Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Peer Benchmarking to Boost Margins
Transcript
- Lucas: If you own two or three franchise units, you probably know your numbers cold. But if you own twelve — and I've talked to franchisees who own thirty, forty, even a hundred — it's easy to miss which stores are quietly bleeding margin. Luna: Especially when the franchisor gives you a standard P&L that averages everything out. A good store and a bad store can look the same on paper. Lucas: Exactly. And that's where peer benchmarking comes in. Instead of comparing yourself to some industry average or last year's numbers, you compare your individual stores against similar units within your own network. Same brand, same region, similar volume. Luna: So it's like a yardstick that's actually relevant. Not 'the average quick-service restaurant has a 30 percent labor cost,' but 'my store in Oak Park has a 32 percent labor cost while my store in Evanston has 28.' Lucas: Right. And that specificity is powerful. I was looking at a case study from a multi-unit franchisee in the Midwest — runs twelve sandwich shops under a national brand. They started using a benchmarking platform called FranConnect. It pulls data from their POS, their labor system, their inventory management — and generates dashboards comparing each store on about twenty metrics. Luna: What kind of metrics? Lucas: Labor as a percentage of sales, food cost, waste, average ticket, customer satisfaction scores, speed of service. The key is that they're all normalized — so a store that does $40,000 a week gets compared to other stores doing $35,000 to $45,000, not to the $80,000 location downtown. Luna: That makes sense. Because otherwise you're comparing apples to oranges. A high-volume store in a busy downtown is going to have different dynamics. Lucas: Exactly. And this franchisee found that three of his twelve stores were in the bottom quartile on food cost. They were running around 33 percent, while the top stores were at 27. That six-point gap was costing him roughly $1,800 a week across those three stores. Luna: Wow. So nearly $100,000 a year. And he wouldn't have caught that just looking at the aggregate P&L. Lucas: Probably not. So what did he do? He dug into those three stores. Found that one was over-portioning — the manager wasn't using the scoops properly. Another was throwing out a lot of expired product because the inventory rotation was sloppy. The third had a theft issue — one employee was giving free food to friends. Luna: And benchmarking surfaced that. Not as an accusation, but as a flag. 'Hey, this store is an outlier, go look.' Lucas: That's the key — benchmarking doesn't solve problems, it tells you where to look. He fixed all three issues within two months. Average food cost across those stores dropped to 28.5 percent. That alone added about $70,000 to his bottom line. Luna: And he probably improved customer satisfaction too, because portion consistency matters. So it's not just cost cutting — it's quality control. Lucas: Absolutely. And here's the interesting thing — he didn't fire the underperforming managers. He showed them the data and asked them what they thought. Most of them were surprised. They didn't realize they were that far off. Once they saw the benchmark, they self-corrected. Luna: That's the psychological shift. It's not top-down discipline. It's transparency. 'Here's how your store compares to your peers.' Most people want to perform well — they just need to see the scoreboard. Lucas: And that's why peer benchmarking is different from franchisor reporting. The franchisor will tell you if you're below the system average, but they're often looking at the whole brand — including stores in different states, different real estate profiles, different traffic patterns. Peer benchmarking lets you slice by what actually matters for your specific situation. Luna: So how does someone get started? Is this only available through platforms like FranConnect, or are there simpler ways? Lucas: There are a few routes. FranConnect is popular — it integrates with most POS and labor systems. Another is Restaurant365, which has built-in benchmarking. Some franchisees just build their own spreadsheet. If you have ten stores, you can manually enter labor and food cost percentages each week and compare. It's not fancy, but it works. Luna: And the franchisor might even provide some of that data. Some brands share store-level metrics in a quarterly review. You can use that as a starting point. Lucas: Right. But the real value comes when you benchmark frequently — weekly, if possible — and when you share the results with your managers. One franchisee I know sends out a 'leaderboard' every Monday morning. He doesn't name the bottom store