Ten years ago, franchisors spent more time looking at their bottom line than that of their franchisees—thinking as long as their numbers looked good, individual units would follow. Today, we know that’s not true.
Franchisors need to be acutely tuned into how each and every one of their franchisees is performing because THAT is what will make or break the overall brand. It’s what sells new franchises (we tell all potential buyers to talk to existing franchisees about their profitability), it’s what makes franchisees more satisfied, and it’s what keeps you in business. It doesn’t matter how many over-performers you have; too many underperformers will inevitably take a toll on the entire system.
The big challenge is that many franchisees don’t understand basic financial concepts, so getting them to report accurate information or even understand their own profitability can be a challenge. The corporate office of a system has to take an active role—cutting costs, eliminating start-up “extras,” improving vendor relationships, educating franchisees, and assigning financial mentors—to make sure franchisees actually are profitable.
If you and your brand have made strides in this area, email me, I’d love to hear more about it.
Want to know more about improving unit-level profitability? Check out our 2014 Operations Webinar Series. This is just one of the many critical areas we covered.