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Low-Burn | Scaling Your Startup S2 E8 with Neyborly’s Ben Seidl & Xendoo’s Lil Roberts | E1224

When it comes to financial health as your scaling your startup there are six steps to healthy financials for scaling your startup. Watch for insightful tips for your small business by our CEO and Founder Lil Roberts, at This Week in Startups – Scaling your Startup. E1224 of Low Burn.

 

 

Small business owners must adapt to digital transformation

4 Reasons Why Digital Transformation Is Table Stakes for Small Businesses

Small businesses are making the leap into digitalization to respond to evolving consumer behavior and expectations, adapting to new working norms, putting data to work to drive performance and building business resiliency.

Profile of a Founder: Lil Roberts of Xendoo

We believe business owners should have time to do what they love, build their business – not do bookkeeping.

Lunch with Norm and Lil Roberts

Importance of LIVE events & What’s the Future of Ecommerce | Lil Roberts | Ep. 173

The new buying habits are post-pandemic! What to expect? Xendoo CEO and Founder Lil Roberts is back to share with us the new buying habits post-pandemic and how eCommerce fits into retail’s post-pandemic future.

“We believe business owners should have time to do what they love, build their business – not do bookkeeping.”

Online Bookkeeping Provider xendoo Now Helping Small Businesses in 46 States, 12 Countries

One of Broward County’s biggest startup success stories continues to grow at a rapid pace.

Fort Lauderdale-based xendoo has developed a SaaS bookkeeping platform targeted at small businesses. The startup reported a two-year revenue growth of 777% from 2018 through 2019.

Using Your Food Effectively: Three Tips to Control Food Costs for Restaurant Owners

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

As a restaurant owner, you have a lot of expenses on your plate every month that a partner like Xendoo can help you manage, such as providing tax tips for restaurants. Like rent and insurance, many of those are fixed and are beyond your control except when it’s time to renegotiate those agreements. But others are variable and are within your power on a day-to-day basis. By far, the two most significant of these variable expenses are food and labor, and there are things you can do to minimize both without sacrificing customer service or menu quality. Labor is relatively straightforward, but food costs can often be an elusive target for new restaurateurs. Let’s take a look at some things that you can do to reduce food costs and increase your bottom line.

What Is Food Cost?

Put simply, your food cost is the ratio of what you spend on groceries to your front-of-house sales and is almost always expressed as a percentage. For example, if you have a good restaurant bookkeeping system in place and know that your monthly Sysco invoices are $30,000 and your sales for the month are $100,000, your food cost for that month is 30%. Of course, lower is always better when it comes to ways to reduce food costs, but 30% is the generally accepted ideal for most restaurants.

several plates of food with similar ingredients sit on a table

Reduce Food Costs: Know Your Plates

There is a science to menu planning, and it involves a lot more than just deciding what dishes you are good at preparing. First, you need to know exactly the cost of ingredients for each dish you offer on your menu, which is often called the “plate cost.” Calculating your plate cost can seem complex at first glance, but it’s fairly simple once you get the hang of it. Before you can calculate anything, you need to be sure you have standardized recipes with clearly defined units of measurement and quantities.

Make a list of each ingredient in the dish and do the same calculation for each one. You need to know the unit of measurement your supplier uses (the purchase unit), what your supplier charges you for it (the unit purchase cost), and the yield. Yield will only apply to some items that require trimming or peeling (like meat or potatoes) before they can be used, resulting in some waste that needs to be calculated into your cost. Standardized yield charts are available from most vendors. These three numbers will give you your actual unit price for the ingredient.

Menu Engineering: Putting it all together

Next, think about how you prepare your dish and define the unit of measurement called for in your recipe (the serving unit). Next, figure out how your serving unit relates to your purchase unit and calculate your serving unit cost. For example, if you buy ketchup by the pound and serve it by the ounce, you would divide your purchase unit cost by 16 to get the price per ounce. Lastly, define the quantity of serving units in the recipe (portion size).

