We have all heard that Unit Level Economics is important in franchising, but going from understanding it in theory to transforming it into action is a big step. According to QSR Magazine, “the success or failure of a franchise concept can pivot off of how well unit economics are tracked, managed, and improved.” In this article, we will take a look at why Unit Level Economics are important in a franchise business, and how to put it in place in your organization.
Why Unit Level Economics for Franchise Businesses
Strong Unit Level Economics is the foundation upon all business success sits. Even though most franchisors get royalties from revenue, not profit, having franchisees succeed in the long run creates genuine referrals and organic growth. Those who want sustained growth for both the franchisor and franchisee pay close attention. According to Joe Matthews, strong Unit Level Economics can also help in Franchise Development as franchise candidates look for the following:
- Does your business make money?
- Is the business sustainable? Will it continue to make money into the foreseeable future?
- Can I see myself in the business?
So the focus builds that franchise business from many angles.
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