A Three-Part Plan to Ensure Franchisee Success in 2021

Written by Keith Gerson

If you’re like many franchise leaders, you’re currently in the midst of planning for the upcoming year. Given the challenges of 2020, it’s more important than ever to take several key steps before the year ends to set up your brand and individual franchisees for success.

Over the next several weeks, we’ll share our top franchise planning recommendations for how to prepare for 2021 to improve the visibility of your brand’s results, gain insights into franchisee behavior, and improve processes to drive efficiency. By focusing on these key items, you’ll boost franchisee performance, achieve franchisee satisfaction, ensure franchisee compliance, and drive engagement and alignment.

The first step: franchisee engagement. To achieve your goals for the year, you and your franchisees must start the year on the same page. With that in mind, it’s critical to communicate with your franchisees about the upcoming year, including goals, budgets, and more. Here are two key ways to engage with your franchisees before the end of the year to make sure they’re positioned for success in 2021.

1. Speak with every franchisee before the end of the year

Having your executive management team personally check in on franchisees between now and the end of the year won’t take much time — but it will likely produce the greatest ROI of almost any investment or activity that you can undertake. A simple call will go a long way in showing your level of commitment and conveying how much you value your franchisees, and the insights you’ll uncover can be critical for the budgeting process.

This shouldn’t be a time to inform your franchisees about all the great things you’re doing on their behalf, but rather an opportunity to ask your franchisees to share their hopes and dreams, highs and lows, and how they are doing in their personal operations. Though you likely have Franchise Business Consultants (FBCs) that initiate these conversations on a frequent basis, it makes a difference that these calls come from the executive management team. You probably remember episodes of Undercover Boss where an executive of the company would go disguised into multiple locations to learn what’s really going on in the field. While doing this can be an expensive and unscalable endeavor, by establishing these same touch points through phone calls, your franchisees will be genuinely moved that you care enough to take the time to hear how they are doing. You’ll have the opportunity to offer advice and ensure that they receive the training and support that they need to move forward in times of uncertainty. And most importantly, you’ll come away with a SWOT analysis that will help you construct your 2021 budget based on systemic needs, while your COO/VP of Ops/FBCs will have the basis for coaching your franchisees in situational instances where there is a financial or performance delta to be bridged.

Another effective way to capture these invaluable insights can be achieved by using third-party companies, such as Franchise Business Review and Franchise Research Institute, which are able to turn the voice of the franchisees into actionable data. Again, the key is to get objective feedback on the health of your franchise culture, as well as feedback on your franchise support managers’ feedback and the resources and services that are most and least valued by your franchisees. You’ll also have the opportunity to gauge if franchisees are recommending the franchise and measure franchisee intentions to sell their business, so you can minimize impact.

2. Help your franchisees budget for success

In surveys we conducted with franchisors in early 2020, 80 percent said their biggest challenge in helping their franchisees improve their performance was a lack of business and/or marketing plans. At the end of the day, franchise recruiting, satisfaction, and retention all are contingent upon franchisee profitability. With so much uncertainty in the days ahead, franchisors must lay the foundation for success in 2021 through leadership in the budgeting process to help franchisees actively engage in situational budgeting. That engagement is critical. In a study conducted by Ingage Consulting and Franchise Business Review, engaged franchisees were 3.7 times more profitable than non-engaged franchisees.  

Every franchise system has franchisees performing at different levels, especially when you consider their strengths, weaknesses, time in business, store types, etc. But despite those differences, you can — and should — have a defined process that you can use to address the varied results from location to location and region to region.  

Whether you’re aiming to complete a sales plan, marketing plan, margin plan or overhead plan, you will need an evaluation process (as we mentioned in the section above), as well as a comprehensive review of the top 10 key performance indicators (KPIs) needed to drive success on a franchisee-by-franchisee basis. To boost franchisee performance, you must equip them to monitor trends and identify what they are doing well and what may need improvement.

