Data-Driven Growth: Don't 'Wing it'

Business strategies to help scale your franchise system.

By Sam Ballas, CFE

East Coast Wings + Grill began franchising in 2004, with the first franchised unit opening in 2005. Since then, the brand has grown to more than 40 operating locations with additional units in development to sustain an annual 15 percent to 20 percent new-unit benchmark. Growing quickly, though, has never been the brand’s focus. This may be counterintuitive to most franchise models but has proven to be one of the biggest reasons for our success.

While many franchisors get swept up in the need to build revenue – in many cases, due to the lack of capital – it’s important to understand that rapid development doesn’t always equate to more sales and success. To optimize system performance and achieve sustainable, long-term growth, a franchise system should grow strategically and at a manageable pace. This is achievable through the development and implementation of data-backed business strategies that, with the right foresight, resolution and patience, can help any franchise system grow responsibly.

Develop Your Benchmarks

The information gained from unit-level economics will help drive development decisions and serve as an excellent selling point to potential franchisees. The question becomes: How can you leverage unit-level data to maximize and map future growth opportunities? A great place to start is by creating a proprietary measurement system unique to your brand. Devise an algorithm based on key performance indicators (KPIs) and ironclad benchmarks. This will help your system determine what operating and sale standards should look like or closely parallel at every location.

The KPIs to which you attach numerical value will depend on your specific franchise. For example, being a full-service restaurant brand, East Coast Wings + Grill weighs metrics like guest count, customer-based surveys, ticket times and product consumption. Regardless of which ones you choose to focus on, your KPIs and subsequent benchmarks will identify units that aren’t performing up to par, giving you the opportunity to address the issue appropriately before it becomes a real problem. It’ll also show what high-performing units are doing differently, and those practices can be applied to existing and future units to better optimize performance.

A sustainable franchise growth plan begins and ends at the local level. No matter how you choose to measure KPIs and create those ironclad benchmarks – through your own franchise or with the assistance of a third party – ULEs equip corporate and franchisees with the information they need to plot, build and develop a healthy system.

Data-Driven Site Selection

It’s a franchisor’s responsibility to put the brand in the best possible position to succeed. Instead of concerning yourself with the number of doors you can open at a certain pace, focus on improving the processes for site section. That means actively dissecting the predictive consumer analytics, such as psychographs, to gather pertinent data that not only tells you who the consumer is, but also: what they care about; their purchasing habits and behaviors; how often and how much they’re spending; and where they are spending.

You want to cross-reference accurate data against your business model and the goods/services you provide. This information will tell you where your customers live, how they’re interacting with similar concepts, when they’re making purchases and so on. One way to achieve this is through credit card data. This will tell you more precisely what markets are most advantageous for site selection and give you a better indication of whether a given location would benefit your system and a potential franchisee.

Additionally, if a franchisee wants to invest in a specific area but the analytics show a strong potential for low-unit volume, you’re now armed with the right information to save you and them time, money and emotional investment. Collecting and utilizing data in the site selection process will pay dividends over the long-term growth of your system.

Numbers Extend Trust

The hallmark of any great franchisor-franchisee relationship is trust. Franchisees want to know that they are investing in a reputable franchise with a proven track record and nimble systems in place. It is essential to maintain a great franchisor-franchisee relationship to execute the model successfully. Prudent franchisors want to know that franchisees will embrace systems and protocol, and ultimately execute with excellence. Healthy numbers and data-driven decisions speak volumes toward establishing that kind of trust and confidence between the two parties.

For example, some franchises believe that an increase in features or expanding the floor plan will attract more consumers and drive sales, making their franchisees happier. However, at East Coast Wings + Grill, we reduced in-store square footage by 27 percent for all new locations, because we saw where the data was pointing. These locations are elevating the overall guest experience and franchisees are capitalizing on the 30 percent reduction in development costs. This has allowed us to operate and develop more efficiently and at a lower cost, while experiencing similar (if not better) revenue streams – which drives a larger EBITDA and shows franchisees that we genuinely care about them and their store’s continued success.   

Mutual Benefit

If a franchise can establish this mutual trust and demonstrate a commitment to utilizing concrete numbers and sales data, it serves to bolster the brand and franchisees, in turn, become our advocates. Companies will begin to see franchisees reinventing in the model and potentially generate more referral leads as franchisee excitement for the brand and lifestyle catches attention.

Every franchise is capable of creating and using data-driven strategies. It’s the most effective approach to achieving healthy and sustainable long-term growth for any franchise system. As a franchisor, you want to provide as much certainty in the decision-making process as possible. With trusted data, you can do that.

Sam Ballas, CFE, is Founder and CEO of East Coast Wings + Grill and is a member of the IFA Board of Directors. Learn more about East Coast Wings + Grill by clicking here.