The Simple Franchise Profitability Playbook for 2024

Epic Managers helps franchisees hire high-performing unit-level managers After years of costly distractions in our own franchise organization, they learned there are 2 things that MUST be done if you want strong YOY growth.

Before you finalize your 2024 annual plan, read this. This playbook can make 2024 your best year ever!

The Simple Franchise Profitability Playbook for 2024

For years in our franchise organization, our annual plan looked something like this:

  1. Launch fancy new all-in-one HR tech (again)
  2. Redesign employee compensation plans (again)
  3. Shop for a cheaper benefits solution (again)
  4. Increase YOY same-store sales 15% (again)

Look familiar?

After years of rolling out these complex change-management initiatives, we realized they were:

  • Consuming loads of time and energy
  • Distracting our teams from their core mandate – consistent execution of “the process”

It was killing profitability.

Because in franchise, the winning formula is performance = people + process

Most lost profit in a franchise comes from 2 things:

  1. Employees not following “the process” laid out by the franchisor
  2. Managers who aren’t willing or able to drive consistent execution of “the process”

No fancy HR tech or communication platform can make up for that.

For clarity, “the process” is shorthand for the operating standards and customer touchpoints that that are unique to the brand and critical to the customer experience.

So we developed our own simple annual planning framework that kept people + process as the north star. It delivered profit growth beyond our wildest expectations.

Here’s the framework:

  1. Get every store team “on-process” (Jan)
  2. Replace the people who were unwilling or unable to follow “the process” (Feb-Mar)
  3. Launch one key initiative after the team is consistently executing “the process”
  4. Leave space during the year for franchisor initiatives, promotions and unforeseen changes

I’ll break the first two down further:

Verify that every employee knows & follows “the process”

Just because employees learned “the process” in new hire training doesn’t mean they still follow it.

Have each manager meet with their employees in early January to set the expectation that everyone will follow “the process” exactly as the franchisor trains. Then the manager observes “the process” in action to verify compliance.

For example,

  • Service providers performing the service or selling a product
  • Front desk associates selling a membership or package

Based exclusively on these observations, managers rate each employee on an A-B-C player scale:

  • If the employee consistently follows “the process”, they are rated an A-Player
  • If the employee doesn’t know “the process”, or isn’t confident, but they’re willing to commit, they are rated a B-Player and will receive additional training/coaching
  • If the employee knows the process, but chooses not to follow it, they are rated a C Player, they receive corrective action, and will be replaced (quickly) if they don’t change their behavior

NOT following “the process” is NOT an option

Verify that every unit-level manager is driving consistent execution of “the process”

A-players quit if C-players aren’t held accountable by the manager, but 65% of managers say they don’t properly address their C-players.

So, Regional managers and senior leaders need to observe unit-level managers while they coach their employees, including 1-on1s and reviews.

Managers are rated on the same A-B-C Player scale:

  • If the manager has set proper expectations and is driving consistent execution of “the process”, they are rated an A player
  • If the manager doesn’t yet have their entire team on-process, but they are willing and actively working on changing the team’s behavior, they are given a B-player rating and receive additional coaching and support.
  • If the manager allows their employees to “make the process their own”, or chooses not to hold employees accountable for being “off-process”, they are rated a C player, receive corrective action, and are (quickly) replaced if they do not change their behavior.

Not all managers are capable of leading a process-oriented team. Some managers cannot make the transition.

That’s ok – replacing them makes performance, morale and profit go up immediately.

People + process must be addressed first if you want strong YOY growth.

If you’re the type of operator who believes that store teams should only be accountable for their numbers, regardless of HOW they do it, you should sell your business. Or prepare to be endlessly frustrated by inconsistent performance, high turnover, and declining profit.

You might be thinking “our people do follow the process”, but if you have underperforming locations, I guarantee you they’re not. Don’t take my word for it – just go observe them in action, and you’ll quickly see that “the process” as defined by the franchisor is virtually unrecognizable. And when you see that, smile – you now have a clear path to vastly improved profitability

To be clear, this effort is simple but not easy.

Galvanizing teams around “the process” and finding high-performing managers takes commitment and investment. But if you see it through, you’ll LOVE the way your P&L looks. The best operators and managers understand that in franchise, performance = people + process.

These insights are proudly NOT written by ChatGPT. #franchise

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