September 2015 Living Large: How Three Brands Crunch Big Data
BY BETH EWEN
The subject of this month’s Living Large column is big data—how to use information to boost franchisee performance. The problem is taking a firehose of numbers and filtering out the most important.
Big data, this month’s Living Large subject, was right up Nancy Bigley’s alley. “I was so excited about this topic, which is maybe scary,” says the CEO of Bottle & Bottega with a laugh. “I love data. It’s the thing that makes me light up. It tells you a really great story” and allows for better business decisions.
The trick is choosing the right data points to share, in the right way, to avoid overwhelming operators. And that’s not always easy. Bigley recently identified five top data points she wanted to add to the dashboard her franchisees can access to gain real-time information.
“I have a list of about 18 things. I wasn’t planning to put them all on the dashboard, but I wanted to see how aligned we were with the franchisee,” Bigley says. She sent the list to her franchisee technology committee, and asked them to choose their top five that would help them drive their business.
“We only were aligned on two out of the five,” Bigley says, “which was surprising but also interesting. I got on the phone and said walk me through this, because I was surprised.” It turns out the operators were interested in more comparisons with prior years, whereas Bigley wanted to drill deeper into data points about guest frequency numbers, for example.
“They felt like it wasn’t important to look at every single day,” Bigley says. “I really thought about it after the call and I thought, you know, they’re right. You can track data, but if it doesn’t mean anything, if you’re behind your target but you don’t know how to get to your target, then you’re just collecting information that’s frustrating.” Bigley is now preparing a different mix of data than she originally thought.
Bigley also shares numbers with franchisees on a monthly basis, including same-store sales and product mix, split between mobile art-and-entertainment parties and bricks-and-mortar events.
“I do a monthly post for them and I do Nancy’s Notes, which is a newsletter that says how we’re doing against our targets,” she says. She lists the top five-performing studios, with the rank but not the actual numbers, to foster competition but not embarrassment for those not doing so well.
“They’re very competitive and they want to see it,” she says. “We want to be competitive, but it’s also about helping each other. That’s also why I like to list multiple people. What we say is, if you want to get to No. 1 or 2, you should call these people” with high ranks and ask them how they did it.
To Bigley, data will always be important. “The trick is getting the right data to track, because there’s so much,” and watching real-time data can just suck up valuable time. “Some of our franchisees get so much in the weeds,” she says, and that’s when she’ll counsel them against the siren call to “refresh, refresh, refresh” their dashboard, which “can be addicting.”
Even a data enthusiast like her knows when to call it quits. “Step away from your computer and go out and talk to people in your market,” she’ll advise.
Wild Wing Cafe is still an emerging chain, with 41 restaurants and counting, but it can act much larger in at least one way.
“Even smaller chains like ours—technology is available to help us provide information that large companies provide. That’s the good news,” says Tom Lewison, CEO.
In the past, most analytic tools and metrics were proprietary, he explains, developed in-house, whether it was calculating the cost of goods based on recipes, or forecasting the associated items that sell well with something like a kid’s meal.
“That information used to be difficult to find out,” Lewison says, but no longer, as many third-party software providers sell systems that can mine data.
“But here’s the other side of the coin. It’s still difficult to determine what’s best for your chain. You still need to customize to some degree.”
The first component in Wild Wing Cafe’s scheme is a point-of-sale system that’s mandatory for franchisees. Wild Wing automatically collects data and puts it into a data warehouse, using templates for analysis.
The second step is using that data to calculate the health of each restaurant. Same-store sales, of course, are compiled on a daily and weekly basis, compared to the same period the year before. That gets broken down further into day parts, and into categories such as food, beer, wine or liquor. “And we also include transactional information regularly,” Lewison says. “You can have average check increases, but losing transactions is a very serious thing.”
A third component is what Wild Wing calls a weekly operations summary focusing on net income, which tracks cost of goods, labor and “some other direct, controllable items so you can get a feel for what your profit looks like at the end of every week, prior to getting a P&L at the end of every period.” That back-of-the-house system is available now for corporate-owned stores, with other tools provided to multi-unit franchisees who wish to use them.
