Growth in a Franchise System: Maximizing Unit Level Economics

LaGrowth in a Franchise System: Maximizing Unit Level Economics

It starts at the top, with you – the franchisor: implementing an efficient system; instilling the culture; providing units the tools to succeed. A vital aspect of each of these components is communication. Franchisors must communicate with their franchisees beyond providing them with marching orders. Franchisees are much more likely to embrace your decisions and buy into an idea if they understand the rationale behind them.


In general, make sure franchisees have a thorough understanding of the financial aspects of the business. This should be done before you connect the operations of the business to the financials. More importantly, communicating with your units about their financial situations should not cease after the initial training period or only occur in dire situations.


One way to maximize unit economics is by setting clear benchmarks.  This gives your units a precise goal in mind, and lets them put their numbers into perspective. More importantly, benchmarks give franchisors insight as to which units are successful and which ones are falling short of the mark. Using that information, franchisors can focus on specific units and work with them to increase their numbers. Review the unit’s financials with them, and explain which aspects are and are not working. Once they understand what needs to be changed, and why, demonstrate how they can go about achieving better results. Again, your business decisions will make more sense to your units if they comprehend how it influences their finances for the better.


Or, if you find that some units have become complacent in their success and lost the drive to be number one, one method to inspire motivation is by releasing the results to your units of how they faired in relation to other units in hitting those benchmarks.  This could have a powerful effect, especially if your franchise offers a bonus or reward to the top earning units or franchisees.


But don’t forget, while it’s important to communicate from the top down, listen to what the franchisees and units have to say. After all, they are your customers.