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Home > Franchisor > Benchmarking
Key measures of franchise business performance – or franchise benchmarks – are critical to the effective management of franchisee and franchisor performance.
Benchmarks can be applied to any franchise business and may include key ratios or percentages for things such as:
For a benchmarking program to be effective, franchisors must develop and build the following into their franchise systems:
The success of any benchmarking program will be linked to the nature of the franchise business, and the franchise royalty applied.
For example, where royalties are calculated as a percentage of a franchisee’s turnover, the franchisor will have an obvious interest in monitoring the franchisee’s sales.
However the franchisee needs to be profitable to be able to generate ongoing sales, and therefore the cost of goods sold and expenses of the business should be equally important for franchisors to monitor and benchmark profitable performance.
The presence of a comprehensive franchise benchmarking program should be a key consideration for any potential franchisee in their assessment of a franchise opportunity.
The timeliness, relevance and accuracy of information provided by a robust benchmarking program can provide dynamic management information and facilitate rapid decision-making and business improvements by both franchisors and franchisees.
Franchisors can also boost franchisee profitability, and in turn, increase franchisee confidence to grow sales, through the effective development and application of an appropriate benchmarking regime.
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