How to Implement a Franchise Loyalty Program
A franchise loyalty program typically operates on a points-based system whereby customers earn points for each purchase or other loyalty-related actions such as referrals or social shares. Customers can then redeem these points for rewards such as discounts, free products, or exclusive offers.
Its primary purpose is to incentivize repeat business and build loyalty to the brand. By offering customers rewards and incentives for their loyalty, franchise businesses can encourage customers to make repeat purchases, refer friends and family, and engage with the brand in new and exciting ways.
In addition, these programs can also provide valuable data and insights into customer behavior, preferences, and purchasing patterns that can inform marketing and business decisions, such as product development, customer segmentation, and targeted promotions.
What Is a Franchise Royalty Fee?
A royalty fee for franchises is a recurring fee that franchisees pay the franchisor for the right to use the franchise system and brand name. It’s typically calculated as a percentage of the franchisee’s gross revenue and is paid regularly, such as monthly or quarterly.
The fee is a source of revenue for the franchisor, as it provides ongoing income and helps support the continuing development and growth of the franchise system. In exchange for the royalty fee, franchisees typically receive support and training from the franchisor and access to the franchise system’s proprietary technology, products, and services.
The fee amount can vary depending on several factors, such as the industry, the size and scope of the franchise system, and the level of support the franchisor provides. Franchisees should carefully review the franchise agreement and the royalty fee structure before signing on to ensure they understand the fees and how they are calculated.
Franchisees should also consider the potential return on investment when evaluating the royalty fee. While the fee can be a significant expense, it can also provide access to a proven business model and a recognizable brand name, which can help drive sales and revenue growth. Franchisees should carefully evaluate the potential benefits and costs of the franchise system before investing and consider consulting a franchise attorney or business advisor to help navigate the process.
7 Ways to Implement a Franchise Loyalty Program
1. Invest in a universal point of sale
Investing in a universal point of sale (POS) system can be a good decision for a business that wants to streamline its payment processes. A universal POS system is a platform that can be used across different types of businesses, regardless of the industry in which they operate.
Some potential benefits include:
Efficiency: Process payments faster and more efficiently, reducing customer wait times and increasing revenue for franchise businesses.
Flexibility: Customized to fit the specific needs of a franchise, whether it’s a retail store, restaurant, or service provider.
Centralized reporting: A centralized platform to track sales, inventory, and other important data.
Integration: Can integrate with other systems, such as accounting or inventory management software, to create a seamless workflow.
Enhanced customer experience: Provide customers with a better payment experience by offering multiple payment options and easy-to-use interfaces.
However, investing in a universal POS system can also come with costs, such as hardware and software expenses, ongoing maintenance and support, and employee training. As with any investment decision, it’s essential to carefully evaluate the potential benefits and costs before deciding.
2. Create a data-sharing agreement
Creating a data-sharing agreement is critical when multiple parties want to share and use data. Consider the following:
i) Does the franchisor have central control over data?
Whether the franchisor has central control over data depends on the specific terms of the franchise agreement.
In some franchise agreements, the franchisor may require franchisees to use a centralized point-of-sale (POS) system or another management system that allows the franchisor to collect and analyze data from all franchise locations. This allows the franchisor to have central control and use it to make strategic decisions for the franchise network.
However, in other franchise agreements, franchisees may be allowed to use their own POS or data management systems, giving them more control over their data. In this case, the franchisor may still have access to specific data, but they may not have central control over it.
The franchisor and franchisee must clearly define the terms of data management in the franchise agreement, including specifying which data will be collected, who will have access to it, how it will be used, and how it will be protected.
ii) Does each franchisee have access to their customers?
In most franchise agreements, each franchisee can build their customer base and access the customer data they collect, meaning they can market to and communicate directly with their customers.
However, the franchisor may have some control over how customer data is collected and managed across the franchise network. For example, the franchisor may require all franchisees to use a specific customer relationship management (CRM) system or marketing platform. Viz, the franchisor, may have access to the customer data collected through the system, but each franchisee would still have access to that specific to their customers.
Each franchisee must comply with applicable privacy laws and regulations and protect the customer data they collect. Franchisees should also communicate clearly with customers about how their data will be used and obtain their consent before collecting personal information.
3. Capture data
Implementing a loyalty program is an excellent way for franchises to capture valuable customer data and drive customer loyalty and business growth.
Collect customer information at sign-up: When a customer signs up, ask for their contact information, such as their name, email address, and phone number, to contact them with program updates, promotions, and other marketing materials.
Offer incentives for providing additional data: Encourage customers to provide additional data, such as their birthdate, by offering incentives like a free product or discount. This can help the franchise build a complete profile of its customers and target marketing efforts more effectively.
Track customer purchases: Use the program to track purchases and gather data on what products or services are popular among customers to help inform future marketing and product development decisions.
Analyze customer data: Use the data collected from the program to analyze customer behavior and identify patterns or trends. This can help the franchise better understand its customers and make data-driven decisions in all business areas.
Protect customer data: Collect and store customer data securely. Appropriate data security measures, such as encryption and access controls, can help protect customer data from unauthorized access or disclosure.
4. Keep it simple
When designing franchise rewards programs, it’s important to keep it simple to ensure that it’s easy for customers to understand and participate in, such as limiting the number of tiers, using a points-based system, offering easy-to-understand rewards, using a simple sign-up process, and communicating program updates clearly.
i) Reward customers everywhere they shop
Rewarding customers everywhere they shop is a great way to incentivize customer loyalty and create a positive experience.
Points-based system: Establish a transparent point system that is easy for customers to understand, assign point values to different actions, offer tiered rewards that give customers an incentive to earn more points, and offer regular promotions or bonus point opportunities to keep customers engaged.
