Profits lift for franchisees at The Cheesecake Shop

Inside Franchise Business: Some of the executive team at The Cheesecake ShopThe Cheesecake Shop has seen average profits gained by franchisees across the 212-strong retail network in Australia and New Zealand rise by 7.5 per cent in 2018.

EBITDA and Owners Wages has lifted from 18.9 per cent for the year to 30 June 2017 to 19.6 per cent in the 12 months to 30 June 2018. This is an increase of 0.7 percentage points for this ratio over the past 12 months.

On average (same store) sales have also grown by 3.6 per cent which means with higher sales and a higher ratio of cash profit to sales – that in dollar terms on average, store profits are up by 7.5 per cent.

Managing director Ken Rosebery is pleased with the figures. “That is a great result in a mature, steady business like ours,” he said. “We’re proud to have achieved improved performance for our franchisees when franchising in general is copping a lot of negative media lately.”

Technology has been at the heart of the financial improvements: the franchisor implemented cloud based accounting, payroll and reporting systems back in 2014, and these significantly improved the monitoring of franchisee financial health and payroll compliance.

Today franchisees receive monthly data on their financial performance and comparisons with other franchisees.

“This has really helped us to better manage franchisee profitability and ensure they get value from their investment,” says Rosebery.

For the roughly 10 per cent of the franchisees who are operating under-performing stores the franchisor has a program of additional support.

“We have a cohort of stores in remedial stage, we use financial data to see they are underperforming.”

When it’s time to take action, the franchisor considers additional marketing resources, a lease review, even relocation. It’s all part of being a franchisor that is focused on improving its franchisees finances, he says.

“We’d like to get profitability as a proportion of sales over 20 per cent,” he told Inside Franchise Business.

Understanding the numbers and their impact on profitability is essential to improved business. “One of things franchises look for is a franchisor right on top of the figures. If you measure it you can manage it. We know the numbers in this business and transparency is incredibly important with franchisees,’ he said.

A subdued market has brought lower expectations of growth this year across Australia. However The Cheesecake Shop continues to expand, with 10 new stores in the pipeline here and New Zealand, and four further outlets lined up for the UK.