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Choosing the Right KPIs: Part 2 of 2

I want to hear more about how the more advanced franchisors create weighted factors. Can you expand on that a little?

In the normal field visit where somebody’s coming to visit a franchisee, typically, someone will walk in with a clipboard and there'll be 40 questions about stuff they thought of when they were building it out or while walking there. An advanced franchise will have about 300 questions, up to 400 questions, and will take three or four hours because they're looking at everything. They're listening to how their customers talk on the phone and they will identify what's important. So they will even, you know, like the pizza franchise I work with, they'll take a picture of a pizza and they will examine how spread out the toppings are, if there's a sauce ring, if there's this, and will actually apply a score to each item of how the pizza is supposed to look. So that's how in-depth these can go and they will weight things like health violations, which in a restaurant are huge, right? So if somebody didn't wash their hands, I mean, that's going to cost them 20 points compared to if the store wasn’t locked on time or some window wasn't clean or something like that. Everything's important, but definitely not somebody not washing their hands before they go back and make food is huge. That could make somebody sick and that could end up in the paper…And some could “Auto Fail”. For example, if you're selling non-approved products in your franchise, some franchisors will penalize franchisees for doing that, because obviously that's a big “no-no” in franchising.

So, that's some examples that I've seen where that happens, but it is important to weight those. When I talk with new franchisors, I tell them to set a priority. I read the book Traction, by Gino Wickman, and if anybody's read the book Traction, which is an awesome, amazing book, one of the things that really stuck with me is, “If everything's important, nothing's important.” That's why I work on the focuses and what do you want to be known for? And then also, you know, make your operations and your evaluations, and your KPIs that we work with, make them a reflection of what your focuses are, what your values are. So it does come from the top down.

Totally. I love it. I love how in-depth you went with that. So, switching gears a little and going a bit higher level, you mentioned one before, about tracking too many metrics, but what are some other pitfalls that you see franchisors having when trying to track performance across their entire system?

There's a couple, so in the tracking itself, honestly, the biggest thing I find is they don't engage with their franchisees a lot of times. They won't use the data to do what it's used for, or they don't understand that it's important in the first place. Historically the data hasn't been there and it hasn't been easy, accurate, and hasn't been easy to access. It's just been something that they haven't had, which, you know, is something that new brands have over old brands because these preexisting companies it's impossible to get by without it.

I’ve had franchise owners come to me with 300, 400 units saying, “Hey, I want to do this.” Had nine meetings,then I met with the board and everything, but guess what? Zero buy in from the franchisees and they have to pick their battles and they've been doing it a certain way for 30 years. They don't care. They're not gonna buy into this system anymore. So, yeah, these established brands have been around forever. They have some name recognition, but they don't have the tools that you can build into which all starts with the franchise agreement, the disclosure document, and setting things up from the beginning. If you have a franchisee doing something from the gate, they're not going to care. That's how it's always been and they've been doing it since day one. It was in the FDD or within the franchise agreement. It's that “old switch-a-roo” that they get all defensive about, but the franchisor has set it up and do it from the beginning. They're pretty good at it, but we help them with that. It's either, they don't recognize the value, they don't know that the opportunity is there to do this, or they can't get buy-in from the franchisees. One of those three things.

I mean, once the data's there and they use it, it's pretty much, you know, it works well. I've been copied on emails from the franchisor to the franchisee, and one of the reports we have is a descending KPI report. So, it’ll list the KPIs, like customer satisfaction and we'll list every franchisee in order from highest to lowest. So all you have to do is go to the lowest and send the email to the franchisee or the lowest one and say, “Hey, you know, out of all the franchisees, this is the score that you're the lowest on, let's figure out what we can do to make that better.” In a positive way. You don't want to be adversarial unless it's a complete violation or they're doing something wrong, but at the same time, it's something that you need to work on.

And it's done in a flash and they can see an issue, so pretty cool.

Very cool. Very cool. And, you know, I was looking at your website and I was watching that walkthrough video that you have, and one thing that really stood out to me was how you kind of almost share system data and KPIs with individual franchisees. So, I'd love to hear, have you seen that have a positive impact and kind of motivate these lower performing franchisees to kind of step it up as well and just giving them that competitive spirit?

Well, yeah, one of the ideas to do this is to create competitiveness and sometimes that will happen on the top end, too, not just for low scores, like they want to be first or they want to be at the top 5% of those performing stores.