Partner up: Franchises can partner with other local businesses to offer rewards that can be redeemed at either location. For example, a restaurant franchise could partner with a local winery to offer a discount or free wine tasting at the winery for customers who dine at the restaurant.
Engagement rewards: Increase brand awareness and customer engagement across multiple platforms by motivating customers to engage with your brand on social media by offering rewards for liking, commenting, or sharing posts.
Mobile app: Streamline the process and make it easier for customers to access rewards by developing a mobile app that allows them to earn and redeem rewards at any participating location.
Loyalty platform: Increase customer engagement and loyalty across the entire brand with a loyalty platform that allows customers to earn rewards for shopping at multiple locations.
ii) Allow reward redemptions everywhere
Allowing reward redemptions everywhere creates a flexible and convenient program for customers.
Digital rewards program: Implement a digital rewards program that allows customers to redeem rewards through a mobile app or web portal. Use push notifications to remind customers of their rewards balance, offer personalized promotions or discounts, and add gamification elements like badges or leaderboards.
Universal reward vouchers/coupons: Instead of providing rewards specific to each franchise location, offer universal vouchers/coupons that are easily redeemable everywhere.
Digital gift cards: Digital gift cards are electronic versions of traditional gift cards that can be purchased and redeemed online or through mobile devices. They are a popular option for gift-givers who want to send a gift to someone in another location or for people who prefer the convenience of digital transactions.
With digital gift cards, customers can purchase a gift card online or through a mobile app and send it directly to the recipient via email or text. Depending on the retailer’s policies, the recipient can redeem the gift card online or in-store.
Digital gift cards offer several advantages over traditional gift cards. They are more convenient, as they can be purchased and redeemed anywhere with an internet connection. They also eliminate the need for physical cards, which can get lost or stolen.
5. Personalize rewards programs
By using data for demographic research, generating profiles, and encouraging repurchases, franchises can create a positive and personalized experience.
i) Use data for demographic research
Data for demographic research can help franchises gain valuable insights into their customers and buying habits.
Customer data: Analyze customer data such as purchase history, demographics, and preferences to identify trends and patterns. This can help franchises understand their customer’s buying habits, preferences, and needs.
Market research tools: Use market research tools such as focus groups and online surveys to gather additional customer preferences and needs data. This can provide valuable insights into the broader market and help franchises identify opportunities for growth and expansion.
Social networks: Monitor social networks to provide valuable insights into customer behavior and preferences. Gather data on customer sentiment, preferences, and needs.
Data analytics tools: Identify the key metrics that will help you measure the program’s effectiveness, such as customer retention rates, purchase frequency, and average order value. Use predictive analytics to anticipate customer behavior and identify opportunities for upselling and cross-selling. For example, you may use predictive analytics to identify customers likely to purchase a specific product and offer them a personalized discount.
ii) Generate profiles
Generating customer profiles can help franchises gain a more in-depth understanding of their customers and create targeted marketing and loyalty programs.
Collect customer data: Collect data on customer demographics, purchase history, and behavior, including purchasing frequency and purchase amounts.
Segment customers: Identify the key criteria that will be used to segment customers, like demographic information and behavioral data, such as purchase history and engagement with the program.
Create customer profiles: Create customer profiles that summarize the key characteristics of each customer segment—for example, age range, gender, location, interests, and purchasing behavior.
Use and refine customer profiles: Use customer profiles to personalize rewards and incentives based on each customer’s preferences. For example, you may offer a discount on a customer’s favorite product or send a personalized birthday offer.
Utilize customer feedback and ongoing data collection to refine and update customer profiles over time. This may involve adding new data points or adjusting the segmentation criteria.
iii) Encourage repurchases
Encouraging repurchases is critical for franchise growth and success.
Rewards: Incentivize customers to return to earn rewards and discounts.
Personalization: Send personalized offers and promotions to customers based on their purchasing history to create a sense of exclusivity and encourage customers to return to the franchise to redeem their offer.
Customer service: Create a positive and memorable experience by providing excellent customer service that exceeds expectations.
Top-of-mind: Regularly communicate with customers through email, SMS, or social networks to stay top of mind.
Products and services: Continuously improve products and services to meet customer needs and preferences and create a loyal customer base.
6. Track the program
Tracking the success of a program is important for franchises to measure its effectiveness and make data-driven decisions.
Set measurable goals: Set measurable goals to track progress, such as increasing customer retention or the average purchase value.
Track program metrics: Track program metrics such as the number of new sign-ups, active members, and rewards redemption rate for insights into the program’s success and areas for improvement.
Analyze customer behavior: To understand the program’s impact on customer behavior, analyze tracking purchase frequency, average purchase value, and purchase patterns before and after enrolling.
7. Evolve the program
Keep the program relevant and effective by continually evolving and improving.
Feedback: Gather feedback from customers and franchisees to understand what is working and what needs improvement.
New technology: Embrace new technology and trends to stay up-to-date and relevant. This may include offering a mobile app, implementing a digital loyalty program, or integrating with social.
New rewards and incentives: Offer new rewards and incentives like exclusive discounts or early access to new products to keep customers engaged and excited about the program.
Program offerings: Expand the program offerings to include new products or services or partner with other companies to offer exclusive benefits to members.
Your Loyalty Management Software Solution
bLoyal is a loyalty platform for franchises and multi-unit businesses that offers a range of features, including the ability to create custom loyalty programs, set up automated marketing campaigns, and track customer behavior and spending patterns. The platform also integrates with popular POS and eCommerce systems, making implementing and managing loyalty programs across multiple locations easy!
