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No matter what business you’re in, repeat customers are your best and most profitable customers. This is true for retailers, restaurants, or franchisors looking to expand. For restaurants and retailers, this means redefining success. With so many choices offered to customers, year-over-year sales growth is simply too short-term to indicate the overall health of your business. What really matters is the repeat business from your customers, or your Guest Lifetime Value (GLV).
Related: Considering owning a franchise? Get started today and find a personalized listing of franchises that fit your lifestyle, interests, and budget.
Guest Lifetime Value
the E-bookTitled “Guest Lifetime Value, the True North Star Indicator for Restaurants,” Olo defines guest lifetime value as the revenue generated from each guest through their relationship with your brand. The company estimates that the top 5% of GLV generates approximately 30% of restaurant revenue. Repeat guests in the past six months place 2.2x more orders than the average guest. Earning customer loyalty leads to more repeat customers and higher order values.
It also saves you money, because acquiring new customers isn’t easy or cheap. Calculate your cost by dividing your marketing expenses (advertising, mailing lists, discount and promotion costs, etc.) by the total number of new customers (which may not be as easy to track as you think). How much more profit would you make if you got more business from your existing customers? Of course, you always want to acquire new customers; the secret is to turn them into guests for life.
Meet your customers’ needs by not only meeting them, but anticipating them. It’s no longer enough to offer high-quality food and merchandise at affordable prices. Today’s shoppers and diners want to feel like you know and understand them. They want a relationship that grows and deepens over time. If you bring them value, they will bring you money.
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The role of technology
Luckily, technology can help analyze that through loyalty programs, especially those linked to apps. Staff can see if regulars have ordered and connect with them by suggesting additional orders or offering small gifts. Through the app, you can even provide personalized messages to encourage them to visit for special occasions (such as a small discount for their birthday) or message them if they haven’t visited recently. This proves that you understand and care about your customers.
Plus, this data can be useful for business purposes: By understanding customer behavior over time, managers can dedicate more staff to busy times – another element of customer convenience.
It’s the basis of business: anticipating, meeting and exceeding guest expectations, and doing it with a human touch.
For franchisors, the theory is very similar: you get much more bang for your buck if your current franchisees buy more locations and territories. Your franchisees are your customers, and knowing, understanding and anticipating their needs will motivate them to expand their business with you. Just like with restaurants, that’s in the franchisor’s interest more than growing by acquiring more new business owners. (We like them, too.)
Think about it: after the first few stores are up and running, a franchisor doesn’t need all the training and background material they received initially. They’ve already taken advantage of the training, implemented the systems, and are successful. This saves the franchisor time and money by not having to reinvent the wheel with each new franchisee.
Here’s an example: A franchisee acquires 6 stores for $95,000 and does so well that they acquire 5 more stores in Texas for $90,000, 10 more stores in Florida and Maryland for $180,000 each, and 6 more stores in Colorado for $105,000. But training is only required the first time, and it costs the franchisor the same to visit one store owner annually as it would for 40 store owners. After that, royalties, equipment fees, etc. become the franchisor’s net profit.
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Thinking from the franchisee’s perspective
Additionally, consider the testimonials factor: the trust and investment of existing franchisees clearly makes your concept and business more attractive to other potential unit owners and, ultimately, potential buyers of your concept.
To achieve this, you need to emulate the franchisee’s mindset and understand that your customers are more than just a number. But unlike a restaurant or store, there’s no app for that. You have to make the connection yourself. Host franchisee events and get to know them as people, not numbers, from the first interview onwards. Talk to them about why they’re investing, their goals for the future, what are their kids’ names, etc.
Make yourself available to your customers (within reason). Serve them well, answer their questions, listen to their suggestions, and continually research ways to improve your business model to increase sales. That’s GLV.