Choosing the Right KPIs- Part 1 of 2

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Welcome to another episode of Franchise Marketing Podcast. We’re excited for our guest.

It is Jason McReynolds. Jason, Welcome!

Jason: Hello! Glad to be here.

Glad, glad to have you on. So you’re the founder of Fran Metrics. For those who haven’t heard of Fran Metrics, would you mind giving us an introduction into what you do and who you are?

Jason: Yeah, for sure. I started out as part of a franchisor organization where I was in charge of supporting the franchisees and helping them out if they were struggling and we tried to get into some systems to help us collect some data, share data to support the franchisees, and have a way to

benchmark all the results of all the things that were important to us. We did not find a real good one and the ones that were out there didn’t really engage with the franchisees or had other issues.

So I set out to develop something and that’s why we started Fran Metrics. So, our purpose is basically to have an automated system and a more technologically advanced system to help identify issues within a franchise quickly. Instead of it being a lagging indicator, finding out what’s going on within that unit, without waiting for a field visit, without waiting for a franchisee to say, “Hey, I got a problem, or I’m not making money”, six months down the road and then, “Oh, we better go deal with it now, but now might be too late.”

So, the old way of doing it and the really antiquated way of doing it the way, and the way most franchise organizations did it before, was they would require the franchisees to send in the profit and loss statement. They would send them an email or a spreadsheet, which is a really ridiculous way to do things nowadays, but in the past, that was just the way it was.

So we’ve been able to go out and connect with POS systems or with CRMs, and then also with a cloud-based bookkeeping system, like QuickBooks Online, and bring all that data together to give really powerful information about what’s going on in each unit.

That’s really cool. I’m sure from a franchisor level, they’re able to really find some deep and interesting insights that also help dictate and flag almost like this stickiness and retention of franchisees. I’d love to hear a bit more about what are some of the interesting ways that franchisors are using this data?

Well, so franchisors can use this data in many ways. One I’ve already alluded to is supporting franchisees and flagging, like you said, any kind of metric that’s off. And again, it could be a computation of multiple data points coming in. For a gym we work with, they care about how many trial memberships turn into regular memberships or the revenue per membership or things like that.

So, one’s financial, one’s based on numbers and doing the math, but the point being, if something’s really important to you, if it’s kind of your core focus, you have some data point to do that and then flag lower performing units and say, “You’re not really holding up to what our focus is, what we’re trying to do for our customers, what’s the most important thing to us.” It could be customer feedback. It could be “We want the best customer satisfaction rating”. So, finding out who’s not doing that.

But another thing that the franchisors get and actually the thing that I’ve been able to get more interest off of is the consolidated data for item 19 of the disclosure document. Because again, back in the day, I would say about 40% was the number of franchisors who actually had a solid item 19 for the financial performance representation, it’s now at about 70%. So, for franchisors to go out there without a solid item 19, they are at a real disadvantage.

Very, very interesting! So, for franchisors that are just starting out and want to build this system and this dashboard, I guess the first step would be to identify which metrics they should track. So what are your recommendations? What metrics and KPIs are important to them?

Well, that is very industry specific, for sure. So, a restaurant, for example, you’re looking at service speed times, because the quicker you are in a restaurant business, especially delivery, the quicker you are, the better. Domino’s did a survey back 20 years ago, they figured out when they lowered their delivery time, they were able to get twice as many orders from that customer, and the ones that they were late on stopped ordering. So, it’s really what you’re known for and Domino’s was known for quick delivery back in the day. Not that they’re not now, but that’s kind of what separated them when they started. And so if I was at Domino’s, I’d say service speed is what we’re known for, it’s the number one priority. But in any restaurant business, labor costs are going to be important, cost of goods sold and food costs are going to be important.

When we go into each organization, we’ll identify specific KPIs or metrics that we want to analyze, but the more important thing is that you don’t get too many and that you get the right ones for what you want to do, because if you’re looking at too much, it gets lost in the importance of which ones are right. That’s why I’m not a big fan of profit loss statements or a laundry list of every single expense you have. Do you really need to know how much you pay in rent every month when you have been paying it every month for five years, it’s just taking up all that room. I say, listen, keep it to 20 metrics or less because if your franchisees are just looking at a long list of things it’s like, “What’s important to you”, right? So it’s important to prioritize.

But they do change. I mean, there’s all kinds of different metrics based on what you are. The GM will have a different one than a restaurant, which will be different than a home service one, they’re all unique. There’s a couple of common threads, like customer service, revenue, and operating profit, like the basic financial ones. The KPIs that are dealing with operations… those are going to be unique to each organization.

That totally makes sense. So, do you see these metrics changing over time as a system grows from say an emerging brand to already an established one or enterprise level of franchise?

Yes, they definitely change. It’s almost like a different focus, not necessarily a change in what should or shouldn’t be important to the organization. A franchisor will come back and find issues and say, we need to start tracking this. It’s really more of like an internal audit or examination of what they want to be or what kind of issues they’re having. Like if a location was dirty, they would say “Ok, we’re getting feedback all the time that the bathrooms are dirty” or something. I don’t know if that specifically would end up on a KPI report, but it’s an example of something that maybe we put a little bit more focus on or we build that into a score that they can see. So if scores are coming down, they’ll know and they can find why it’s coming down.

You know, one of the big, important scores is going to be the evaluation score or the field audits, when they come to visit the locations, and you can change the numbers within that scorecard. That’s typically what more advanced franchisors will do, they’ll say one thing is more important than the other, and make that adjustment and it’ll show up that way in the numbers.