Every multi-location operator has checklists, SOPs, and logs, that they develop to standardize their operations across all locations every shift.
Having these processes is the only way to set a brand standard, and to provide a consistent guest experience to your customers at every location.
The issue operators face isn’t having processes, it is that the employees and franchisees aren’t using these tools on a daily basis as they were designed. The average operator hovers below a 20% completion percentage.
The cost of NOT following these processes diligently is lower customer satisfaction, less sales, and profits over time.
When a location is held accountable for following procedures, they are more prepared, faster, and less likely to make controllable mistakes with customers. This results in less bad customer interactions and more satisfied customers. More satisfied customers result in more sales and profits.
We’ve made this argument for years and, quite frankly, it has fallen on deaf ears. People don’t associate doing a checklist with sales, profits, and customer satisfaction. Let’s explore why operators don’t associate process compliance with sales and profits.
- Still Operate: you can still operate, I would argue not as well, if you don’t do your checklists before your shift.
- Sales and Profits: there are a ton of factors that affect sales and profits at a location. It’s hard to say one thing has a bigger effect than any other.
- Data Lag and Trends: changes in operations don’t show up immediately in Sales and Profits, it can take weeks or months for a trend to appear.
- Operators Don’t Know What They Don’t Know: there is a lack of historical data within their businesses to prove that following operations procedures consistently can change the business for the better.
You Can Still Operate: Daily operations process compliance on paper can’t be measured easily. We’ve seen the numbers when a company isn’t actively managing its process compliance and it hovers in the 3% to 20% range. That 20% equates to only doing 2 out of 10 required processes. What is happening operationally to your business when your teams skip 8 of 10 readiness/cleanliness/food safety processes?
This proves point number 1: You can operate today without doing your checklists. Customers will still come in, you will sell them goods and services, and you will collect money.
The question is, will you operate as well and will you have more customer satisfaction issues if you don’t do your checklists vs. doing them?
Common sense says yes, you will have more issues over time when people don’t follow your procedures as you designed them to be followed. They will forget to do things that affect the team’s ability to serve customers efficiently. If that wasn’t the case, then why have procedures at all, why not just let every employee do whatever they want to do every shift?
By the way, when you don’t hold your teams accountable for following your procedures, that is what you are doing. You are saying these aren’t absolute rules, these are suggestions, and based on how you are feeling, and your work ethic, you should determine what is important for the brand and what isn’t.
Some of you will read that and balk, critics will say you are painting a doom and gloom picture when there isn’t one. Looking at the customer satisfaction reviews of the top QSR chains, only one is in B territory, and only 3 chains are above their average customer sat score for 2021. By the way, the top chain for customer satisfaction is Chick-fil-A and they use an Operations Management platform in every restaurant. Everybody else is a C player or below.
Remember, these are some of the top-grossing, most systematized, largest restaurant companies in the world. They spend insane amounts of money and time developing systems, and processes, and training them. Yet only one can get above 80%, and I will repeat myself that Chick-fil-A uses an Operations Management Platform, like OpsAnalitica in every location. Chick-Fil-A also has the highest AUV’s of any QSR chain.
Sales and Profitability:
There are so many factors that affect sales and profits: advertising, marketing, LTOs, discounts, pricing, fixed costs, variable costs, competition, and weather, could all affect your current sales and profits. A lot of those factors are out of the operator’s control.
There are also a lot of factors that Operators control that also affect sales and profits. Operators control how well they execute: Customer Readiness, transaction time/speed of service, quality of service/product, customer service, inventory, cleanliness, and quality.
Some people make a mistake when thinking about Operations Processes vs. Sales and Profitability they look for a linear real-time relationship vs. overall trends.
If you don’t do your processes well, you won’t catch as many of your own issues before the shift. Those misses could impact customer interactions.
Let’s say you have a bad interaction with a client due to one of those misses. The cost you are incurring has two components. One component could be immediate if you must comp an item or provide some other financial relief to save a customer. That is a hard cost and easy to track.
The other component is going to be in the future when that customer is making the decision to come back or to go to a different place. This is the true opportunity cost, this is when a customer is making a decision that could affect your future revenues for years to come. The customer is deciding whether they are going to continue to be your customer or not.
There is no magic formula for this. I’ve seen numbers that say 33% of people will stop coming to your location after 1 bad interaction and I’ve seen stats that say after 3 subpar interactions is when a customer will decide to alter their return frequency. We’ll go with 3 for the sake of argument. Also, you never know if the customer having a bad experience if this is their 1st or 3rd.
