When I attended my first convention as a franchise business owner, I felt like a freshman on the first day of high school. Many people knew each other and warmly offered handshakes and hugs. I knew almost no one. I also noticed how many of these people had multiple ribbons hanging from their nametags indicating all the ways in which they were special. “Multi-Unit,” “Award Nominee,” “Million Dollar Club.” I had one lonely green ribbon that said “franchisee.” I’d soon learn that some ribbon-adorned owners really were “wealthy franchisees” while others were peacocking. At that first convention I couldn’t tell the difference. And when I compared my business to what I perceived their business to be, I felt inadequate.
Comparison is a common practice in franchising. Your ranking relative to other locations is one of the key indicators of business performance. It lets you know who’s succeeding and hopefully why. It also provides context for your performance. A slow month for just your business means something very different than a slow month for the entire company. If your sales are down, there’s an issue unique to your restaurant. If the whole brand is down, there’s a larger issue. It’s important to know the difference.
Comparison is useful when it reveals truth about performance. If one restaurant in your system is doing 20% more in sales than another and the only difference between them is that the first one does more marketing, it’s easy to draw a conclusion. If restaurants located in colder climates are outperforming warm locations, that’s also useful information. Comparison is great when it sheds light on what’s happening. Scientific method relies on the comparison between a control and a variable. That how we get objective data. It’s how we learn the truth.
But comparison can distort the truth when we don’t have all the information. Too often we guess what’s going on. Through this subjectively, we draw wrong conclusions.
When I was a franchisee, I could see my weekly and year-to-date rankings in gross sales at the local, state, and national levels. I’m a numbers guy, so I watched these rankings closely.
The concern was that I really didn’t know how to interpret these numbers. What did these rankings actually mean? It’s easy to assume that top-ranked locations are running better. But gross sales don’t tell the whole story.
One top-ranked franchisee shared with me that 70% of his business comes from just two corporate clients. I give him credit for earning these accounts, but it wouldn’t be accurate to say he’s built a great business. His number one ranking doesn’t reflect his vulnerability.
Another multi-unit franchisee revealed to me that he redirected business from two of his locations to the third just to drive up his ranking. For one week, he could brag that he had the number one store in the state. You can guess how his other two ranked.
I’m not suggesting that gross sales aren’t an important metric. They’re vital. They tell us who’s getting the most revenue. Hopefully they’ll also explain why. It’s helpful to know what’s driving sales. If looking at others gives you replicable ideas to improve your restaurant, then by all means, do it. That’s constructive. But if comparison is distorting the truth or causing you to feel bad, it’s a problem.
Filling in the blanks
There are many reasons why other restaurant locations might outperform yours. When you’re not certain why, it’s tempting to guess. Here are possible interpretations you might have:
- “They have a better location.”
- “They’re marketing more.”
- “I’m facing more competition.”
- “Our franchisor favors them.”
- “I don’t know what I’m doing.”
The truth might be none, one, or all the above. It’s important to find out. You can’t learn from someone unless you can correctly identify the key factors influencing their performance.
When my franchises rose in the rankings, many attributed our success to geography. “I wish I had locations like yours,” some would say. Our locations were good, but there were plenty of other factors they neglected to consider, such as our customer service, our marketing, and our online reviews. Unless they replicated those elements, it wouldn’t be scientifically sound to assume our geography was the difference-maker.
Choosing your reference points
Is your house big or small? It depends on the houses you compare it to. A moderately sized home on a block of mansions will look small. The same home in row of two-bedroom ranch houses might seem huge. Size is relative.
Without objective measures for performance, we look to other franchisees to gauge how we’re doing. But which franchisees make for the most useful comparison? Do we look to those operating in a similar territory? Should it be those in business for the same length of time? Or do we just look at the top sales leaders in the system? Each of us chooses which franchisees to use as our yard stick. That choice impacts how we see our own performance.
A franchisee doing $2 million in sales may feel bad when she compares her restaurant to one doing $4 million. But she could just as easily make the comparison to a location doing $800,000. If we feel entitled to $4 million or believe that’s the standard, it going to make us feel bad.
The franchisees you compare yourself to are called targets. Upward targets are people you perceive as superior or more fortunate. Downward targets are those you see as inferior or less fortunate. The $4 million franchisee is an upward target and the $800,000 franchisee is the downward target. Both have an effect on your psyche.
Downward targets can make you feel better about your circumstances. “Wow, at least I’m not in that situation.” These comparisons increase your gratitude. If you’re empathetic however, they can also make you feel sad.
Your responses to upward targets are more complicated. Sometimes they can inspire you. This is especially the case when it’s someone you can relate to. “If she can do it, so can I.” Seeing one of your own accomplish something confirms it’s possible. That makes them great role models.
Some franchisees miss out on the inspiration by focusing on the differences between themselves and their upward target.
- “I don’t have the location they do.”
- “I’m not like him.”
- “She just got lucky.”
These conclusions, often wrong, reinforce their self-doubt. And if they compare themselves to the upward target rather than focusing on behavior, they’re bound to drop deeper into the darkness.
No matter how upward targets make you feel, comparing yourself to them can be harmful if you don’t have all the data. Your role model may not actually be the success you think they are. Many of are false idols. Your perception of them may be completely off, in which case following their lead may be dangerous. That franchisee grossing $4 million might be spending $4.1 million on marketing. They might be paying much higher rent. Maybe they’re working themselves to death. Perhaps their personal life is in shambles. Unless you know the true costs of their gross sales, you really can’t measure their success. Your upward target may not be “wealthy” at all. The most successful franchisees in your system with the highest profit and the best lifestyles may be doing it quietly, way down in the rankings. It’s hard to know who’s really thriving.
Using upward targets to improve
Studying the top franchisees is your system can be immensely helpful provided you focus on ideas and not on identity. Whom they are is less important than what they do. The objective is to identify action steps you can replicate. What are they doing to bring in more customers and increase ticket size? How are they marketing? Where are they finding new employees? Zero in on actionable ideas.
But don’t dwell or their circumstances. You’ll always find another franchisee who seems better off. They have a superior location. They have less competition. They have more sunshine. It’s easy to make assumptions about why they’re outperforming you (if they really are). It does you no good to focus on factors out of your control. Others’ advantages are irrelevant to your business when you can’t replicate them. So don’t even try. Play the hand you’ve been dealt. Run your restaurant. Borrow others’ ideas to do more with what you’ve got. You might find you have all you need.
Comparison can be very helpful for you to gauge and improve performance. Just make sure you focus not on who others are, but on what they do. Then focus on what you can do better.
Scott Greenberg is a speaker, writer and business coach and the author of The Wealthy Franchisee: Game-Changing Steps to Becoming a Thriving Franchise Superstar. Find more information at www.scottgreenberg.com.