How Do I Develop Franchise KPIs? Metrics That Matter

As a franchise system grows, it becomes harder for a franchisor to know which individual locations are performing well and which ones need help. That makes choosing KPIs more important, especially when a system tracks dozens of units across different markets.

Ross Franklin, founder and CEO of Pure Green, has grown the health-food franchise to 87 locations across 25 states since opening the first shop in New York City in 2014. According to Franklin, franchisors can get a misleading picture when they look only at the systemwide average. "The average hides everything; the gap between your top and bottom quartile is the real story," he said.

Franklin's approach starts with looking beyond the average. Average unit volume stays on the dashboard, but Franklin also looks at the results by quartile. That can show whether the systemwide number reflects broad performance or is being driven by a smaller group of high-performing locations.

Franklin also tracks cost ratios, with particular attention to how often they are reviewed. He tracks cost of goods as a percentage of sales weekly rather than monthly. "In fresh food and beverage, waste shows up fast," he said.

Franklin also watches labor costs. In 2024, salaries and wages, including benefits, came to a median of 31.7% of sales for limited-service restaurant respondents, according to the National Restaurant Association. The median was 30.0% for respondents reporting a pretax profit and 34.1% for those reporting a loss.

Franklin also recommends tracking four-wall EBITDA at the unit level, giving franchisees a clearer view of profitability rather than focusing only on sales. Franklin tracks a franchisee validation score as well. He views that as an early signal of problems rather than simply a measure of brand sentiment.

Franklin's concern is that franchisors can collect plenty of data without getting a clear picture of unit-level profitability. Sales may increase while margins deteriorate, and a franchisor focused mainly on revenue may not see the problem until a franchisee raises it.

Franklin reviews cost of goods every week because changes in waste can show up quickly in fresh food and beverage. Quartile reporting is another part of his approach. Franklin wants to see the top and bottom performers, not just the systemwide average. He applies that same view across the financial metrics he tracks.

The point, Franklin said, is to know what is happening at the individual-unit level. A systemwide average can tell you how the business is doing overall. It doesn't necessarily tell you which franchisee needs a call.

• Compare your strongest and weakest locations. The distance between them can tell you more about the health of the system than the average alone.

• Watch costs on the schedule that makes sense for the business. For a fresh-food concept, that may mean checking food costs weekly so changes in waste do not go unnoticed.

• Use the numbers to decide who needs attention. Unit-level profitability and franchisee validation can help point the franchisor toward locations that may need a closer look.