With that in mind, we recommend having a process-driven playbook to provide to franchisees. Your playbook should include where and how to identify KPIs aligned with your goals (e.g., cost of goods sold, revenue, or cost structures that are out of balance). You will use these KPIs to develop franchisee sales plans, marketing plans, and margin plans, as well as your budget. The whole point of the budget is to identify and mutually agree on what the priorities are, where franchisees want to make changes and what they want to fix. You’ll need to have your franchisees describe the change they desire and how they’re going to do it. Before the budget can be finalized, the franchisee must acknowledge and agree to each of these areas. This is applicable to all franchise industry types and segment sizes to educate and create engagement with franchisees throughout and beyond the budgeting process.

If you don’t already have a budgeting playbook to provide to your franchisees, download “The Franchise Budgeting Playbook: Your Roadmap to Unit-Level Profitability.

The end of the year is a natural time to look back at what worked and what didn’t for your company. For franchise brands in particular, this should include a close look at your technology.

Consider the food franchise industry. While many food and restaurant brands have made a significant investment in different technologies over the past several years, many of those tools haven’t provided a return on investment yet. Yet, it is possible for technology to provide a high level of value to franchisees. In fact, we’ve found that about half of franchisees say technology tools are among the top values that a franchise brand can provide.

The key, of course, is choosing franchise technology tools that deliver practical benefits and are easy to implement and use. As you continue planning for 2021, make sure to take the time to thoroughly evaluate your current technology and technology fees, so you can better determine what will benefit your brand in the year ahead. Here’s how to get started.

1. Initiate or adjust your franchisee technology fees

FranConnect completed a comprehensive review of 2,191 Franchise Disclosure Documents over a three-year period to fully understand the types of fees franchisors are using. We found that 61 percent of franchisors now collect technology fees from their franchisors (charged via a monthly recurring flat fee). Technology fees are franchisee costs paid to a franchisor to add, update, or upgrade required business tools and systems. What’s particularly encouraging is that 50 percent of franchisees claim that technology tools were amongst the top values that a franchise provides.

Technology fees have become the standard for ensuring a franchising organization can keep up with a rapidly evolving competitive environment. If you are not currently charging technology fees (or aren’t charging a high enough fee), you may want to consider collecting or adjusting that fee in 2021, so you can equip your franchisees with the technology they want and need to grow their units.

2. Clean house of unnecessary IT clutter

Franchisees and employees are accessing more and more business applications according to a study conducted by Okta. According to a Wall Street Journal article about the study, small to medium business enterprises jumped from an average of 53 software programs and applications to 73 in the last year. This analysis is based on login activity on Okta’s network over the past year by more than 5,600 companies worldwide.

We have grown beyond the information age. Now, there is arguably too much data, and very little of it is being acted upon. As a result, franchisees are overwhelmed and aren’t effectively using the tools they have. This results in lower levels of franchisee engagement and utilization of these tools.  

This spurs the need for many franchisors to move to a centralized franchise management platform, which can eliminate the need to log into many disparate systems. This enables all data to be imported into one platform solution and readily visible on a single pane — also known as a Command Center. The Command Center keeps everyone hyper-focused and aligned around the most important elements of your business

The best practice these days is to have all relevant data imported into a “persona-based” dashboard that shows what’s most important to a franchisee and franchisors based on their role in the organization. If you’re a CEO, you’re likely going to want to see the most important KPIs across all departments and networks such as royalty collections, a roll-up of the P&L, unit level revenues, and franchise sales closings.

On the other hand, someone in franchise development may want to key in on areas such as new lead creation, response times to new leads, call activity, no-response rates, discovery days, etc. In many cases, you’ll create greater adoption and engagement of your technology while the costs associated with a platform solution will be less expensive, as you will find that many existing applications and software solutions may be redundant.

