#1 Way To Increase Profitability in your Franchise
Dec 23, 2024
As business owners and franchisees, we constantly ask our team members to increase profitability and produce better results, especially when there is an issue in one of our KPIs (Key Performance Indicators). And it usually goes like this: “Hey Joe, I noticed your labor cost is over by 2%. We really need to get it down to at least 1% in the next 30 days, okay?” And that's it.
But just making the request is not enough. You'll be surprised how many Unit Managers, Assistant Managers, and even District Managers don’t know how to make that happen because they have not received any tactical and practical training.
To prevent them from misunderstanding an instruction or simply not knowing how to execute it, you must develop a troubleshooting guide for your leaders. Think about it! If you provide such a guide for your employees, they will know exactly what actions they should take to change those numbers and indicators positively.
Therefore, they will be more likely to achieve the goals you want and deserve.
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In my experience, this is the number one way to increase profitability in your franchise business. Surprisingly, I have not yet met a franchisee who has such a guide, other than our clients, of course.
As part of our services, we help them develop these documents for their leaders so that these men and women who lead their units are aware of the steps they need to take to improve the business’s profitability.
Why is a troubleshooting guide important?
If you develop this guide, your Unit Managers, Assistant Managers, and District Managers will have clear instructions on how to achieve the business goals.
To keep up with the first example, instead of giving them the sole instruction to “reduce labor cost by 1% in 30 days”, what you would say instead is something like:
“Hey Joe, I see that your unit is 2% over your labor cost target. The issue appears to be that your employees are not clocking in and clocking out based on the schedule that you arranged to achieve your goals. So take a closer look at that so you can see the schedule you created actually happen”.
Everyone in your organization who runs operations should be clear on this set of actions that truly impact business results. As a franchisee or business owner, it is your job to document these strategies on paper, not only to keep them safe but also to transmit critical business knowledge to your employees.
How to create a troubleshooting guide
Your list of troubleshooting actions should not just include metrics directly related to financial numbers like sales, labor, cost of goods, etc. It should also cover all the KPIs that can affect your business, including turnover, customer service, speed of service, and inventory rotation.
But having a troubleshooting guide with a list of things to do is not enough. The next step is to develop the training behind it and then train your employees to execute those actions.
The clock-ins and clock-outs example is a pretty simple strategy, but many other critical drivers change the KPIs and require training. You must create that training so the people managing your franchise unit can generate the profitability you want and deserve from your investment.
That way, you're giving them a list of what they can do as well as the training on how to do it. What’s left is for them to actually make it happen. If they don’t execute as they should, that's a different situation that their direct supervisor should address.
Don’t miss: Training Is Expensive! But Lack of it Costs More
As you can see, creating a troubleshooting guide is a great way to maximize franchise profitability. If you do this, train your employees, and follow up with them, you will achieve your business goals.
This is one of the key tenets we teach in the American Franchise Academy. If you want help creating this troubleshooting guide or take advantage of the one we have already done, explore our programs for Unit Manager training, District Manager training, and Multi-Unit Franchise Ownership.
We have developed dozens of tools, processes, and procedures that you can use to achieve your dream of business ownership through franchising and thrive for the long term.
Reflections:
- Are you providing your team members with a formal training plan?
- Do you and your team know what your profit target is and how to get it?
- Are you aware of the critical drivers that change your KPIs into better numbers?
- What strategies can you design to control and improve them?
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