Your most valuable asset as a franchisor is your franchisee. Your success is contingent on training, mentoring, and helping your franchisees to increase their profits. A franchise that focuses on generating a significant amount of relevant information to analyze will give them the ability to identify trends and help their franchisees optimize their performance.
As a franchisor, it can be helpful to utilize a data analytics system that helps you make assessments about where you can focus to drive profitability. Here are a few tips on how to use franchise analytics for business growth.
What are franchise analytics?
To use franchise analytics for business growth, it is essential that you understand the basic fundamentals.
Analytics can be defined as the discovery, interpretation, and communication of meaningful patterns of data, and the process of applying those patterns towards effective decision making. Different businesses may value different analytics. Using financial data as an example, accountants produce financials to help decision-makers make decisions. It is critical that the financial data be accurate. There is additional power within analytics, as it makes correlations between operations and several key metrics.
Every time that you are looking at analytics for your business, it should be within a general framework for you to answer the following questions:
- What happened?
- Why did it happen?
- What is happening now?
- What is likely to happen next?
If you are using analytics to answer the above questions, you are more likely to make grounded assessments about your business that will allow you to take the appropriate action needed in order to achieve the success you want.
How do analytics apply to the franchisee space?
From a franchisee perspective, there is tremendous value in analyzing your business. It provides a way for you to see which meaningful metrics are trending up and trending down which can help you to focus on understanding why these changes are occurring. One of the most powerful parts about franchising and providing analytics to franchisees is that it gives them tools to increase their visibility and profits which in turn helps you grown your brand.
Once data is collected and analytics are available, you should work with your brand to create the most meaningful benchmarks that help your franchisees. For instance, you can measure by geographical market, revenue tier, years in the brand, etc. These benchmarks provide powerful ways to help franchisees understand where new opportunities are to increase their success.
Kyle McEuen, SVP of Franchise Services at ProfitKeeper by PrimePay, has been with ProfitKeeper for over 14 years, and his extensive experience is one from which many franchisees and franchisors can benefit. Kyle shares, “Analytics is a powerful enhancement which allows franchisees to move with more velocity, there’s less guessing when you have this actionable data. Knowledge is the capacity to act.”
Once you can identify what you need to do to generate greater success, you can go and ask for support from the franchisor and other franchisees for best practices.
How do analytics apply to the franchisor space?
From a franchisor perspective, having the ability to collect data and view it often is important for you to identify opportunities amongst your franchisees to prevent failure, and to help coach them for success. When you monitor those metrics and Key Performance Indicators (KPIs), you will be able to identify which franchisees need more of your assistance.
There is a lot you can learn from collecting this data. For example, you can gain insight into the customers of franchisees, products, pricing, and more. Using this data gives you the ability to analyze sales and performance data to determine how franchisees are performing. It can give you a snapshot of where a single franchise owner stands as far as success is concerned relative to other franchisees.
Once you are able to determine a franchisee’s rank through data collection, you’ll then be able to act on the data to provide additional training and support to the franchisees that need it. In addition, exposing individual franchisees to this data can help make the successful franchise owners more inspired to keep doing what is driving that success. It can also identify who needs improvement which will allow them to take the opportunity to learn from the top performers.
All-in-all, analytics help you to identify and focus on the areas that you need to make changes in your business to increase profitability.
What is benchmarking?
Benchmarking can be described as a strategic and analytical method of consistently evaluating an organization’s products, services, and practices against a recognized leader in the industry for the purpose of improving business performance.
Think of benchmarking as the yardstick that you start from. It is a source of power for you as a franchisee or business owner to take action, create new practices, and do things that improve your operation.
What are Key Performance Indicators (KPIs)?
Key Performance Indicators (KPIs) are metrics that allow you to see the health of your business, the success of running your business, yearly trends of your business, and more. This data can help you identify daily goals as well as inform you on where to focus your training efforts when it comes to coaching franchisees as a franchisor.