publicly, but every manager sees where they rank. The competitive energy is real. Luna: I can imagine. Nobody wants to be in the bottom quartile every week. It's like a sales contest, but for operations. Lucas: Exactly. And the improvements compound. Once you get food cost in line, you start looking at labor. Then customer satisfaction. Then speed of service. Each metric you benchmark gives you another lever. Luna: But there must be pitfalls. What if a store is in a tough location — bad traffic, older equipment — and it's never going to benchmark well? Lucas: That's a real issue. You have to compare apples to apples. If a store is in a declining strip mall, comparing it to a store in a new development isn't fair. So the best benchmarking systems let you tag stores by type — urban vs. suburban, drive-thru vs. no drive-thru, leased vs. owned. You create peer groups that make sense. Luna: So you're not just comparing all twelve stores. You're comparing the three urban ones against each other, the five suburban ones, and so on. Lucas: Exactly. And that's where the nuance comes in. A store can be a top performer in its peer group even if its absolute numbers look lower than a high-volume store. That's still a win. Luna: I also wonder about data quality. If the POS or labor system has bad data, the benchmark is useless. Lucas: That's a huge caveat. Garbage in, garbage out. You need to make sure your data is clean — that labor hours are recorded correctly, that inventory is counted accurately. One franchisee I spoke with spent three months just cleaning up his data before he started benchmarking. But he said it was worth it because once the data was reliable, the insights were immediate. Luna: So the first step might be to audit your own data collection. Make sure every store is using the same procedures for clocking in, counting inventory, entering sales. Lucas: Right. And then start small. Pick one metric — maybe food cost — and benchmark that for a month. See what you learn. Then add labor. Then add average ticket. You don't have to do everything at once. Luna: We should probably mention that this works beyond quick service. I've seen benchmarking in home services franchises, fitness franchises, even senior care. The principle is universal. Lucas: Absolutely. A home services franchisee I know benchmarks his technicians on jobs completed per day, customer callback rate, and average revenue per job. He compares teams in similar territories. Same logic. Luna: And I'm guessing the return on investment is pretty high. Most of these platforms cost a few hundred dollars a month. If you find one profit leak, it pays for itself. Lucas: Easily. In that Midwest sandwich case, the franchisee spent about $400 a month on the benchmarking software. He saved $70,000 in one year on food cost alone. That's a 14-to-1 return. And that's not counting the improvements in labor and satisfaction that followed. Luna: That's the kind of number that makes you wonder why every multi-unit franchisee isn't doing this. What's holding them back? Lucas: I think part of it is fear. If you benchmark, you might find out that some of your stores are performing poorly. And then you have to do something about it. It's easier to stay in the dark. But the best operators — the ones I've talked to — they want to know. They'd rather find the leak than let it drain their margin. Luna: And there's also a mindset shift. It's not about punishing underperformers. It's about giving them the data to improve. Most managers want to do a good job. They just need to know what 'good' looks like. Lucas: Exactly. And when you frame it that way, the resistance drops. You're not auditing them. You're giving them a tool. It's collaborative. Luna: We're obviously big believers in that approach — giving people useful tools and data, without any agenda. Speaking of which, that's actually why we keep this podcast ad-free. We don't run sponsorships or sell your attention. If you find value in episodes like this one, and you want to support keeping it that way, you can do that at buy me a coffee dot com slash fexingo. No pressure, just an option. Lucas: Yeah, and it genuinely helps us stay independent. Every contribution goes right back into producing these conversations. So if that matters to you, the link is there. Luna: Alright, back to benchmarking. One last thought — for someone listening who owns three units and wants to start today, what's the single best piece of advice? Lucas: Pick one metric that matters most to your margin — for most restaurants that's food cost — and create a simple weekly spreadsheet. List each store, its percentage, and the peer group average. Share it with your managers every Monday. Ask them what they see. You'll be surprised how fast things change.