TURNING INFORMATION INTO RESULTS
in this article:
June 2008 - Lorraine Lord investigates a system that helps franchisors and franchisees not just measure their results but actually understand how their business works
Buying a franchise is one thing but that's just the beginning of the journey. It's only once you have a basic understanding of how the business runs that you can start to appreciate how it actually works and what you can do to improve it.
Having the right information is key to managing any business, but there's more to it than collecting data. You have to be able to use that data, compare it easily and make decisions based upon it. That's where franchisees and franchisors often face major challenges. In this article, we look at how a new business information system is helping New Zealand franchisees.
Every franchisor wants the best possible information on how each franchisee is performing. Every franchisee wants advice on how they can improve their bottom line. But nobody wants to spend hours entering data and analysing columns of figures to make that happen.
The frustrating thing is that, often, this information already exists. It's keyed into electronic Point of Sale (POS) systems whenever a sale is made. The difficulty is in accessing that information in a useable form. Franchisees are just too busy to go over their till rolls every day and pick out certain statistics. Yet without that data, the franchisor cannot have a clear picture of the whole business and the franchisee can't access the information they might need to grow their business.
The challenge, then, is to find a way to access that POS information automatically, to present it in a comprehensible form and to combine it with benchmark data in a flexible way that enables analysis. Franchisors and franchisees both want to know how a store is performing against historical figures, against budget, against group averages or other stores. The more quickly and easily such information can be delivered, the better able the franchisee is to respond and maximise their performance.
Columbus Coffee faced these challenges several years ago. ‘We looked at the commercially-available systems but they were either unstable, cumbersome, or didn't suit multi-outlet businesses,' says Nathan Bonney, the franchise's business manager. ‘After searching for 2-3 years, we knew exactly what we wanted so we decided to build it from scratch. As one of our franchisees, Milos Pejovic, is a software developer, he and Columbus franchisor Graeme Tait got together to create something that truly met the needs of a retail franchise such as ours.'
The resulting system has been endorsed by Casio, which provides the tills used throughout the Columbus chain, and is being made generally available to franchise and other multiple-outlet operations (see www.summa.co.nz). Columbus Coffee generously allowed Franchise New Zealand access to their own system to see how business information can help franchisors and franchisees.
The program, known as Summa BI, takes information directly not just from Casio but from other till systems and PC-based systems and slots it into a database. It then presents the information in a user-friendly fashion with the most important information appearing on a one-page ‘business dashboard' (see illustration) that gives each franchisee a daily picture of exactly how their business is performing. This includes month-to-date sales vs. last month, last year and budget; top 15 product sales; sales by department; and a four-weekly rolling average of daily sales. Franchisees can then drill-down from that page to access detailed information on specific topics, whether that be sales mix, staff performance or whatever, and see how those figures compare to their own budget or system-wide averages. The franchisor can access all this information not only for each store but on a system-wide basis and make appropriate comparisons.
‘Taking data straight from the tills means that no extra work is required to keep the information bang up-to-date,' Nathan explains. ‘Using graphs and charts means that franchisees can instantly see trends, opportunities and danger signals. The whole system is Internet-based so franchisees can access it any time, from anywhere, and need no special software or in-store computers.'
But does it really make a difference? We sat down with Nathan Bonney and Columbus franchisee Danny Wrigley to see how having good information can help franchises improve their performance.
For Nathan, the Summa system has made life a whole lot easier. ‘We were always able to get raw product detail from individual stores, but actually putting that information into useable form to extract management information was very time-consuming. You had to really want the information to be prepared to put the effort in. But now, say we wanted to compare sales of large and small flat whites in mall locations versus high street sites. I can literally do that in seconds and the information won't just present as a series of numbers - it will show as a graph which makes spotting anomalies so much easier. It's those anomalies that might point to a problem in one particular store or an emerging trend we need to reflect in staffing or stock levels.'
Nathan identifies a number of ways in which the system helps improve the service the franchisor can offer. ‘First, we have access to an incredible depth of information that we can use to help franchisees budget, plan and develop their businesses. I had two new franchisees in the office yesterday and we could review their sales, look at their hot sales items and then compare them with the system as a whole and, specifically, other stores in similar locations. I was able to say, "Look, stores like yours have found xyz product good - why don't you try putting that on the menu?" When you have all the facts and figures, such discussions are very straightforward.
