After a somewhat turbulent time in the media, there’s light at the end of the tunnel for franchise leaders practising positive franchising. As discussions on all sides continue, a theme has emerged: it’s time to look deeper into your franchisees’ unit level profitability, and operate with transparency.
Insights around top-line sales are just the beginning when it comes to understanding the practical tactics that can reduce their margin compression and improve profitability. By exploring the total financial position of your franchise units, the opportunities and risks for the business can be become much clearer.
4 key ways to help your franchisees reap rewards
1. Support your franchisees to get the most out of their employees
Even a small change in the way you think about people resourcing can result in a big surge in unit profitability, which – when multiplied – can positively impact your network. Consider all sides of the employee relationship, such as scheduling, compliance, team motivation and training.
Scheduling
Effective use of employee time can take practice to master, so share any business-wide learnings upfront. Software can also help to provide a holistic approach when it comes to tackling rosters, timesheets and communication between teams. Look into apps like Tanda and Deputy to see what they can offer.
Compliance
It’s never been more important for every franchisee to be confident in compliance, including how to pay workers properly. Help your franchise owners stay up to speed with the latest employee legislation adjustments, like the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017.
Motivation
An effective team needs clear guidance and goals. Arm your franchisees with the data and other information they need to establish clear and realistic key performance indicators (KPIs) and targets at unit level.
Training
Whether your franchisee’s team requires customer experience or skilled labour, ensure they are empowered to offer the relevant training to set the team up for success.
2. Share the low-down on cash flow
Cash flow management is one of the biggest pressure points for fast-growing franchise groups – and businesses of all shapes and sizes. As a franchisor, explore how you can bring a variety of data points together to the advantage of your group. For example, consider the insights you could build and share when you:
- Create dashboards that include key points of both operational and financial performance.
- Go beyond sales and revenue targets to include key liabilities such as loan repayments, super and PAYG compliance.
- Calculate the breakeven point across your franchises, then work with franchisees to understand the relationship between price, volume and cost.
3. Own your key performance indicators
Transparent benchmarking can inform and align a franchise group with multiple units, but only when done with careful consideration.
“The larger the franchise group, the more complex the task becomes due to varying factors,” explains Hai Trang, founder of accounting firm OneLedger. “These are dictated by demographics, climates, locations and operators. The task of the franchisor or head office is to standardise reporting across the group; to compare apples with apples.”
Understand the key performance indicators that are relevant across your business. For example, you might like to track:
- How many people enter the store
- How long customers wait to be served
- How much of a certain product you sell
- How many recurring customers you have
- How much you pay in wages to earn a dollar of revenue (breakeven).
Once you’ve identified the key performance indicators that make for a successful franchise unit, share and compare the results transparently across your network, and work with your franchisees to find paths of improvement.
4. Manage buying trends
Are your processes, rates and relationships working hard enough for you? When you’re operating at franchisor level, you may have the oversight and buying power to improve costs or workflows that are only visible at a networklevel, which can then flow down to your units. Take time to explore whether you can:
- Renegotiate purchase prices from suppliers
- Improve purchasing processes, such as reducing shipping costs
- Improve function of acquisition, using tools like purchase orders to prevent over/under ordering
- Better monitor stock turns and cost of goods sold usage, to reduce shrinkage and wastage.
Imagine implementing one small practical change that leads to a big percentage change in a unit’s profitability. Now multiply this learning across the many units in your network, using transparent software and benchmarking. Profitable partnerships build positive franchisees.