Lewison praises the POS systems available today as far better than the bad old days when franchisees had to submit their own sales report along with a royalty recognition rate they had to calculate. “Those days are way gone,” he says, including for the franchisor who had to conduct the dreaded audit. “And how fun do you think that was, to walk in and say, we’re going to audit your sales.”
The danger is buying a POS system that franchisees come to hate. “You can buy one today that’s antiquated in six months,” Lewison says, and to avoid that he looks beyond the vendor’s software, and examines its leadership and potential for longevity. “You’re buying licenses and upgrades. If the leadership is not forward-thinking, you’re gong to have outdated technology quickly.”
Every couple of years or so, he invites in a few vendors to see what they’re offering, if nothing else to keep current vendors on their toes. “We believe competition is the spice of the free enterprise system,” Lewison says.
Wild Wing Cafe’s newest data-gathering tool is called Voice of the Guest, provided by a company called Shared Insights. “How neat that we’re going to get it,” he says. “You think of a mystery shopper program of old, that costs about $45 a shop plus whatever the meal was, and then you get a snapshot picture. For much less than that we can get much more” from this new tool, he says.
Lewison acknowledges other chains are “way ahead of where we are” in technology, but he’s fine with that. “We’re not on the cutting edge, and that’s not one of our stated objectives. But my analogy is, if I buy a new golf club that’s last year’s best model, it’s pretty good and it’s less expensive.”
He expects Wild Wing’s next step to be into wireless point of sale, which is more affordable than standard point of sale terminals but has tougher security compliance requirements. “A tablet is $500 rather than $1,500 for a terminal, and it’s portable, and by the way the franchisee and the operators think it’s pretty cool.” Staying cool, affordably, will remain the goal.
All about face time
“It’s on top of our mind all the time,” says Lenny Verkhoglaz, CEO of Executive Care, about using data to help franchisees drive performance. They’ve identified three key metrics around building relationships.
First, a franchisee should see roughly 40 faces a week at potential referral sources such as hospitals and nursing homes. “We ask them to keep up with that number for a number of months until they build up their business and find the right person in a company they can work with to get referrals,” he says.
The second metric is how many of those “face visits” turn into phone calls to the office. “The bigger the marketing effort outside, the more phone calls can come in,” he says.
Although there is no hard and fast rule, in about four to six months owners should be getting five to 10 calls a day from customers inquiring about their home healthcare services.
Verkhoglaz insists his franchisees hire a salesperson to do those marketing visits. “That’s because owners say, I don’t feel like doing that today. We require our franchisees to hire experienced sales staff. This way they’re accountable. We like to see consistency out there in the field,” he says.
The third metric is conversions to customers from those calling in. “How effective is the person in the office in scheduling the visit with the client, to explain the service and get the person signed up? If those steps go well, it’s a 90 percent chance the sale will be closed.
“We can spot bottlenecks. For example, if the person does well outside and calls are coming in but there’s no sales, then something is going wrong,” he says, citing a recent example. One of his franchisees had a marketing person who was doing an excellent job with face-to-face meetings, but no phone calls were coming in. “We came to the conclusion at the same time as the owner that the person inside the office isn’t good. So she is changing out the team this week,” he says.
Executive Care shares those key performance indicators across the system, posting them once a month with each franchisee’s numerical rank, but not naming which office it actually is. “So if office No. 1 is doing extremely well, and No. 5 is not, we encourage them to call us and we’ll put them in touch with each other,” Verkhoglaz says.
Labor costs are another key metric. “Our business is based more on variable costs, because as the number of clients increases so does the number of caregivers, and compensation goes up,” he says. “We help our franchisees keep an eye on that.”
The final “huge” metric for Executive Care is client satisfaction. They use a third-party vendor called Home Care Pulse, which interviews 10 percent of clients and caregivers every month “to get a pulse on our operations. It’s a very thorough service,” which franchisees receive through a systems fee that equals 1 percent of revenue. The vendor does the same for competing homecare companies and shares benchmarks across the industry.
Verkhoglaz believes those metrics, if tracked religiously, will lead to success. “I’m speaking from experience because we figured out what is important and what is not,” at their corporate-owned homecare company. “Our franchisees are busy, conducting their own business. We don’t want to cloud what’s really important.”