Franchising your business is a lucrative way to expand quickly and increase your profits. That said, there are many strategies you\u2019ll need to implement to ensure your franchisees continue to uphold your brand standards and operational guidelines. <\/p>\n\n\n\n
So, how do you monitor your franchisees and track their performance without time-consuming strategies or oppressive micro-managing tactics? In this guide, I\u2019ll break down how to track the most crucial key performance indicators for franchises. I\u2019ll also offer some valuable tips on helping your franchisees make improvements.<\/p>\n\n\n\n
Before tracking and evaluating your franchisees, you need to determine which key performance indicators to monitor. There are countless franchise analytics to keep tabs on, but here are a few of the most important ones.<\/p>\n\n\n\n
Managing your organization will be difficult if you don\u2019t know how much money your franchises are making. The most important key performance indicator to pay attention to is gross sales. Otherwise known as sales revenue, gross sales are equal to the total revenue (before expenses) generated by a franchise\u2019s sales over a given period, whether that be a week or a year. <\/p>\n\n\n\n
Gross sales are an essential metric for calculating overall income and profits. Your overall sales are also key in determining the effectiveness of your marketing campaigns as well as the overall potential of a franchise location. Tracking franchise gross sales allows you to understand seasonal fluctuations, address any issues, and optimize your sales strategies.<\/p>\n\n\n\n
Expenses are the costs of running a franchise, including rent, salaries, inventory, materials, utilities, insurance, marketing fees, and royalty payments<\/a>. Essentially, a franchise\u2019s expenses are the total cost of goods plus operating costs. You need to keep track of your franchise\u2019s expenses so that you can calculate their profits accurately. For example, if a franchise spends $4,000 per month on rent, $10,000 on employee wages, $5,000 on royalty fees, and $5,000 on operating costs and inventory, the total monthly expenses are $24,000.<\/p>\n\n\n\n Keeping track of expenses can also help you improve the franchise\u2019s profitability. You\u2019ll be able to see the expense reports across all franchise locations. So, you may be able to identify ways to cut costs across different branches and ensure waste is kept to a minimum.<\/p>\n\n\n\n You can calculate a franchise\u2019s net profit margin by deducting its expenses from its gross sales. On top of giving you a clear insight into a franchise\u2019s overall business performance, this KPI helps you identify weak areas and make informed decisions for improvements. You\u2019ll also better understand the franchisee\u2019s ability to generate revenue and manage expenses.<\/p>\n\n\n\n You should understand the profitability of not just your entire business but also your individual franchises. Doing so will make planning future investments, paying debts, and expanding your operations much easier. Moreover, you\u2019ll need to be able to prove your profitability to keep attracting and retaining new franchisees.<\/p>\n\n\n\n The ultimate goal of most franchisors is to grow their business and make more profit. The growth rate is a metric used to determine the change in sales performance over a set timeframe. By tracking this KPI, you can determine whether a franchise is contracting, expanding, or retaining a steady income. The growth rate is also helpful in predicting a franchise\u2019s potential growth and future business performance.<\/p>\n\n\n\n You can calculate a franchise\u2019s growth rate percentage by subtracting the initial value of the franchise from its current value, dividing the result by the initial value, and then multiplying the total by 100. Sound confusing? Let me break this down further.<\/p>\n\n\n\n If a franchise is currently valued at $240,000 but was initially valued at $200,000 a year ago, the growth rate would be:<\/p>\n\n\n\n Another important metric to track when monitoring your franchisees is customer satisfaction. The Net Promoter Score (NPS) is the KPI most commonly used to gauge customer loyalty and satisfaction. The best way to calculate NPS is by obtaining customer feedback through surveys and questionnaires.<\/p>\n\n\n\n Ask customers to rate how likely they would be to recommend the franchise to others, usually by picking a number on a scale of 1 to 10. You can then categorize your customers\u2019 scores into detractors (those who won\u2019t recommend your franchise to others), passives (those who might recommend you to others), and promoters (those who are likely to recommend your franchise). <\/p>\n\n\n\n The more promoters you have compared to passives and detractors, the higher your NPS will be, and a higher NPS indicates more satisfied customers.<\/p>\n\n\n\n The above KPIs are the most crucial to keep track of when monitoring franchisees, but there are many other analytics you should be paying attention to. Let\u2019s take a look at a few other important metrics:<\/p>\n\n\n\nNet Profit Margin<\/h3>\n\n\n\n
Growth Rate<\/h3>\n\n\n\n
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Customer Satisfaction and Loyalty<\/h3>\n\n\n\n
Other Important KPIs for Franchisee Monitoring<\/h3>\n\n\n\n
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Why You Should Measure Franchise KPIs<\/h2>\n\n\n\n