It’s important to have some measures in place to monitor success in every part of your business. You need something to compare against when weighing up levels of success or failure. Franchisee recruitment is no different. Not only do you need to measure how many new additions to your franchisee numbers takes place from the applications received, you also need to evaluate how the new franchisee develops over time. The first couple of years are crucial.
Most franchisors will measure the conversion rate of leads that translate through to them becoming a new franchisee, and not delve any deeper than this from a recruitment stand point. We should be looking further down the new franchisee journey to see if we have been truly successful in recruiting the right individual for our system.
There is always going to be a balancing act for any franchisor when looking to grow their system. Underpinning system growth is usually the number of new franchisees being recruited to the system. The quality, illustrated through capability, is an element that I’d like to focus on. We have a relatively short period of time during the franchisee selection process to evaluate the likelihood that the candidate before us will be a good fit for the business. I have worked for a few different franchisors over the years, and have seen first-hand growth targets being prioritised over the underlying capability of the incoming franchisee. A franchisor, facing legal action from a disgruntled outgoing franchisee and years left on a head lease in their name, can be desperate to get someone to take on the site. It can be the start of many years of pain for both franchisor and franchisee if we get it wrong at the outset. The effects of a less than ideal recruitment decision can be ordinary returns on the site for the franchisor; an ordinary experience for the brand’s customers; and importantly, ordinary returns for the franchisee. The scenario could be even worse if the returns fall into the negatives for the franchisee. A franchisee that doesn’t make money will not be engaged in doing what is right for the system. We all know the illustrations of a disengaged franchisee – compliance issues, corners cut, inadequate staffing levels, suppliers not being paid, and the ugly list goes on!
So what is the true measure of successful franchisee recruitment? Most would say having a good pipeline of quality leads that convert into new franchisees ready to take on a store, thus supporting the growth of the system. It’s hard to fault this definition. I would however add one more layer of analysis that doesn’t often get much airplay. Do we measure how successful these new recruits are 6 or 12 months down the track? The retail site got built. The new franchisee went through the training program. We put up lots of balloons on the store opening day, and all turned up to cut the ribbon and congratulate them. The franchisee was presented with the keys to the store, but how have they performed since then? There’s a raft of measures you could use to do some analysis, but here’s five that I think are good indicators of recruitment success.
• What was their background prior to joining the system, and how well have their skills impacted the business?
• How well have they immersed themselves into the local community?
• How do they perform in the key metrics of the business?
• What have the comparative sales been? Have sales met the expectations of the site?
• What are their current cash flow levels?
A new franchisee brings to the table their varied skills and previous experience. It may have been in a related industry, or perhaps a different industry all together. I like to take the approach that where you have had success is not that important. The focus should be on how you achieved the results, and how well that aligns to the business opportunity being considered. It is useful to retrospectively look back at where your successful franchisees have come from. This can guide you to know where to go fishing in the future.
How well has your new franchisee immersed themselves into the community that surrounds the store or territory? Community is a broad term. Community encapsulates the customers who already know and use your brand; people who aren’t customers or visit you infrequently; people who could be potential employees; other businesses in the area and key local contacts such as the council and sporting clubs. Engaging with each of these layers of the community can set the business up to deliver to its customer, attract the right level of talent to employ and increase its ability to integrate at all levels. Trying to operate a business in isolation from those who live and breathe in your local area may not be the best strategy.
Every business has some key metrics they use to know how they are trending in the key areas. This includes customer service, sales growth, profitability and performance on operational standards just to name a few. There can be a tendency to give a new franchisee a period of grace where these aren’t looked at as closely as established franchisees. Of course a new franchisee needs some time to find their feet. Don’t ignore the initial results, but be sure to use some sensitivity and context when discussing them with the new recruit.
Assessing sales performance will take a few different forms depending on whether it is a new site or the new franchisee has bought the business from another franchisee. In either case, you would have some expectations on what the sales trend will be. I see most businesses having a good focus on sales. Everyone sweats on reading the weekly sales report! The ups and downs of sales trends will be the focus of any good weekly team meeting. From a recruitment perspective, how does the trend compare to the expectations you had when you were making your recruitment decision. You would have thought long and hard about the fit of the candidate’s skills, experience and values. So how did it all translate to sales growth – the key measure that drives us all.
Success in franchising for me all comes together when you couple sales growth with growth in cash flow for the franchisee. Growing top line sales is definitely good for the franchisor, but needs to translate through to growth in franchisee profit to truly deliver on the win-win foundation of franchising. Spending some time looking at the profit and loss statements six months after joining the system can reveal some areas for the franchisee to focus on to avoid a nasty surprise later on down the track. There are usually some easy fixes here, and an opportunity to pair them up with an existing franchisee to mentor them. Your selection process would have involved some discussions on financial ability and expectations. Reviewing retrospectively the financial performance of your recruits might result in refinements to your selection steps. You may also learn more about the effectiveness of your franchisee training.
We will all get recruitment decisions spectacularly right or unfortunately wrong from time to time. The focus will be on dealing with the situation, then getting on with business, as it should be. A broad level review of your recruitment outcomes will help you refine your selection process, and target the critical elements of your franchisee training. How do you currently evaluate your recruitment strategy? Are you measuring the whole story, or just the first chapter?
Bert Cotte is the National Franchising Manager of McDonald’s Australia. Having previously worked with other franchisors in various roles, he brings to the table a wealth of experience in franchising.
McDonald’s has grown to more than 850 restaurants in Australia, with almost 80 per cent of them owned and operated by franchisees. At the heart of McDonald’s success, are its franchisees’ and their strong commitment to the business locally. If you are interested in finding out more about franchising at McDonald’s visit:
Web: http://mcdonalds.com.au/franchiseopportunities