That may sound like a lot of numbers, but you can calculate your plate cost with these numbers in hand. Let’s take the example of a side order of french fries. You buy Russet potatoes for $2 per pound, and let’s assume four potatoes to the pound. After peeling, you have 19% waste (an 81% yield). Your recipe calls for 8oz of potatoes on the order, so it’s easy to calculate the plate cost from there. At $2 per pound with 81% yield, your actual cost per usable pound is $2.47. Divide that by 16 to get the price per ounce ($0.15) and multiply by 8oz called for in your recipe to get your plate cost of $1.20 for an order of fries. Sticking to the 30% food cost rule, you should be pricing this menu item at no less than $4.00.

Menu Engineering: Reuse Ingredients

Mexican restaurants are often cited as one of the most profitable restaurant categories. One of the key reasons is the relatively small number of common ingredients used in most menu items. Think about it: how many things on a Mexican menu can you make with some ground beef, chicken, tortillas, cheese, beans, and rice? A lot. Having common ingredients among dishes means you don’t have a lot of different items sitting around on the shelf not being used if a particular dish isn’t selling well. Avoid menu items that call for ingredients—especially expensive ones—that are unused in any other dish.

Take Regular Inventory

A good, detailed inventory taken regularly is important in figuring out how to reduce food costs because you need to know which items are running high and whether you might have food walking out the back door at night. No one likes to think that someone on the staff might be stealing, but the sad reality in the restaurant business is that theft does happen. Therefore, always have the inventory conducted and signed off by at least two people to reduce the inventory shrinkage. Other reasons for an item running high may be poor preparation resulting in unnecessary waste or spoilage from incorrect rotation.

Compare Foodservice Vendors Regularly

You have several options for foodservice vendors, and just because you’ve chosen one doesn’t mean you have to stay with your current choice. The vendor that had the best pricing a year ago, or even six months ago, may not have the best prices today. Food prices fluctuate based on market supply and demand, and vendors often try to entice new clients with low introductory pricing that they can’t maintain for long. So be sure that you’re shopping your options regularly to keep them honest.

Produce delivered to market with classic vw bug on cobble stone street in front

Check-In Your Food Truck

When your truck comes in, be sure that someone checks off each item on the invoice and verifies the correct quantity before the driver leaves. Foodservice vendors will often run out of stock in the warehouse and either make substitutions or omit back-ordered items. Be sure that your rep knows what substitutions are and aren’t acceptable and what items are critical for your business. You should receive a credit for any back-ordered items, but sometimes the vendor might make an oversight, or the driver might simply make a mistake unloading the order. You can’t afford to pay for food you never receive, right?

First In, First Out

One of the most common reasons for spoilage is the lack of proper rotation on the shelf. When the food truck comes in, ensure that the person putting it away understands that new items always go in the back and older items get rotated to the front. It’s often tempting when things get busy to stick the new inventory in the front where it’s most convenient. A periodic spot check of expiration dates will usually reveal whether your team is rotating items properly.

Prevent Cross-Contamination and Spoilage

The way you store perishable items can sometimes affect their shelf life. Be sure that your cooler is set at the recommended temperature (28-32° for fresh meats) and that items in the cooler are correctly stored to prevent cross-contamination of microorganisms that can lead to early spoilage or even sickness. In addition, be sure that raw meats, poultry, and seafood are placed on bottom shelves to prevent meat juices from dripping onto other foods and causing contamination. 

Run Daily Specials

Daily specials are a great way to offer a tasty variety to your customers and get rid of that extra inventory lingering in the pantry a little longer than it should. Train the front-of-house staff to sell the specials effectively and promote them on social media. If you offer a buffet, that’s also a great way to reduce food costs while keeping your customers happy.

Food cost will always be one of the challenges of the restaurant business, but it doesn’t have to be a nightmare. Using these tips, you can help keep your food cost under control and tame one of the biggest variables to your profit margin. If you are already close to the ideal food cost of 30%, congratulations, you’re ahead of the curve. But if not, you now have the tools to figure out where your grocery money is going and make sure you’re getting the most bang for your buck. Xendoo is here to help, so be sure to reach out and discover the full suite of services that Xendoo offers to restaurant owners just like you.