And I have to say, you know, not all franchisees are the same. Some are more engaged than others. We track when they log in and some it’s like, you know, you'd have to hold a gun to their head to get them to log into anything because they just don't do that. They just go to work and they should be, but we automate, we send emails, we do a lot of steps to try to get them to engage. Then, others are proactive and on there all the time and they do care. And so there's, there's not a single answer, but yes it can. And, the franchisors have also got to do this engaging. We can only do so much. We can automate emails, we can send out reports, we can communicate with franchisees a little bit, as a vendor, but the franchisors should be saying, “Hey, the Fran Metrics reports are out. Please give them a look. you know, actually remind them that this is the way that you can figure out where you can improve. The franchisor goes to visit their franchisee, typically three or four times a year in person. Well, what are you going to do between that? This is something you can evaluate and it's based on all the reporting units. So you're not comparing yourself to some arbitrary number that the franchisor pulled out a hat, we're taking all the metrics, either averaging or making a median, and this is a real benchmark from real data from within the organization. You can't argue with the numbers, you can only work on them or not, or choose to be better or not.

Very true. So I know on the marketing side, there is this constant battle of looking at vanity metrics, which are kind of nice to look at and don't mean anything, and real actionable metrics where you can actually take action on. So I'm curious, from your perspective, how have you been tackling that, educating, and empowering franchise owners on that level?

Well, there's two things that have to matter for any metric we put in there. Number one is that it's important to the system and what your goals are. And number two, it's actionable. You can't change it. It's out. Like how I already talked about rent. I mean, but if there's anything that's beyond… I phrase it like this: If I'm a multi-unit franchisee, and I wanted to build a bonus system to motivate my general managers to do better, this would be it, this would be the scorecard because everything is actionable and the result of how you're operating. It's meant to be a system to improve things, not to brag, not to show data that's not important. It's something to put your ideal operations and even your values in place. Like I said, it could be your customer feedback score. If you say, “Hey, I want our customers to be blown away when they walk in the door, there's gotta be some number you have to be able to place on that, and that's very important. In our system, you can see if the trends of these metrics align with each other, or if there's some cause and effect. We can't tell you what caused it or which number is the cause and which is the effect, but you can see if they correspond to each other and you can go back and say, “Hey, when we find out that franchisees have this rating on their customer service, their profitability is higher or their revenue is higher. So, this is a real thing that we've actually shown and you can actually put the actual numbers into that statement.

A statement has a lot more “Umph!” behind it when you can actually put numbers, instead of just some generic kind of feel good thing, like some meme you see on LinkedIn that says you can raise your profit by $2,000 if you do “this”.

In fact, our breakeven analysis will actually allow franchisees and the franchisor to just click on something to see a “What If Scenario”. What if you had the mean level of food cost or labor cost, compared to the whole system: What would that look like?

So, like the email I was talking about where the franchisor was talking to the franchisee, they said, “Hey, you would’ve made $5,000 dollars more last month just by having the average, not by being the best or setting records… just by having the average of what everybody else was doing.

So, maybe we can make some adjustments somewhere.

Very cool. So, Jason, one question I always like to ask is, what advice would you give someone just starting out as a franchisor?

My biggest advice for franchisors is get the right people in, especially for new franchisors. Just because somebody has to check and a pulse does not mean they're going to make a good franchisee. They say there's the 80/20 rule, but dealing with that franchisee is going to be like a 90/10 rule. You're going to be spending 90% of your time with the worst 10% of your franchisees, and you're not going to be able to grow with bad franchisees. If you kick them out you're going to have to disclose that you lost a franchise location: Don't do it. Don't take the money, that's all I can say is don't take it. Do your due diligence, make sure they fit in with your culture and your values, make sure that you've aligned with them so you can get them on board with what you want to do and make sure it's all about getting the right people and building the right relationships. So that's my one biggest piece of advice that I've seen franchise owners make and they regret it. And they're still talking about it eight years later, like, “Man, why’d we sign that agreement?!”

I love the advice. I love it. So, Jason, we are getting near the end of the episode. I always like to end it with something that I call the lightning round. Don't worry, it's just a few fast paced questions. No hardballs, I promise. First question is what is your favorite tool or app that you can not live without?

All right, the one I can't live without? Slack. Yeah. I'm on it all the time!

All right. Next question is: What is your favorite book?

Probably E-Myth or Traction. One of the two.

Next question is: Who is a franchise leader that you look up to?

Yeah, that's a good one and it’s lightning round! Charles Bonfiglio, from Tint World. He's pretty cool. I like him a lot, talk to him a lot and he’s cool. I probably butchered his last name.

Alright Jason, last question, I promise. Where can people find out more about you and Fran Metrics?

Yeah, so our website is FranMetrics.net, so if somebody wants a demo or something, just go on there and book it, and I’ll show you around.That's probably the easiest place, right online. Click HERE to schedule a demo!

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