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Information leads to incentive for franchisees: using an Internet portal as an effective tool helps shape a system-wide ethos of healthy competition.

Spurring a competitive spirit among franchisees is a crucial thing for successful franchisors. It can also be a highly sensitive matter, depending on how you do it. Our company has come up with an Internet portal that, we think, successfully stokes the advantages of inter-franchisee competition while at the same time respecting the preferences and privacy of franchisees who want to focus on beating themselves.

MyVerlo.com serves as a comprehensive, integrated online portal for everyone in the company, from our 250 salespeople, to the 28 owners of our 80 franchised stores, to mid-level management at our headquarters, right up through to our executive offices. Throughout the day and week, the site offers a wide variety of helps to everyone in the system, including online sales training, information about our marketing and advertising campaigns, a count of the number of visitors to our public Web site and templates for e-mail and instant-messaging communications within the company.

But by far the most exciting and productive use of the portal is how it allows franchisees and their salespeople to monitor their individual performances on a regular basis and, to a great degree, see in black and white how they stack up against other franchisees, stores and salespeople in the system. Franchises are ranked together on the site according to measures including their actual sales volume and their average sales ticket. The site also makes available to franchisees projections of monthly and annual sales performance, based on past trends. It also gives franchisees "dashboard" views of real-time store traffic, phone traffic, sales volume (by salesperson) and average ticket trends. This traffic stream is provided by an in-store system we designed and had built by a local manufacturer to help franchisees better monitor what goes on in their stores, even when they aren't in them personally.

Exclusive Data

Franchisees also have another level of information available to them on the portal: data on how each of their individual salespeople is performing in terms of gross revenues, average ticket and other measures. This data on each franchise is exclusive to that particular franchisee and isn't shared with all the other franchisees in the system. Each franchisee decides how much of this information he or she wants to share with his or her own salespeople, so they can benchmark themselves against their peers.

The sharing of this information creates an open and competitive culture that has helped our system achieve growth since we started developing our corporate intranet in 1998. But our expansion has been particularly strong in the last several years as we foster an entrepreneurial spirit among franchisees and salespeople, motivating them to impress upon customers not only the quality and price-performance characteristics of our mattresses but also our customer-satisfaction ethos.

Every 10 days, the portal updates sales information by individual salesperson and by each overall franchise operation, based on point-of-sale data that is provided by the stores themselves. There's never any question about how well a franchise or a salesperson is doing; all the data is available in black-and-white. It helps franchisees evaluate whether their current position is a result of what they're doing, what the company is doing, what the economy is doing or some combination of all three factors. If their average ticket is $600 and the franchisee across the state line is pulling in $925 a ticket, a franchisee knows exactly what challenge is ahead. If our projections show that one of a franchisee's stores is expected to significantly outperform the others, he or she can leverage that information into an action plan for the salespeople at the under-performing stores.

Veil protects franchisees

We stop short of making information available online that would or could embarrass any franchisees or salespeople. For franchisees, for example, we certainly don't post profits or margins, and we don't share sales or other results for their individual stores, only for their entire enterprises; and for salespeople, no one will ever be able to find out on the portal what sort of salary or commissions any individual employee is earning. There remains a veil over certain information that protects franchisees and their employees from useless or destructive pinpointing.

Yet savvy franchisees are able to match the data available on the Web site, put it in the hopper along with their own personal understanding of one another, analyze these and other factors and draw important insights about where their own franchise stands in the pack. There's an informed expectation that allows them to draw some conclusions and make some observations about their peer group of franchises and their own standing within the group and then take whatever actions they deem desirable or necessary within their own operations.

In large part, the way the Internet portal is used reflects our corporate conviction that what gets measured, gets improved: if you continue to monitor your progress on basic measures such as sales and close rates, you'll inherently work to improve them. This constantly helps franchisees measure themselves to their own goals.

Another advantage for the corporate portal is that is becomes the focal point of communications among franchisees, rather than some separate forum that forms outside the organizational umbrella. Within the typical franchise organization, of course, small groups of franchises form for the purposes of sharing information and best practices, overall encouragement or, sometimes, commiseration. What we've done in part with MyVerlo.com is get out ahead of this tendency of franchisees and for them to look at the portal as a way to understand what's going on not only across the company but also with other franchisees. In that way, the portal is a powerful medium for building communications and camaraderie among franchisees and with the central office.

Not everyone needs it

Given the usefulness of sharing performance numbers so broadly, and the safeguards that we have built in, we have had almost no complaints from franchisees about the bulletin-boarding that we offer on the portal. Of course, that doesn't mean that all of our franchisees embrace the information sharing and the technology with equal fervor. For example, Ray Westman, a franchisee who owns three stores between Chicago and Rockford, Ill., doesn't access the comparative information on the portal.

"We're all in different markets, so it's not like the information is about someone who's competing with you across the street and doing better or worse than you in the same market," says Westman. "It's nice to see that you're doing better than some and worse than other franchisees. But what does that give you? It's not going to make me work any harder at doing better because I'm tenth rather than fourth. I'm always going to try to do better because better is better."

Franchisees aren't forced to embrace it or even use the portal; it's just a tool to help them. We keep improving it so that it becomes nearly an irresistible tool to our franchisees. We provide eight online modules that cover a variety of topics, ranging from "sales and body language" to industry-specific subject matter such as "Side-by-Side Selling." Extensive and growing use of these tools by our sales-people systemwide has helped our system improve average ticket over the last four years. Our close rates, which have increased more than 25 percent over the same time period, now are more than double the national average for a sleep shop. And sales of our mattresses with a value of more than $1,000 at retail have tripled in the last four years.

The portal helps our company advance other corporate goals as well among franchisees. For instance, the visitor-traffic counts that we make available on the site help franchisees to understand the importance of our public Web site in generating sales leads. It's important for our franchisees to know that Verlo.com generates more unique traffic for our company than any of our stores does, individually. This trend also reminds franchisees that consumers increasingly are doing their homework before they stop by our stores or our competitors' and that; as a result, they and their salespeople had better know their stuff. The information also helps legitimize our marketing priority of putting our Web site address in all of our advertising and, in turn, helps justify the significant corporate investments that we make in it and the portal.

It's possible for franchisees to know too much about one another. But the way we handle the power of information on our portal, it's become an effective tool for shaping a system-wide ethos of healthy competition.

Dave Young is the president of Verlo Mattress Factory Stores. He can be reached at 262-473-8957 or info@verlo.com.
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Title Annotation:FRANCHISE RELATIONS: TOGETHER TO THE FUTURE
Author:Young, David
Publication:Franchising World
Geographic Code:1USA
Date:Sep 1, 2005
Words:1437
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