 

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Tips to Increase Retail Sales for Your Small Business

This past year has been incredibly hard on retailers, especially small businesses. Retail sales plunged more than 20% between February and April last year, but with pandemic restrictions easing, the industry is starting to recover. As folks are venturing out more, it’s the perfect time to refresh yourself and your sales associates on tips to help increase retail sales and work towards building your business back up!

Make your customers feel safe

Many people are finding it tough to return to their pre-pandemic selves quickly and are still moving with caution. Help them feel at ease by reminding them they are safe in your shop. Take note of what protocols major retailers are following. For example, make hand sanitizer available at the entry and the register. Use signage to share your mask policy, your cleaning protocol, and any policies on the dressing room or how to use ‘tester’ products. The safer customers feel, the more likely they are to make a purchase which will help increase your retail sales.

Curbside pickup and local delivery

 Many stores began offering curbside pickup and local delivery in 2020, and most customers have become accustomed to these services. Keep in mind that today’s customers value convenience,  so continue to offer these alternative methods moving forward. 

Train your staff

While you’re refreshing your team on cross- and up-selling, make sure they are up to speed on the basics, too. For example, do they need a reminder on any specials or promotions you’re offering? Ensure they are experts on your store’s products and that they are as informed as possible on your customer service expectations. Encourage them to think ahead to how they might answer specific questions customers might ask, including all frequently asked questions. If your staff can put your customers at ease, they are more likely to purchase from you than your competitors.

 

A sales woman upsells a product to a customer at checkout

Cross-selling and up-selling

The savviest sales associates know how to cross-sell and up-sell. When a customer is interested in one particular item, the savvy salesperson suggests a corresponding item to go along with it. “If you like that, you will love this, too!” Up-selling is suggesting a more expensive alternative to the item the customer is already interested in buying. “Oh, that one you have is great, but have you seen this (more expensive) version?” If your customer leaves with an item that they will enjoy more and feel like they got a great deal, they are more likely to be a repeat customer which can further help increase retail sales.

Merchandising

Make the way you merchandise or display your products a priority. Keep your displays fresh and regularly move merchandise around the store, which creates a sense of newness and will have your regular customers looking at products they may have otherwise passed. Feature new and seasonal products near the entrance. Keep everything clean, organized, and make sure it’s easy to navigate the store. Keep popular and inexpensive items near the registers to encourage impulse purchases during check-out. You should also keep up on your inventory accounting to ensure that those displays have enough product on them.

Make it personal

 80% of companies are more likely to purchase from a company that offers them a personal experience. So how might your store offer a personal touch? Branded items are a great way to creatively connect with your customers – make sure your logo or taglines are on bags, receipts, and automated email receipts. Consider slipping an extra treat into shopping bags, too. Perhaps a small button or magnet with your logo and website. And the best way to get personal is to really connect with your customers. Make it a priority to chat, remember their names, and take note of the types of products that interest them.

Loyalty programs

Customers love loyalty programs! Many small businesses still enjoy using classic “buy 10, get 1 free” style punch cards, but there are great digital-focused loyalty programs, too. Options like Loopy Loyalty and Smile.io encourage customers to shop with you again and engage with your brand. And get creative! These programs offer ways for you to customize the program to match your branding and speak to your customer. As you build your loyalty program, make sure you aren’t creating an unattainable goal. Earning $5 for every $25 you spend feels much more exciting than earning $1 for every $50 you spend, right!?

Make time to analyze

Small retail store owners are notoriously stretched for time, but it’s essential to set aside time to review what sales tactics are working and what aren’t. Look at the numbers and strategically think about what might have led to increases or dips in sales on any given day. This is where having professionals like the team at Xendoo manage your retail bookkeeping can go a long way. Through accurate and timely reports, you can quickly review the numbers and figure out what sales strategies are most effective.

It’s an exciting time for retailers to have a fresh start! Seize the opportunity and train your staff on new sales tactics, refresh your inventory offerings and displays, and get creative with new ways for your customers to engage with your brand. By outsourcing your bookkeeping and accounting to the team at Xendoo, you’ll save time and money, and you’ll finally have the data you need to be more strategic about how to increase retail sales and remain profitable.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

A retail shop displays an open sign in their window.