‘Second, the system helps franchisees to understand their business better. The relation between volumes, product margins and speed of turnover is not only obvious when it's well-presented but is actually useful when it's constantly monitored and up-to-date. The system has been designed to emphasise key measures: for example, if your sales figure is within target parameters, it will be highlighted in green, if it's just outside then it will be yellow and if it's well off it will be red. That's not something you only find out at the end of the month - it's something you can see right now, while you still have the opportunity to do something about it.
‘Third, it's a huge help in preparing for meetings. The franchisor team all review the dashboard every morning so everyone is aware of what is going on and can follow up anything of interest. We visit each franchisee every 4-6 weeks so we review performance in advance, see it in the context of other stores and plan discussion points. These may result in menu updates, staffing changes or additional training. And, of course, if a franchisee rings with a query, you can bring up all the data on your screen in an instant and see what they're seeing.
‘It also helps us to understand exactly how all the different franchises operate. Every franchisor knows that every franchisee says, "But my site's different," and that's true up to a point. With Summa, though, we can quantify those differences and we can see where the similarities are, too. Because the franchisor team has access to that information, we can organise our support services on the basis of specialist skills rather than having general field staff responsible for a particular group of franchisees or a geographical area.'
But Nathan thinks the best feature of all is that it turns the numbers that make up the business into something that franchisees can see and use. ‘Our business is about people, and we choose our franchisees because of those skills, not because they are number-crunchers. Summa uses technology in a way that engages people.'
For Danny Wrigley, having access to real-time information is an essential part of running a store. Having worked for Burger King's operations team for eight years, when he and his wife Tracey bought an under-performing Columbus Coffee store they recognised that in order to turn the business around they needed hard facts as well as hard work. Fortunately, their purchase coincided with the initial trials of the Summa system and Danny has since been an enthusiastic supporter of the system and a keen contributor of new ideas.
‘The dashboard gives me access in one place to all the information I need and presents it graphically, which helps me to interpret it. It's a great tool that really adds to your management ability - but it doesn't replace it. You really need to know your business so you can spot patterns and plan for them. For example, on days when you regularly get a low average transaction value but a high customer count, you're going to be selling a lot of coffees so you need to roster on your best barista team and buy more milk.' And, as he says, being able to relate who is on duty when to sales levels, wastage and use of discount cards or till voids also helps protect against fraud (see page 97). ‘We haven't had a problem here but just knowing that we can do it acts as a deterrent.'
Danny also values the ability to look at his store's performance against group averages as a whole. ‘I might see that we're selling fewer large flat whites than other stores this winter, so I'll talk to the staff about that and we'll discuss ways to improve sales. A few days later I can show them the number has gone up and they know they've made a difference - we all feel good.
‘Equally, if you can see that other stores are achieving greater efficiencies of staff or stock then it encourages you to look for savings yourself. You can't see individual stores' figures, but you can ask the franchisor to run comparisons against particular types of store - for example, in other malls - so you can check whether you really are out of line or whether it's just because of the type of store you have.'
Columbus Coffee's 25 franchises operate in a huge variety of locations, from malls to high streets and large stand-alone sites in office complexes, and each has its own dynamics as a glance at the sales per table, per chair and per square metre charts soon shows. Franchisees also have the freedom to develop menu products outside a core range to help them maximise sales in their individual market. ‘This is another area where a good business information system is vital,' Danny says. ‘I can quickly see my mixes and margins and profitability of any product. The skill then is in learning to use that information. The dashboard tells me what's selling but only I can judge what's worth selling - and that's where I'll direct my efforts.'
According to Daniel Cloete, having access to timely, accurate and above all useable business information is one of the major factors in generating business success. As a former retailer himself and now national franchise manager for Westpac, Daniel has spent a lot of time looking at figures and analysing what they mean. ‘Franchisees are often selected for their people and sales skills rather than their numerical talents,' he smiles. ‘But I have never met a top-performing franchisee who did not have a very good understanding of what drives their business and where their profits come from.
‘A good business information system can help all the franchisees within a network achieve that same level of understanding. Knowing the figures, seeing the trends and being able to react quickly gives franchisors and franchisees the ability to fine-tune every aspect of their businesses and achieve peak performance.'
This material is copyright © Franchise NZ Marketing Limited, Franchise New Zealand ™ magazine and Franchise New Zealand On Line . While it may be downloaded for personal use, no part may be reproduced in any form whatsoever without the specific written permission of the publisher.