Technology can help or hinder your organization, so it’s worth it to take the time to evaluate what’s working and what may need some improvement. For a deeper look into getting more out of your franchise technology and tools, download our eBook, “Optimizing Franchise Development: Old School Principles Meet New School Tools.

While 2020 saw an overall decline in franchise leads — which isn’t shocking, given the circumstances of the year — you may be surprised to find out that the number of deals is trending upward. For franchise brands looking ahead to 2021, that’s great news. With the right plan in place, you can pursue franchise growth in the upcoming year.

To achieve that growth, you’ll need to focus on generating quality leads, following up on those leads appropriately, and tracking your metrics to ensure that you’re getting your desired results. As you continue planning for the upcoming year, keep these considerations in mind for enhancing and tracking your franchise leads.

1. Track the right franchise sales KPIs

Warren Buffet once said, “You only find out who is swimming naked when the tide goes out” — and the coronavirus pandemic has taken the proverbial tide out about as far as the eye can see. With FranConnect’s access to over 800 franchise brands worldwide, we have found that going into 2020, there were many “naked” franchisors squandering their costly franchise leads. In fact, our data shows that 72 percent of franchise leads never received a call.

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Another critical KPI to consider is initial response time. Our data shows that 85 percent of the leads that resulted in sales were those that were responded to in four or less hours from inquiry, proving that speed to the lead is critical.

Additional KPIs that are critical to know are those of cost per lead and cost per sale by source. With an effective franchise sales CRM, you’ll have the ability to input your marketing spend, and the technology will generate your costs as leads populate and deals close. It’s important to know your metrics so that you can do more of the things that are working and avoid the things that aren’t working.

2. Leverage your promoters

The top two sources of franchise deals in Q2 and Q3 2020 were from two forms of referral sources:

  • Franchise referral consultants (i.e., brokers)
  • Organic referrals (e.g., family, friends, associates, and customers)

In the FranConnect Franchise Sales Index report from the first half of 2020, we found that franchise referral consultants (brokers) were the only lead source that saw an increase above pre-COVID-19 results, coming in at 5.3 percent. This equates to an average of 20 leads per sale. The second-highest source of leads that became sales were organic referrals, with a lead-to-deal ratio of 4.9 percent, translating to slightly over 20 leads per sale. Those franchise referral consultants produced 21 percent of all deals, and referrals represented 17 percent of sales, consistent with Q1.

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Research has shown that referral marketing, when done well, can typically result in a 10 to 30 percent increase in sales. Nielsen’s Global Survey of Trust in Advertising survey highlighted a notable growing trend: Consumer trust in traditional advertising channels has markedly decreased, while personal recommendations among customers is far and away the most trusted advertising format. Personal recommendations didn’t just edge out all other options; they dominated with an 81 percent vote of confidence, compared with consumer online opinions, which trailed at 58 percent.

Rest assured that mastering the generation of referral leads on many levels is simpler than it seems. Franchisees want their system to succeed. Start by letting your franchisees know why referrals are so important to all franchisees (as the saying goes, “A rising tide lifts all boats”). The fact is that many of your franchisees have been touched by the tireless efforts of their franchisor and would likely validate or refer if asked. And it’s never been easier to mobilize your franchisees to give testimonial videos with the pervasiveness of high-resolution mobile phones. All you have to do is ask. 

Consider putting a referral program in place that capitalizes on giving recognition, whether it’s a shout-out from the CEO in your newsletter or a “rain maker” award handed out during your virtual events in front of the franchisee’s peers. When the ability and willingness to travel returns, consider a special CEO event where your franchisees and significant others can join other award winners at a resort for helping your brand to grow. I’ve found that this goes a lot further than simply handing out a check, which rarely drives the desired outcome.

To achieve growth in 2021, you must have a plan for boosting, pursuing, and tracking leads. To learn more about the most effective sources for leads and deals, as well as insight into how to improve your sales effectiveness, download “The FranConnect Franchise Sales Index Report 2020.”