How to Make a Budget for Your Retail Store

As you look to grow your retail business and ensure you can maintain long-term stability, you will need to create and follow a retail budget. It’s one of the most important tools in small business retail management and can guide you as you make decisions, navigate unexpected changes, and work towards increasing cash flow and optimizing your profit. 

Your budget is something you make annually and adjust regularly based on actual expenses. This is where a skilled bookkeeper or accountant comes in handy! They can help make sure your budget predictions are accurate, and assist you in adjusting it throughout the year.

Being able to handle unexpected expenses on the fly is perhaps a budget’s greatest strength. A small retailer might face anything from windows suddenly covered in graffiti overnight to a global pandemic that forces them to temporarily close their doors. Budgets can help you hope for the best while planning for the worst. Here are the most common expenses a small business owner should consider when making a retail budget. 

Staffing

Everyone knows that retail business owners must regularly budget for their sales associates and store managers’ compensation, but don’t forget to plan for the associated payroll taxes and employee benefits including their time off. Additionally, consider additional labor costs for marketing, graphic design, inventory buying, facility maintenance, and order fulfillment and shipping. Keep in mind that Xendoo can help cut costs here by providing retail bookkeeping and accounting at a lower rate than on-staff employees.

A retail store front with a bike leaning against a post in the foreground

Photo by Sherzod Max on Unsplash

Facility Costs

When you first open your brick & mortar retail business the list of expenses associated with getting your physical space up and running is long. Painting, installing new lighting and hardware, choosing merchandise fixtures, installing electrical outlets, and a security system. Landscaping, adding in new vinyl graphics for your doors and windows, and don’t forget about signs. And there are more costs to maintaining your facility than one might expect. You will need to budget for unexpected expenses like plumbing problems, roof leaks, and ongoing maintenance such as replacing lights, signs, and store fixtures as needed. If your business has a second location you’ll need to make sure you budget separately for each space.

Marketing

Your annual marketing budget will change throughout the year. As you plan it out, keep in mind what times of year are best for sales – around holidays like President’s Day and Memorial Day, and as the seasons change. Plan to budget for paid social media and influencer marketing throughout the year, as well as any email marketing expenses you may incur. And don’t rely solely on digital marketing – your business may get great exposure by marketing through community partnerships, events, and even by mailing postcards to your customers.

Inventory

Inventory buying is one of a retail businesses’ most important and strategic costs to budget for. Retailers must prioritize inventory accounting, and keep a variety of things in mind like current trends, seasonal changes, and what sold well this time last year versus what didn’t. You’ll need to consider discounts and deals your vendors offer throughout the year, as well as freight charges. An excellent tool to consider using as you budget for inventory is an open-to-buy plan. An open-to-buy plan is an inventory management system that shows you how much inventory you can buy throughout the year.

Security

Even the smallest of retail businesses need to budget for loss prevention. Keeping your inventory numbers accurate will help you determine how much shrinkage affects your business. Do you need to increase your security? Perhaps you need to invest in security cameras or loss prevention training for your employees. According to the National Retail Federation, retail shrinkage is on the rise —totaling $61.7 billion in 2019, which is up from $50.6 billion the year before.

Technology

As you plan and review your budget, look for spots where technology might be able to save you money. Are the systems you are using, like an eCommerce platform, credit card machine, and merchant services, or your accounting software too expensive? Are there cheaper solutions? Spend a bit of time researching options and you might find better solutions. Some of your providers might even work together, for instance, Xendoo customers get a discount on Xero and Quickbooks software.

 

Trust us, we know that staying on budget is often easier said than done, especially for small business owners who are stretched for time. A quality bookkeeper or accountant like the team at Xendoo can help you plan and stay on budget, as well as find areas where you can save money through accurate, timely reports and advice. Become a budgeting pro with Xendoo today.

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

Bringing Home the Bacon: A Profit Growing Guide for Restaurateurs

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

It’s no secret that the restaurant business is tough, even in the best of times. Really tough. Even before the COVID-19 shutdowns, industry analysts estimate the failure rate for new restaurants in the first year was somewhere around 60%, with another 20% shuttering the doors before the 5-year mark. That’s only gotten worse during the pandemic, with hospitality being one of the industries hardest hit by shutdowns and restrictions. However, as bleak as that reality may seem, the restaurant industry is still viable, and there are things you as an owner can do to help increase restaurant profits and make sure you stay in the 40% that do well.

