How to use data to make the most out of your franchisor/franchisee relationship
The relationship between a franchisor and franchisee is a crucial piece of the pie (or burger or burrito, if that’s what you sell!) for any QSR. As a franchisee, you don’t just have to handle managing your relationship with your employees and customers – you have to maintain a good relationship with your franchisor, as well.
Working well with your franchisor is about more than just getting along with the folks from corporate. Like running your restaurant, managing your employees, and attracting new customers, data can help improve your relationship with your franchisor. After all, relationships are about building trust and communication, and collecting the right data can help inform your conversations. You can build trust by tracking costs, identifying the value of the relationship, and quantifying what’s working right while also uncovering any issues or opportunities for the franchisor to help.
1. How much are you paying?
One of the benefits of operating a franchise is having the franchisor do some of the heavy lifting. Marketing, advertising, product development – these things are expensive, and it’s nice that someone else is handling them for you. But don’t forget: your franchise fees are still paying for it. It’s important to know exactly how much you’re paying in franchise fees and what they’re paying for.
Your financing tool can help calculate how much you’re paying. Combine and average out your franchise fees over the last year. If you pay multiple fees to your franchisor – like a separate fee for training, for example – include that in your total. Maybe you pay a flat fee and don’t need to do any math. In any case, take your average franchise costs and compare them to your average sales totals. Do they seem low? High?
Remember that, in order to develop a healthy profit margin, your total fixed costs should be no more than 30% of sales – and that includes rent, taxes, insurance, and any other fees. Your finance tool should be able to tell you if your fixed costs are eating into your profits.
2. What are you paying for?
Now that you know how much you’re paying, it’s important to find out what you’re paying for. Your franchisor uses your fees to pay for a plethora of things, from advertising to R&D to training. These are all important aspects of the franchise agreement – and you should know how your fees are being spent towards these things, so you can feel confident that you’re getting your money’s worth.
As in any relationship, communication between franchisors and franchisees is key. Your franchisor might share a newsletter or host regional meetings to gather feedback from store owners. This is your opportunity to ask for a breakdown of franchisor costs. How much is spent on marketing, and how is it split between different channels (television, radio, billboards, etc.)? How much is spent on training? How much time and money did it take to get the latest new product to market?
Marketing may not be your personal responsibility, but as a store owner, it’s important for you to know how your QSR is being developed and promoted behind the scenes.
3. Do you have the best tools?
Data can be helpful even when it’s not telling you something. Did it take more than a few steps to calculate your average franchise payments? Ever had to spend an entire day building reports to send to corporate? Do you have old spreadsheets that you’ve been using for years because your current system doesn’t have a better way to store that data?
You may not realize how much your relationship with your franchisor could be adversely affected by the tools (or lack thereof) at your disposal. And, in an ironic twist, your franchisor often has a solution to this problem. Part of your franchise fees go toward the tools you use to do your job. If your tools feel out-of-date, or if they’re not doing what you need them to do, share that feedback with your franchisor. It’s in their best interest to give you the best tools to run your QSR, and since you’re the one on the front lines, they’re not going to know when your tools are due for an upgrade unless you tell them.
Don’t make the mistake of storing business-critical information on an old spreadsheet. Talk to your franchisor about the tools you use to run your business.
There are many facets to the franchisor/franchisee relationship, and each has its own nuances that are unique to your personal business and management style. But if you focus on these three things – knowing how much you’re paying your franchisor, knowing what you’re paying for, and making sure you have the best tools at your disposal – you’ll improve your relationship and empower your business at the same time. Use data to improve your franchisor/franchisee relationship today.