Unit Economics — The Best Way to Drive and Measure Profitability at the Unit Level

Franchisors are faced with a multitude of challenges, essentially running a company with sometimes hundreds, or thousands, of owners at the unit level. Success for franchisors isn’t just measured by the number of leads or franchise sales they get, but also on the performance of their brand at the unit level.

Zach Nolte, Director of Operations at Kitchen Solvers, a custom cabinet and storage solutions franchise, had no background in remodeling or contracting, but when he began with Kitchen Solvers as an operations manager he brought his experience with processes and management to the company and quickly rose through the ranks.

To Nolte, the most important measure of success is the per unit metrics. While average sales across the system are always an important indicator of success, Nolte says “really digging in to meet the goals of each individual franchisee” is what truly leads to growth overall.

Jennifer Durham, Senior Vice President, Chief Development Officer at Checkers* and Rally’s, the iconic double drive-thru brand, shared similar sentiments.

“Unlike many franchisors who tend to measure unit success by sales growth or royalties generated, at Checkers and Rally’s, we measure success by the profitability of our franchisees’ locations,” Durham said.

Unit level metrics are important because franchisees have different needs and capacity. Some may want to hit over a million dollars in sales, while some markets just don’t support that. It’s up to these corporate development teams to help franchisees achieve their goals to further the brands mission as a whole.

So how does Nolte capitalize on units best practices if they are seeing great profitability and growth? It’s all about collaboration and sharing ideas.

“We hold Friday calls that about 50-60% of our franchisees participate in. This is a time for everyone to ask questions, talk to the top performers, and review what is and isn’t working for their businesses,” he explained. “We cover everything from sales, marketing to handling employees and installation issues. We are also very open with our top performers and try to document their success and how they accomplished it.”

Checkers and Rally’s also capitalizes on unit success by implementing best practices system wide, but let’s the corporate team and restaurants do the beta-testing to ensure success.

“Because we own and operate more than 300 company restaurants, we are constantly testing and implementing new technologies and tools to make us more profitable, and we share those learnings with our franchisees,” Durham explained. “The goal of increased profitability influences everything we do across our system, and our entire team, from franchise development, real estate and construction, to our operations and marketing support departments, is focused on helping franchisees achieve maximum profitability from each of their restaurants.”

The great thing about a franchise system is that you have the corporate support and other unit level owners to advise and guide you if your unit it struggling. Nolte says his team will spend one-on-one time, pinpoint issues and troubleshoot, as well as offer things like advertising and marketing support to struggling unit owners.

It’s this support as well as a few other factors that potential franchisees take into account when they are choosing a brand to invest with.

“We have noticed that the top 3 things potentials prospects want to know are how do I get leads, what training programs like and what does potential growth look like,” he said.

With the support of franchisors, honest and upfront communication with prospects, and a collaborative environment where unit owners and corporate can all work together to implement best practices for achieving success, prospects have a clear vision of their growth potential and how success is measured.

“We will do everything in our power to make sure franchisees have every tool to be successful,” Nolte said.