Understanding Profits: Gross vs. Net

When discussing how to increase restaurant profits, it’s important to distinguish between gross profit and net profit. Gross profit for a restaurant is defined as the price of the item minus the cost of goods sold, i.e., food cost. For example, if your signature lasagna dish sells for $20 and the ingredients to make it cost $7, your gross profit on that item is $13, and your profit margin is 65% (13 divided by 20). Industry norms and best practices suggest that food costs should run somewhere around 30%, which means that if your total sales for the month are $100,000, you should be spending roughly $30,000 with your foodservice vendor. Food costs that run higher than that can often be an indicator of excessive waste or theft (often referred to as shrinkage), so it’s essential to know your gross profit margin.

Net profit is the amount left over after ALL operating expenses are deducted, not just food costs. That includes expenses such as labor, food cost, rent, utilities, equipment repairs or leases, insurance, etc. Because it consists of a much more expansive list of expenses than gross profit, net profit will necessarily be a much smaller number. Typical net profit margins have shrunk in recent years but typically hover around 3-5%.

It’s critical to stay on top of your books and know exactly what your margins to increase restaurant profits because if you’re playing catch-up bookkeeping, you’re flying blind. Generally, when discussing how to increase restaurant profits, most people mean net profit because it’s the one that keeps the lights on for your business. With that in mind, there are two ways to boost your bottom line – you can increase sales or lower expenses. So let’s look first at ways to boost your sales numbers and increase your average ticket price or cover the average.

View of a restaurant menus with prices set for increase in profits

Review Your Menu Pricing

As we noted above, your food cost should be around 30% of your menu price, so you’ll need to calculate the plate cost of each menu item to help increase restaurant profits. To do this, first, make a list of each ingredient required to prepare the dish. Next, choose which unit of measure your foodservice vendor uses for the items (e.g., do you buy it by the pound, gallon, dozen, etc.) and identify your unit cost from your vendor. There may or may not be a yield percentage for the item, which would be waste from trimming or peeling the item before use. For example, certain cuts of meat may require trimming away fat or gristle, which reduces its useful yield. These can usually be found in standardized yield charts available from many vendors. 

Finally, do a similar calculation for the way you prepare the dish:

1.  Select the correct serving unit, which is usually as simple as the unit of measure that your recipe calls for.

2. Calculate the serving unit cost by dividing the cost per measure by the number of serving units per measure. The cost per measure for items with no yield is the unit purchase price, and for items with a yield, the unit purchase price is divided by the yield percentage. For example, if you buy ground beef for $4 per pound and your serving unit is ounces, the serving unit cost would be $0.25 per ounce ($4 divided by 16 ounces to the pound).

3. Select your portion size, which is the quantity called for by the recipe.

A simple plate cost for a hamburger and fries might look like this, assuming four potatoes to the pound and six slices per tomato:

Ingredient Purchase Unit Purchase Unit Cost Yield Actual Unit Cost Serving Unit Serving Unit Cost Portion Size Portion Cost
Ground Beef Pound $4.00 N/A $4.00 Ounce $0.25 5 $1.25
Bun Dozen $6.00 N/A $6.00 Each $0.50 1 $0.50
Tomato Pound $1.89 N/A $1.89 Slice $0.31 2 $0.62
Mustard Gallon $13.00 N/A $13.00 Ounce $0.81 1 $0.81
Potato Pound $2.00 .81 $2.46 Each $0.62 1 $0.62
$3.80

So we can see that the plate cost for this hamburger and fries meal is $3.80. Sticking to the rule of 30% food cost, the menu price of this item should be $12.50. If it’s less than that, it’s probably eating into your bottom line.

