hayes, the bfa’s head of business support.

“It is then an easy matter to review individual franchisees against the average and divide the network up into the strongest performers, those in the mid-range and the ones at the bottom who are not performing as planned.”

Weekly, monthly or even daily capture of data, possibly direct from tills or through accounting software is just one of the methods that successful franchisors need to employ on a regular to adequately monitor their franchisees.

In addition to that you also need to:

Revisit your KPAs

Benchmarking only works well when it’s backed up by great and accurate numbers, so it’ crucial to choose your Key Performance Areas (KPAs) carefully. Your Key Performance Indicators (KPIs) will be dependent on what you can collect from these figures, enabling business-wide monitoring. This way you can separate the wheat from the chaff and increase the success of struggling locations.

“Top-quartile success is something to be celebrated with those responsible – but it is also something to be shared,” says Richard Mukheibir, MD at Cash Converters.

“This success has been achieved by individual managers or franchisees who found an ingredient to boost the oxygen in a flame so high that it becomes as bright and powerful as an arc-welding torch!”

Benchmarking your franchisees against each other not only reveals who’s excelling, but why. Identifying the gold standard means you can export it across the group, boosting your entire brand. KPAs indicate crucial aspects for a better running franchise, so choose them carefully.

Measure well to manage better

While benchmarking is important, it doesn’t mean measuring every single thing. The point is for you to use your numbers and benchmarks regularly to remind your franchisees why the accuracy and timeliness of the data is.

“The management truism is that you can’t manage what you don’t measure,” says Mukheibir.

“So measuring and benchmarking put the power of management in your hands. In the Cash Converters’ world, for instance, we have benchmarked spending on infrastructure, including rentals at 8%. So we know at a glance that spending less than 6% of turnover on this KPI is very good indeed. That’s a prompt to find out more.”

Establishing basic values that you will track in your benchmarking, means relying less on your gut instinct and more on tangible insights.

Keep up the consistency

Another benefit of benchmarking is the direction of support to those franchisees that need it most, when they need it most. For example, a franchisee has to be more hands-on in store to check the numbers every day.

“No matter how well your business operates at the front end, no matter how good your customer service is, no matter how much margin you succeed in receiving, you will not succeed in building a sustainable business of scale without paying attention to management accounts, financial statements and their relation to your benchmarked Key Performance Indicators,” says Mukheibir

At Cash Converters, a store’s retail manager should ideally track the number and value of transactions hourly. This means that anything below target can be revised while capitalising on above-target indicators.

Reference: Standard Bank BizConnect – https://bizconnect.standardbank.co.za

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