It is important to understand which KPIs make sense in your industry. For example, if you are in the food industry, some of your KPIs could be food costs, labor costs, weekly sales, average order per customer, and employee turnover. If you are in retail, some of your KPIs could be sales increase, gross margin, inventory turnover, and repeat customers.
After the KPIs are defined, it is helpful to consistently gather the data and create reports and dashboards to display the information. Many individuals are visual in nature. With that, when viewed in easy-to-read tables, graphs, and illustrations, KPIs can offer a clear direction for immediate action.
What are the most important analytics to measure for my business?
By this point, you may be intrigued by the idea of collecting and analyzing data but may be wondering where to start. Below, we explain two main sources of analytics to help you identify which metrics are best to measure for your business.
Financial data is straight forward as these metrics are anything that comes from financials, such as income statements, balance sheets, or cash flow statements. This helps assess your business and its profitability.
It is crucial that you are taking a look at your financial statements so that you know how you are performing as a business.
Operational analytics are those that will not be found on a financial statement and are used to help you improve your decision-making. This source of analytics helps you to focus on improving existing operations and opportunities. There are many places that you can pull analytics from when it comes to operational data, including:
- POS systems.
- Customer surveys.
- Google Analytics.
- Other back-office systems.
- Social media.
- Geographical information.
Other examples of operational analytics include identifying insight into how many customers you served in a given day, the number of services you provided, your efficiency, and your customer satisfaction score.
There are four parts to this type of analytics that you can use to answer the four questions we mentioned above:
- Descriptive – Answers the question of: “what happened?”
- Diagnostic – Answers the question of: “why did this happen?”
- Predictive – Shows what is likely to happen.
- Prescriptive – Shows what action to take to eliminate future mishaps.
Combining these general categories of financial and operational analytics together can help you create meaningful or relevant ratios. Some common ratios generated from combining financial and operational data include:
- Liquidity or leverage ratios.
- Revenue per customer.
- Revenue or average ticket per shift.
- Customers per hour.
These analytics can help provide actionable insights to produce the desired outcome for your business.
How often should I be collecting and reviewing data?
What use is data to you fundamentally if you cannot rely on it, and if you cannot make decisions based on it? It is important to consider that when you are collecting data and putting analytics together, you should put focus on accurate and comprehensive data.
Per Kyle, “Financials are an example that comes right to mind. If you are trying to collect the financial statement, and you are collecting that every day, I would ask you to consider how many franchisees are really closing their books every day? How many franchisees are entering in their inventory, are doing bank reconciliation, etc.? If you are trying to collect data, especially from a financial position on a weekly basis, how do you know that data is complete?”
To answer the question of how often you should be collecting and reviewing data, generally speaking, the more often you do, the more effective it will be, depending on the type of data. You may be an emerging franchise, or your short-staffed, and as a franchise owner, you may be wearing many hats which can make it difficult to get everything in place for you to look at data on a daily or weekly basis. However, it is important to be very pragmatic and disciplined when collecting this information. You will be able to take quick action and implement changes more quickly, which can increase your profit.
The importance of timing resides in the opportunity to make changes to your business. Integrations can allow for efficient timing for collecting data as you can integrate your accounting software, your POS software, etc., to eliminate the added time spent manually compiling this data.
Analytics should not be something you look at as checking off an item on your to-do list. Instead, you should look at analytics as a powerful tool to make assessments of your business.
Kyle states, “The power of analytics is not the assertions of the data, but the assessment you make and the action you take to increase profits. Your assessments are when the action starts to take place. That action should be reviewed and analyzed so that you can take care of your business, grow your brand, and ultimately increase profits.”
What tools can I use to collect and understand data?
The process of collecting and analyzing data does not have to be manual. With ProfitKeeper by PrimePay, franchisors can take advantage of the cloud-based software to automate financial tasks that help increase profits.
Imagine a service that not only does the work for you but ensures the data is accurate and useful. That’s ProfitKeeper by PrimePay.
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