Identify Your Menu Hits and Misses

Now that you know your plate cost for each item on your menu, it’s time to compare those to some sales reports from your point-of-sale (POS) system to see where your profit is coming from. Create a spreadsheet with four categories and label them “HIGH PROFIT/HIGH SALES,” “HIGH PROFIT/LOW SALES,” “LOW PROFIT/HIGH SALES,” and “LOW PROFIT/LOW SALES.” Then, put each item on your menu into one of those categories to see where each item falls. Dishes that fall into the “LOW PROFIT/LOW SALES” category are candidates for removal in favor of more profitable offerings. Also, consider running daily specials that combine high-profit, low-sale items with big sellers to help move those lower selling items to get that incremental revenue.

Up-Sell and Cross-Sell Effectively

It’s impossible to overstate the importance of staff training in proper selling techniques to increase restaurant profits. Train your service staff to offer customers an appetizer or cocktail before starting their meal, and train them to make quality recommendations. If you are a full-service restaurant and serve alcohol, educate your staff about wine types and selections that you carry. Distributors will often send a representative to do this training for you at no cost. Armed with that knowledge, the staff then knows that the new full-bodied cabernet that just came in yesterday goes wonderfully with a steak dinner and can offer that to a customer considering the steak. The result is a happier customer with a higher ticket who will tell his or her friends about your knowledgeable staff. Run contests to reward the servers with the highest average ticket for the week to encourage up-selling.

In addition to some general restaurant bookkeeping tips, let’s look at some specific ways to manage your operating expenses and keep your bottom line healthy.

Watch Your Invoices Closely

Food prices constantly fluctuate due to various factors, with some items varying wildly. It’s important to know exactly the current price of a pound of shrimp. If that price begins to rise due to an oil spill, hurricane, or another event that causes a shortage, it might be prudent to take the shrimp cocktail off the appetizer menu for a little while if the price gets too high. Also, some food service vendors will try to get your business by initially offering you low prices that they can’t sustain with the intention of creeping the prices up slowly in the hope that you won’t notice. This practice is called “speeding.” Be sure to regularly compare pricing from different vendors to ensure that you’re getting the best price when your food truck comes in.

A server sets tables at a restaurant.

Manage Your Labor

Along with food cost, labor is the other big variable expense that operators can control to increase restaurant profits. Labor is often a very fine line to walk. Too much labor during slow times is an unnecessary expense and may dilute tips among servers and affect their morale, while too little staffing can result in poor customer service and quickly land your business in Yelp hell. Many modern point-of-sale (POS) systems include advanced scheduling that uses sales history to predict how many servers you will need at any given time. Many POS systems can even suggest your best-selling servers on your busiest shifts for you. If you have such a system, take advantage of these features to keep your staffing lean and mean. If you don’t, it might be cost-effective to consider upgrading.

Stick to Multi-Purpose Ingredients

When planning out your menu, try to avoid items that require ingredients that aren’t used in any other dish. For example, if nothing else on your menu uses shrimp, you should probably avoid putting the shrimp cocktail on your appetizer menu because shrimp is expensive and has a short shelf life. But if your menu includes a grilled chicken salad and lemon pepper chicken, the chicken quesadilla pinwheels might be a better appetizer for you. By sticking to ingredients that are used in multiple dishes, you can cut down food costs and waste significantly.

Take Regular Inventory

Taking regular inventory is one of your best tools to detect waste and theft, so set a schedule to take a detailed inventory regularly. Compare it to your sales report to see if the sell-through rate matches what you expected from your sales report. That way, you know which items are moving and which are sitting on the shelf too long, and whether you might have some product walking out the back door at night. Have it conducted by at least two people to ensure that it’s done accurately and honestly. 

Get a Handle on Your Bookkeeping

Good bookkeeping for restaurants is essential, and as a restaurant owner, you probably don’t have the time to be doing your books. Your focus needs to be on doing what really matters – growing your business and improving your bottom line. That’s where a partner like Xendoo can help by offering a full suite of business bookkeeping products and services to help you know where every dollar is going. Outsourcing is more affordable than you might think, and it can pay for itself very quickly. Economists call it “opportunity cost.” It’s the hidden cost of foregoing one opportunity in favor of another because you don’t have time to do both. Yes, assuming you have the knowledge, you might save a few dollars in accounting fees by doing it yourself, but how much will your business operations suffer because you’re spending all your time on that?

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Five Customer Loyalty Tricks for Fitness Franchisees

Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness.

