Effective KPI management is essential to improve and regulate the performance of your franchise network. As a franchisor, you must therefore manage the centralization of data from across your network, but you must be able to provide a reporting system that franchisees can rely on.
For more than 20 years, the franchise industry has been growing steadily.
In France, in 2019, +4% of franchised sales outlets have been opened and +2.2% of franchise networks have been developed. New stores have been able to benefit from brands’ reputations to conquer new territories and new entrepreneurs have benefited from the know-how of their franchisors to carry out their activity and develop their turnover.
In a market that is certainly growing, but that has been strongly affected by the current health crisis, Franchisors must more than ever strengthen their competitive advantages to ensure high performance of all their stores, by developing differentiating and relevant processes in line with consumer expectations.
How to ensure that all your stores are performing well?
By managing sales performance indicators and customer satisfaction KPIs, as well as allowing an easy benchmark between your network’s different stores. As a franchisor, you will strengthen communication with your franchisees and you will have regularly updated data on the health of the points of sale.
This is the role of your Franchise Manager, who ensures the link between the Franchisees and the Franchise brand.
A crucial mission, because these Franchise Network Managers not only ensure that performance is achieved, but they also guarantee that the brand’s requirements are properly implemented in the different franchises and points of sale. For this, they have to align a dispersed team, in accordance with the different levels of data literacy and tools used on the field.
They need to monitor precise indicators to quickly understand their store network’s performance.
Measure your points of sale key performance metrics
Effective management of KPIs is essential to improve and monitor your franchise network’s results. However, to achieve this in the decentralized environment of your franchise, you need to think about the indicators you are going to monitor to track your stores’ efficiency beforehand.
In this article, we are going to introduce the most relevant KPIs to follow, as a Franchise Manager, in order to drive sales and quickly identify operational issues.
Here are 8 KPIs to monitor to ensure your business is healthy:
1. GROSS SALES
Gross sales are the total sale transactions within a certain time period. It represents the amount a store earned and recorded from the sales of its product.
Gross Sales is also defined as the Sales Revenues for a store, before deduction Sales Allowances, Sales Discounts, and Sales Return (Net Sales are the Gross Sales minus the following three figures).
Gross sales is an important metric, especially for retail businesses, because it reflects the total amount of revenue a store brings in over a period of time and can be used to show customers’ buying habits.
This indicator is often analyzed in relation to Net Sales, in order to monitor the evolution of these two values over a given period and to control if there are problems related to product production costs or if there are too many promotions over a given period.
Formula: Gross Sales: Sum of all sales receipts.
2. STORE SALES CONVERSION
A measure of the effectiveness of your Franchisees sales team by monitoring the number of visitors converted into customers. Store Conversion rate is the percentage you get when you divide the number of purchases by the number of visitors (footfall) within a store in the same time period. For example, if a Store receives 200 visitors in a day and has 50 purchases, the conversion rate would be 50 divided by 200, or 25%.
Analyzing the conversion rate of your stores allows you to measure the success of the marketing campaigns of your Franchise and track the success of the salespeople within the stores.
This indicator may also point out the need to review workforce planning, inventory availability, and merchandise in stock as a Franchisor it gives you valuable information on exactly what works and what doesn’t work within processes that you had implemented.
Formula: (Number of sales / Number of unique visitors within a store) x100
3. GROWTH RATE
Growth rates are the percentage change of a sales variable for a specific time period. For a franchisor, growth rates typically represent the growth of the store’s revenues, and earnings coming from the retail network. It can be used to express the annual change in revenues as a percentage. As a Franchise Manager, growth rates can be beneficial in assessing a store’s performance and to predict future performance.
Formula: Growth Rate (Revenue) = [Revenue (Today) – Revenue (Last Month)] / Revenue (Last Month)
4. REVENUE PER SQUARE FOOT
Revenue per square footage is your store’s average revenue for every existing square footage of a store sales space available over a period of time.
Revenue per square foot is a key measure of success in a Retail Franchise and it can be used to measure store performance.
It is a great metric to gauge the performance of a store and it allows the Store Manager to understand store space efficiency. Revenue per square foot can be a good insight to improve merchandising in a store, the store layout, staff allocation, and plenty more store improvement.
Formula: Total in-store sales / Selling area in square feet
5. AVERAGE SALES TICKET
Average sales ticket provide details on the average amount of Sales per Customer. This metric is calculated by totaling Sales and dividing it by the number of customers over a period of time.
This metric is used to analyze business performance, sales activity, and profitability. It helps the Franchise Manager to understand Sales and Sales trends.
This metric can also be analyzed by ticket average per employee to understand seller performance.
Formula: Total sales / Number of customer
How to Successfully Build
6. NPS – CUSTOMER SATISFACTION
The customer Satisfaction rate is a measurement of a customer’s satisfaction with a brand’s product and/or services. The most common score is the Net Promoter Score (NPS), this metric is used to measure the loyalty of customers to a company. NPS is measured with a single question and reports with a number between -100 to +100, the higher score is the better.
NPS shows the willingness of a consumer to recommend your brand to their friends and acquaintances. It allows you to quickly measure whether your Franchise network stores are providing a satisfying customer experience. This indicator quickly shows what needs to be changed in your stores and how to help your franchisees to better welcome customers and offer complementary services.
To understand why the NPS score is important to monitor, and why data visualization is the ideal tool to drive this indicator, read the following article: 5 DataViz Ideas to Breathe New Energy into NPS Analysis
Promoters = Respondents giving a 9 or 10 score
Passives = Respondents giving a 7 or 8 score
Detractors = Respondents giving a 0 to 6 score
7. COMPARABLE-STORE SALES :
Comparable-Store sales refer to the revenues of a brand generated by a Retail store in the last period compared to revenues generated in a similar period in the past.
Franchise Managers use Comparable-Store Sales to measure sales growth and evaluate the performance of existing stores relative to a new store.
Comparable-store sales are also known as same-store sales, identical store sales, or like-store sales.
By comparing sales over different time periods, Franchise Managers can determine the performance of a store. Comparable-store sales not only give a picture of the performance of a store in a given region, but they can also give an idea of the performance of a store within the overall network.
It is an essential indicator to know the health of your points of sale and to build a successful store network.
Formula: Same-store Sales : [Total Sales T+1 / Total Sales – 1] x100
8. NET PROFIT
Net Profit is the measurement of a store’s profit once operating costs, taxes, interest, and depreciation have been subtracted from its total revenues. It can also be described as a Net Income.
As in many industries, the only key performance indicator that matters is profit.
As a Franchisee, your goal is to develop your brand and have a long-lasting store network. That’s why you want each store to generate the most profit.
By following this indicator, you can quickly understand which stores in your network are the most profitable for the brand and encourage them to share best practices with other stores in the network.
Formula: Total revenue – Total expenses = Net Profit
With these results for all the stores within your franchise network, you will quickly identify the most successful stores and you will be able to analyze in detail their success. You can also share this information with all members of your franchise network, allowing stores to benchmark each other.
You will be able to create an emulation between stores and quickly identify the processes that bring the most value to your business. Data will be used not only to monitor the performance of your business, but also to reinforce all tools and processes implemented within your network, and to strengthen the attractiveness of your franchise to potential candidates for opening a new store.