We've breathed a collective sigh of relief…the last few months of a financial year bring certain business elements into focus – whether we will meet this year’s targets, what campaigns we can run to help achieve our targets in the final months and business planning to set next FY’s targets.
So we wake up on the morning of 30 June with the feeling that the Everest peak has been reached and we can now take a breath. We can sleep peacefully knowing that what’s done is done and tomorrow marks a new beginning… except the new FY has its own requirements.
There are all the usual things any business should do at the end of a FY year. Prepare tax returns, set targets and budgets for the new FY, review your business structure and so on.
And then there are some tasks that need to be completed which are unique to a franchisor.
5 ways to make the most of this financial year
1. Franchisee P&Ls
Following the end of a FY franchisees need to prepare their P&L, balance sheet and tax returns. These should be forwarded to the franchisor. There are multiple uses for these:
a. To understand the financial position of each franchisee and where financial health is not evident a plan needs to be put in place to assist the franchisee.
b. Even where financial health is evident there may be areas for improvement. This enables the field team to work with the franchisee to identify areas where operating costs can be minimised or revenue opportunities can be enhanced.
c. This data can be used by the franchisor to benchmark the financial performance of the network. I find it most useful to dissect the network into categories. The categories may differ from one franchise system to another but options to consider include – regional v metro, thresholds of turnover, length of tenure, sales performance etc. The franchisor can then share with the network benchmarking analysis. Examples you may choose to categorise the franchise network into franchises that turn over less than $1m, $1-1.5m and greater than $1.5m. You can then benchmark key financial parameters such as salary expense, accounting costs, wastage and so on.
d. The financial benchmarking is useful in updating set up and operating costs in the disclosure document which needs to be completed within four months of the end of the FY.
e. The financial data can be used to provide insights for prospective franchisees in the recruitment process so that they can conduct meaningful due diligence.
2. Sales analysis
Analysis can take place on the sales history of the business. You can look at product mix, margins, stock management, sales volumes. Sales analysis can assist with identifying skill gaps, product offerings, procedural inefficiencies. The field team can use this data in business planning and to help with staff skills set, training needs and marketing strategies.
3. Analysis of business viability
Analysis of sales and financials assists in assessing the viability of your franchise business model. If a large proportion of your network is performing poorly you may wish to consider a number of action items including a review of the franchise model, potential efficiency gains including technology opportunities. If a significant proportion of your network is performing well you may wish to utilise this information in a franchisee best practice session at a national or state conference.
4. Sharing data with lenders
Sales and financial analysis can then be shared with your lenders if your franchise model has lender accreditations.
5. Franchisee recognition
Let’s not forget a very important reason for end of financial year data collection and sales analysis – franchisee reward and recognition program. Celebrating success is a strong morale booster and generates brand pride.
These activities are over and above the typical end of FY responsibilities of a business and is reflective of best practice in franchising. These tasks should ideally not be left to the end of the FY only but, as a minimum, should be conducted annually.