As a fitness franchise owner, you know very well the challenges of getting new members through the door, even in the best of times. It’s never been easy, but the fitness industry has been one of the hardest hit by COVID-19, with value brands representing the largest share of losses in the industry. Major gym franchises like Gold’s Gym have filed for bankruptcy protection, and others may soon follow. Polling has shown that as many as 60% of Americans either have canceled or are planning to cancel their gym membership due to financial hardship or concerns about safety. Simultaneously, the growth of digital and at-home fitness products has added to the pressure on gyms, with Peloton doubling its sales in 2020. 

So, in that environment, how do you get new customers through the door and convince your existing customers to remain loyal? We can start by taking a cue from one outlier in the value gym segment that has shown more resiliency than its competitors through the pandemic. The Anytime Fitness franchise has rolled out a comprehensive COVID-19 policy to protect their members’ and staff’s safety and begun offering advance reservations to secure a spot when capacity is limited. When customers have confidence that you are genuinely looking out for their best interests, they are more likely to remain loyal.

But beyond just building trust among your members, there are some other things you can do to encourage customer loyalty in this most challenging of times.

Loyalty Rewards Program

Have you ever noticed that it seems like every store you go into wants you to join their rewards program? Well, there’s a reason for that – it works. Create a rewards program for your loyal customers with some nice little freebies to help keep them engaged. This might take the form of a free t-shirt after ten visits, or maybe a free post-workout smoothie with every 10 purchased. You can get very creative with this, so don’t be afraid to experiment. Never underestimate the power of free swag for customer loyalty. Everyone wants to feel special.

Frequent Customer Discounts

Many gym members, particularly in the value segment, care just as much about the size of their wallets as the size of their jeans, so giving them a discount on a product or service is a great way to boost customer engagement. This might be a discount on a personal training session within the next month, or possibly a coupon for deals on gym apparel. Gym apparel is a particularly desirable thing to encourage because, in addition to the revenue from the sale, you get the added benefit of free advertising for your fitness franchise every time the customer wears it.

Three women stand besides each other at a gym

Referral Rewards

Let’s face it – we all have that one annoying friend who can’t stop going on about how great his or her fitness studio or workout program is. Well, that’s exactly who you want to be your customer, so you need to create a compelling reason for that person to be your customer. Create a referral rewards program and offer a membership discount for each new customer brought in on a referral. You’ll soon find your membership roster – and your bottom line – growing steadily.

Premium Memberships

Take a cue from companies with the most loyal followings and offer VIP or premium membership packages. Do a little up-selling. The key here is to create a value proposition that’s compelling enough to entice your customers to pay a little more without eating into your bottom line. If a member is already paying $30 per month for a basic membership, he or she would probably be willing to pay $35 or $40 to add free tanning or a free monthly workout with a personal trainer. It can be tricky to find the right balance for your package, but this is a great way to reward your most loyal customers if done right.

A man holding onto rings tries to beat a record for a gym contest

Run Contests

Contests can be a great way to keep your members engaged with the club and create valuable rewards for members who participate. You might run a contest with a free gym t-shirt or duffel bag to the member with the most visits during the month, or possibly a “Biggest Loser” type contest with a free month of membership as the prize. You can also incorporate social media into your content strategy by encouraging people to share, like, and comment on your content. Give members who complete one workout and check in on Facebook during the next month a raffle ticket to a drawing for a free duffel bag or another prize.

Focus on Your Core Business

Business owners are notoriously bad at time management, spending too much time on things that others can do and not enough on what an owner should be doing – growing the business. Offload time-consuming administrative tasks to employees or an outside firm. Consider outsourcing your bookkeeping and accounting, which is one of the biggest time vampires in an owner’s day. By getting those off your plate, you can have time to spend on thinking up creative ways to engage with your members and drive loyalty at a time when you need it most. 

 

So what’s the best way to boost customer loyalty at your gym franchise? Start by taking your own gym’s advice and just do it. Set a goal and commit to seeing it through. Start with these tips, but don’t just stop there. Be creative and come up with other ideas, and then let us show you how Xendoo can help your fitness franchises become more profitable with a free trial. Let’s start building that customer loyalty muscle together!

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.