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Franchisor Leaders Need their Own KPIs

Published on April 01, 2022

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Over the past several years, franchisee key performance indicators (KPIs) have grown in terms of their use and application. In the past, franchisors would gather franchisee financial statements and/or use surveys to measure the financial and operational performance of their franchisees.

Currently, the advanced state of technology and enhancements to the franchise operating model have caused more franchisors to use KPIs to capture specific franchisee performance data.

The benefits of utilizing KPIs provides a structured method for measuring franchise brand performance. KPIs can identify franchises that are under-performing and can help maintain operating standards. They can also identify why certain franchisees perform better than others. KPIs can include individual and system-wide franchise gross sales, monthly sales growth and franchise monthly gross margin percent and dollars. Additional KPIs can be tailored based upon the franchise business model ranging from food based to service based.

Franchisor leaders should receive five specific KPIs that measure overall franchise brand performance.

  1. Franchise system growth vs. forecast including cost per lead and cost per sale by referral source. I have always wanted to know what the closing rate per lead source/cost is?
  2. What are franchisee satisfaction levels from in-house or third-party surveys. Franchise leadership must be tuned into this metric whether the franchise brand is large or small.
  3. What are system wide franchise profit margins broken down by quartiles. The data should be by product categories and overall.
  4. What are franchise fixed expenses compared to variable expenses and are there trends developing?
  5. What are the current challenges and opportunities for the franchise system in terms of current and potential products and services?

In addition to knowing the vital signs of the franchise, these performance indicators can help to evaluate the performance of franchisor staff that are responsible for operating areas such as franchise development.  For emerging franchise systems, these five KPIs are critical for determining whether the franchise and its key components is on the right track.



About the Author: Ed Teixeira
Ed Teixeira is a recognized franchise expert with over 40 years’ experience in the franchise industry. He has served as a corporate executive for franchise firms in the retail, manufacturing, healthcare and technology industries and was a franchisee of a multi-million-dollar home healthcare franchise. Ed and Richard Chan are the authors of a new textbook, Franchising Strategies: The Entrepreneurs Guide to Success, to be published on July 1st by Routledge on July 1st. He has participated in the CEO Magazine Roundtable Meetings with business leaders from around the country and has spoken at a number of venues including the International Franchise Expo and Chinese Franchise Association in Shanghai, China. Over the course of his career, Ed has been involved with over 1,000 franchise locations and launched franchise concepts from existing business models. Ed can be contacted at [email protected].

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