Auditing Franchisees
Why it
Makes sense?
“It takes 20 years to build a reputation and five minutes to ruin it”.
"Chi-Chi's, a chain of Mexican restaurants once famous for its food, will vouch for philanthropist and investor Warren Buffet's quote. Chi-Chi's boomed in the early '80s, and the chain opened 45 new locations between 1981 and 1983. They are no longer seen because of too-rapid growth, which led to a high management turnover rate of 80%, outdated practices, and inconsistent quality control procedures. A hepatitis outbreak at their Pennsylvania outlet linked to unsafe food handling practices didn't help, leading Chi-Chi to say hasta la vista."
This story illustrates perfectly why franchise audits are so important. In franchising, the brand is the most valuable asset. Consistency creates loyal customers and for franchisors to maintain consistency across all locations, franchisee brand compliance is necessary.
It is not easy to ensure that each location follows the employee handbook to the letter. Each franchisee conducts business differently and their different priorities and experiences make them great business owners. At the same time, franchisors must ensure that the brand's core values and standards are maintained and franchise audits enable this by giving visibility into performance and improving operations.
Benefits of Implementing Franchise Audits
It's common for many franchise companies to send a district manager to franchise locations to communicate brand standards, answer questions, and ensure success. This has many benefits, such as:
- Implement brand standards: Publishing standards and training programs do not ensure the brand standards will be followed. Merchandising, service, security, and safety standards are most likely to be met when franchisees know there will be multiple checks and verifications.
- Continuous learning: Store employees may be well-trained and have all the right answers, but enhancing customer experience is a continuous process. Audits help assess employees’ skills and strengths on a regular basis and serve as a learning opportunity for them.
- Excellence in operations: Franchisees are constantly pushed to improve their standards and practices by audits as best practices and brand standards are reinforced. Besides, when franchisors put customer-based metrics and Key Performance Indicators (KPIs) at the center of audits, they can see how operations across locations are actually faring. Audits also identify any disconnects leading to orders delayed or lost and enhance revenue potential. Tracking order entries, warehouse pick-ups, on-time delivery percentage, damaged orders, and shipping speeds help perfect order performance and gain customer trust.
- Quality assurance: An audit helps track and prioritize non-conformances for a given food or beverage product, and decide on actions that need to be taken to resolve them faster. Problems with product quality can lead to customer and public relations problems. Analyzing trends based on non-compliance/corrective action (NC/CA), corrective action/preventative action (CAPA), and customer requests and scoring the nonconformances using a quality management system can help determine which quality issues to address first.
- Builds knowledge base: An audit can uncover hidden points of product and process weakness by collecting detailed, robust data. This will help resolve future quality challenges.
- Ensures brand alignment: Franchisees might have different preferences and priorities depending on their experience and sensibilities. There is a need to ensure that core standards and programs that drive a brand's strategy are implemented uniformly. Audits help with this as they align head office expectations with actual ground conditions.
- Ensures customer satisfaction: Operators are brand ambassadors, and if one operator fails to meet the brand's standards, it can hurt the bottom line of all other operators. Franchisee audits help ensure that customer service standards are maintained at every location.
- Attracts franchisees: A brand that prioritizes execution attracts both potential franchisees and clients. Multiple-unit franchisees typically invest a tremendous amount of resources like trade shows and dedicated websites- to attract new franchisees. Potential franchisees are more likely to invest their life savings and time in a brand they consider to be stable and efficient.
- Monitor sales under-reporting: It is a common practice for franchisees to under-report sales, as doing so lowers their royalty fees. Financial audits are important to verify the franchisee’s sales/royalty reports and reconcile them with EPoS data to highlight variances.
Getting the Most Out of Franchise Audits
For franchise audits to be useful and effective across locations, certain considerations need to be kept in mind:
- Perform micro audits frequently: Training programs and employee handbooks do a great job of teaching roles and responsibilities but are not enough. Employees are better taught and kept more accountable with daily checks. Besides auditing quarterly or annually gives a limited understanding of business operations. Keeping franchisees connected and engaged with franchisors is easier by auditing their locations more frequently. That’s why daily checks, as well as monthly, quarterly, and annual audits, are recommended.
- Actionable and accessible: Audit reports are a goldmine of data that can be used by the corporate office to identify common problem areas and build training programs and make data-driven decisions.
- Track corrective steps: Franchise audits identity and correct issues, but if there is no corrective component, it loses some of its value. Identifying actionable solutions and tasks with franchisees helps resolve issues before they turn into patterns that affect customers.
- Compare performance: Reviewing the results of multiple locations together can reveal common failures and successes, as well as possible solutions. Using a tool that lists top problem areas and star performers helps to easily compare franchisee performance and identify areas for improvement quickly.
- Share the success: The key to keeping franchisees motivated is to celebrate their success stories and share them. Making a video of their journey can motivate other franchisees. One of the reasons Taco Bell has managed to flourish despite controversies like racial stereotyping, human rights violations, is because it has built a strong relationship with franchisees, fuelling the company's ability to weather some severe storms.
Schedule a free consultation and find out more information.
Quickly answer a Self-test and evaluete yourself
Quick Self-Audit
This is a quick answer test without any commitment and completely free.
Click on the figure to the side and start the quick test.
Fill out the form to schedule a free online meeting