The point here is this, after 3 bad or subpar interactions with your location your customer will make a decision to alter their return frequency which could mean they might skip their next visit or it could be they never come back to your location again.
The point is, that a bad interaction may have a real cost on that shift that could affect today’s profitability and sales. That daily effect is minimal compared to the future opportunity cost. Either way, not being prepared and not providing great experiences will eventually show up in your sales and profits but it will be hard to understand why and track it back because it isn’t an immediate linear relationship.
Traditional KPIs that are used to measure business performance: sales, profits, customer satisfaction; lag behind operations. As we stated above, things that happen today do not start to affect other KPIs immediately.
Let’s say that sales weren’t affected on a day when a customer had a bad interaction, there were no comps, they didn’t complain, and they just left without saying a word. If the customer decides not to come back for a longer period of time than normal, that is when sales are affected. A customer usually comes once a month and spends 50 dollars, but because of a poor experience, they decide to skip a month. That customer’s annual value to you was just reduced by $50 or 8.3% for the year.
It’s when customer experience starts to change a customer’s purchasing behavior is when daily operations start to affect KPIs.
The worst part about this lagging effect is that it’s hard to see how your actions today affect the business. It’s almost impossible to look back at a day or shift or customer interaction and pinpoint how they are affecting you today. Also, as we said above there are a lot of other factors that affect sales and profits that are also muddling the water making it harder to see how daily operations efficacy truly impacts sales and profits.
The best way to see what is happening is to implement an Operations Management Platform, like OpsAnalitica, that measures operations efficiency. Compare your true operations data with your other KPIs to see what is happening in the business. The other key to this is to chart the data and apply a trend line to see if the line is moving up or down. The trend line will tell you what is really happening in your business.
Just to illustrate the point about lagging KPIs and how hard it is to get the truth without really digging for it. In 2020 NRN looked at publicly traded restaurant companies that increased sales during 2019. Of those restaurants, only 20% increased actual customer counts which led to their sales increases. 80% just raised prices and cut menu items. To the naked eye, they were all more successful, but some more sustainably than others.
Operators Don’t Know What They Don’t Know
You have a POS System and you use it to facilitate sales. Once you switched from a cash register to a POS you truly learned the value of the POS. My guess is that if your POS company went out of business and your POS stopped working today, you would immediately get a new POS because you understand the value of it, and living without it would be unthinkable.
Very few operators today have that same frame of reference with an Operations Management Platform, because we are so new.
The majority of multi-location businesses are operating in the olden days, pre 2010.
- You create systems and processes for your locations to use.
- You deploy those via paper or books.
- You train the organization on how to use those systems and processes paying for them to memorize content and take tests.
- You have no or limited ability to hold your teams accountable to actually following the processes on a daily basis.
- Your business is not realizing its full potential because you invest considerable resources into creating and training processes that people don’t use. You are essentially wasting that money and time.
The old world is the business-as-usual world of today. You are generating X amount of sales, and profits, and your customers are X% happy based on their interactions with your brand. Your locations aren’t probably using all the tools and following all the processes the way you envisioned. That is our starting point.
Unfortunately, there is no historical data of a time when the chain was executing everything as designed compared to today. Therefore, we believe that this is all there is for our business and that this is the best we can do. Growth will come from adding more units not from doing a better job of taking care of current customers and running better existing units.
Everyone knows that it is more expensive to get a new customer than it is to take care of a current customer.
The point here is this. Businesses don’t have the data or a frame of reference of what their sales, customer satisfaction, and unit profits could be if their teams were executing all of their processes and procedures properly and consistently.
Leadership teams don’t know what they don’t know.
I’m going back to the common sense part of all of us. We all know the following things:
- It costs more to get a new customer than to wow a current customer.
- The detail-oriented process following teams outperform teams that do whatever they want.
- Locations that operate better have better customer satisfaction.
- Where customer satisfaction is going is where future sales and profits are going.
This all points to locations that follow their daily processes and procedures better, will have higher sales and profits. Vice versa, restaurants that don’t focus on the details will have lower sales and profits and will struggle more and be more of a pain in the ass to manage than their counterparts.
What I challenge you to do is, do a pilot with OpsAnalitica and see the amount of data you can collect and how much better you can manage your locations with an Operations Management Platform like ours. It will blow your mind and you will see how every member of your team can be empowered to be better and how your locations are going to get better as well.