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Using K.P.I.'s to your benefit

Posted by Carolyn Dufton on 26 August 2009
Using K.P.I.'s to your benefit

Some Franchisors can find formulating KPIs to be a confronting exercise but the benefits to both Franchisor and franchisee from having measurable performance targets should not be underestimated.

Establishing KPI's in your franchise often means going back to basics, and exploring the fundamentals of your franchise.

Are your franchisees achieving what they want from their business? or are they complaining that they can't make any money?

Is your system flawed? and if it is are you brave enough to firstly acknowledge that there is an inherent problem and THEN seek professional advice to restructure?

It is futile to expand a franchise network where existing franchisees are not making money and are unhappy in their business.

It is widely recognised that many franchises were started by Franchisors plucking royalty percentages out of nowhere, or using the "average industry norm." As every franchise system is different, it is unwise to use percentages or flat fees without first conducting some form of financial feasibility study.

In a franchise where no real due diligence was performed when creating the franchise system it is common for franchisees to complain about the lack of profit in their business.

It is The Franchisors responsibility to re-examine their business to create a profitable model. This then creates the solid foundations necessary for the business to grow effectively.

A franchise system can be "re-invented" for the benefit of all.

Being a Franchisor can be compared to being a parent of a very large family. Some of your franchisees are "problem children", to some you're a proud parent, and others you hardly notice because they just plod along achieving mediocre results without rocking the boat.

Sometimes the easiest approach is to adopt a "re-active" position. If and when things go wrong you try to fix things, appease the people and move along until the next time. Many Franchisors adopt this "head in the sand" attitude.

Let's examine this situation more closely to consider why an alternative approach would be more constructive.

Carefully constructed K.P.I.'s (Key Performance Indicators) can assist both The Franchisor and the Franchisee in measuring anything in the Franchise business that the Franchisor deems to be of importance.

Ensure that what you track has a big impact on your success results. Concentrate on the things that really matter.

For a busy Franchisor and in order not to burden franchisees, simplicity is the key in structuring your K.P.I.s.

  • K.P.I.'s can include areas such as quality control, lead conversion rates, marketing strategies and sales figures.
  • K.P.I.'s provide information for the benefit of the Franchisee, who can measure their own performance in an effort to improve their business overall.
  • K.P.I.'s are a reliable source of information for The Franchisor who can step in to address any areas where the Franchisee's performance levels are not meeting defined levels.
  • K.P.I.'s allow a level of pro-activity on the part of The Franchisor before a situation worsens.
  • K.P.I.'s present an informed, factual report opposed to a vague perception or concern.
  • No Franchisee can 'slip under the radar'.
  • Regular reviews of K.P.I.'s by the Franchisor and Franchisee opens up the communication channels in a systematic format. Even the worst communicators can discuss K.P.I.'s.

Ideally a potential Franchisor should identify K.P.I.'s in the initial stages of formulating their franchise system with their franchising adviser.This allows for K.P.I.'s to be included in the franchise documentation and to form part of the franchise agreement.

This has many benefits including providing security to Franchisors in the case of underperforming Franchisees.
As K.P.I.'s should be specific and defined, this also provides clarity to a Franchisee who then has defined performance measurements to assist them in fulfilling their obligations as a Franchisee.

Newly introduced K.P.I.'s can be confronting to a franchise network. So seek professional advice about how to establish and identify the K.P.I's in your business, and then on how to introduce them into your network and your franchise agreements.

© franchisingplus

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Author: Carolyn Dufton
About: Carolyn Dufton Dip. Bus (Franchising) heads the team as the owner and manager of franchisingplus. Carolyn has a wealth of small business experience, and many years of hands on franchising experience.
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