EXPERT ADVICE: Jason Gehrke | Director | The Franchise Advisory Center
Five lead indicators of franchisee underperformance
Underperforming franchisees in a network do harm to themselves and to the brand they represent, yet the lead indicators and causes of underperformance are poorly understood. Franchisors will generally rely on afterthe-fact sales data to identify performance trends. The sales data could be days, weeks or even months old before any franchisor personnel asses it for performance trends, and by then the effort required to reverse a 46 Franchising MAGAZINE USA
decline will be significantly greater than if the trend had been identified earlier.
the data (particularly in relation to costs)
Worse still, an analysis of sales data only indicates one element of the performance of a franchisee’s business. Sales data does not provide any meaningful information to assess the management of costs in a business, which can equally represent an area of underperformance.
because the profit and loss reports are
Even for those systems where the franchisor regularly receives profit and loss information from franchisees which shows both sales and costs, underperformance can still go unnoticed. This is because
is not comparable across the network, or provided so infrequently (eg. annually)
that they are analysed too late to undertake a meaningful intervention to improve a franchisee’s business.
So if sales and profits are indicators of the performance of a franchisee’s business after the fact (ie. lag indicators), what
are the factors (ie. lead indicators) that determine franchise performance in
advance, and how should they be assessed?
