Franchisors often struggle with trying
to run an efficient retail network
while increasing market share and keeping their franchisees profitable.
Business management has traditionally
focused on unlocking the profit potential
of an individual site or franchise. But the
rich data available can also lead to overall
sales improvements for the franchisor, if
used correctly in a business management
system.
“Not only are business management
programs essential to a franchisor’s ability to understand the dynamics of his
brand on a retail site level, the quality of
such programs significantly contributes
to a franchisee’s perception of franchise
attractiveness,” says Jim Blades, vice
president of European operations at
Urban Science, a global Detroit-based
sales channel optimization consulting
firm. “A business management program
can improve franchisee performance and
also can inform on profit-critical decisions for the franchisor.”
SmartBusiness recently sat down with
Blades to discuss the components — and
benefits — of a world-class business management program.
How is business management used to
achieve a stable, successful retail network?
The most successful franchisors have a
360-degree approach to retail network management: embracing number, location and
performance of individual outlets. In particular, they give attention to understanding the
dynamics of their brand on a retail site level,
achieving distribution stability by attracting
quality franchisees, helping existing partners
to reap the benefits of their investment, or
identifying sites requiring improvement.
Also, increasing competitive pressures and
squeezing margins for franchisees point to
the need to re-invigorate programs that
monitor retail site metrics.
By analyzing key financial metrics
across retail sites within a given franchise
network, we can understand causal factors behind profitability and sales and benchmark competitive sites against one
another. Only the franchisor is in a position to do this. That’s because individual
site metrics, in isolation, cannot reveal the
drivers of performance that must be
understood and monitored. The ability to
analyze the sum of all the data from individual franchisees releases valuable
understandings for the benefit of all.
Businesses that have a robust process —
a business management system — for
releasing the value of the collective network experience have a significant competitive advantage.
What are the components of a world-class
business management system?
Business management programs conduct
analysis, create benchmark-facilitating
composite reports, reveal best practices
and can lead to identifying the key performance indicators that are associated
with best-in-class performers. The best
programs also pay particular attention to
the accuracy of data collection. If data is
inaccurate, the conclusions drawn from it
will be distorted.
A world-class program will provide
expert and quality advice to franchisees in data interpretation and in
the implementation of recommended
actions to improve their site’s performance. This is key to establishing the
franchisee’s confidence and support
for such programs.
Experience shows that in successful
programs franchisees use the composite
reports, best-practice reports and key performance indicators available through
business management programs to
improve their performance across the
board, including areas such as operating
controls, departmental profit, sales per
salesperson, business planning and
increased ROI.
What can the franchisor hope to gain?
Franchisors compare the performance
of retail sites in different markets, synchronize the franchisor’s and franchisees’
planning programs, and set targets for
improvement based on objective parameters. An understanding of what is driving
franchisees’ profitability feeds into the
franchisor’s strategic planning for market
development. It gives insight into network
stability and identifies sales volume at
risk. It informs on important profit-critical
decisions, such as margins and incentive
planning.
Franchisors can expect an important but
often-overlooked impact of business management in the field. When the field staff
has a proper appreciation of the drivers of
their outlets’ business, the quality of dialogue between franchisee and field staff
and the robustness of planning is considerably improved.
Releasing the potential of collective network experience through an effective business management program is a goal that
more than repays the investment in systems and processes.
JIM BLADES is vice president of European operations for Urban
Science. Reach him at [email protected]. For more information, visit www.urbanscience.com.
