How to spot a franchisor with financial best practice

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Inside Franchise Business: franchisors with financial best practice can help franchisees overcome profit concernsSo you’ve invested in a franchise, and all’s been going well. The sales are up and customers love your brand. But after a while, you check the figures and find the finances aren’t quite as rosy. You’re working hard and your staff are working hard but the profit margin is in decline.

You might have set some key performance indicators (KPIs), you might be submitting the occasional profit and loss statements (P&Ls) to the franchisor but there’s nothing systemised.

Measuring the business is important but when it’s haphazard it’s ineffective.

So can a franchisor help you boost the profits and improve your business?

The Franchise Relationships Institute has studied some of the trends for success in a franchise and recently revealed how metrics can make a difference.

Dividing the franchisor’s metrics structure into four levels, FRI has pinpointed the top two standards for best practice.

Best practice: reaching the top

Franchise systems that are can help franchisees beat profit pain operate with the following:

  • Monthly P&Ls with standardised Chart of Accounts
  • Internal benchmarking and analysis
  • Business plans with budgets and goals
  • Real time menu of KPIs from cloud based POS
  • Structure review of metrics with meeting rhythms

Best practice: top of the top

Franchisors operating in this space have the following:

  • Real time financial dashboard
  • Full transparency of data across the network
  • Focus on financial literacy for franchisees
  • KPIs adjusted to suit maturity of each business
  • More than 50 per cent of franchisees in performance groups
  • Unit level profitability is counted as one of the top three franchisor KPIs

So yes, a franchisor can instigate best practice across the network and help combat margin compression.

Now you know what to look for: find a franchise employing best practice and you are better placed to weather financial storms.

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