This franchisor best practice of monitoring total franchise systemwide sales is simple and included for completeness. Please also compare with monitoring comparable sales, a separate best practice. We suggest it important to consider both metrics as important franchisor key performance indicators (KPIs) – as each offers important, but different insights.
Total systemwide sales can generally be defined as all operating unit (whether franchised or company-owned) sales to customers. Clearly this definition is distinct from and will exclude other franchisor income sources, such as franchise fees and royalties, wholesale sales/margin, rebates etc.
Of course, 99% of franchisors will already be closely monitoring total systemwide sales as their income (typically via royalty % based on sales) depends upon it. Monitoring total systemwide sales is also highly valuable as a measure of total market penetration – as any growth in sales demonstrates a degree of success in growing business in the wider market (for example, a country).
Monitoring total systemwide sales is an important practice, and should be considered regularly (e.g., daily, weekly, monthly, quarterly, every six months or annually). However, it should not be considered in isolation. As identified in a separate best practice, it is wise to also monitor and assess comparable systemwide sales.
About the Franchising Best Practice 500 Series
This is part of a series of franchising best practices. Franchize Consultants is sharing and publishing these best practices weekly for the betterment of franchising. We know that better knowledge and execution of franchising best practices leads to bigger and more valuable franchisor and franchisee businesses.
We have assembled the first 40 best practices into The Best Practice Handbook, which is available for purchase.