Article:

Three ways to improve the performance of your multi-site Franchise

25 May 2021

Multi-site and multi-brand ownership have been on the rise for a number of years now, as entrepreneurial franchisees seek to diversify risk across locations and industry sectors. However, while running a multi-site franchise can be very rewarding, it can also be challenging to maintain a grip on finances. Here are our top tips on how to implement effective financial controls. 

With every added site, the complexity of managing employee, customer, and supplier interactions increases. The need for careful cash flow management also increases in order to support operational demands and ensuring the franchise is adequately capitalised. When you add in the uncertainty and volatility of macro-economic factors such as the UK’s recovery from the COVID-19 pandemic and impact of Brexit, managing financial performance can become overwhelming.

Use your data

Fortunately, franchisees today can have access to real-time data and automation, which improve reporting by making management information instantly available and more reliable, working capital management easier and decision making more data-led. 

There is an abundance of data available for franchisees - from website and social media analytics, to POS and inventory records, to bank feeds and accounting systems. Making sense of this ‘big’ data may require powerful software solutions such as Qlik, Tableau and PowerBI. These platforms help explore customer behaviour and financial trends for scenario planning and forecasting purposes.

However, there are also effective cloud reporting tools that can help franchisees to focus on cash flow, working capital and funding without needing to invest in higher-cost solutions. Some of these tools can be implemented almost immediately – enabling you to survive the current times and create value for the future.

Monitor and manage working capital

If you are looking to manage working capital more effectively, automated reporting apps such as Fluidly, Futrli, Fathom and Spotlight can be a real advantage if you are running cloud finance and accounting technology systems.

Fluidly and Futrli, for example, do a lot of the heavy lifting on working capital analysis and cash flow forecasting for you, leaving you freer to interpret and act on the results. Using intelligent algorithms to look at actual collection and payment patterns and projecting these forward, these apps can predict cash shortfalls far more accurately than traditional methods. The reports these apps produce also substantiate the assumptions used in your projections, and are likely to improve your chances of securing funding.

This means you can spend more time fixing the root causes of cash issues at each site, and communicating with suppliers, landlords and financiers in advance of cash shortfalls becoming a threat to survival of your multi-site group. Demonstrating your ability to take proactive actions based on reliable management information is more likely to improve your bank’s willingness to explore working capital funding options in advance of when you need it.

Use benchmarking

When you want to improve the performance of your sites, cloud based management reporting tools such as Futrli, Spotlight and Fathom allow you to aggregate, rank and benchmark the performance of different sites on a regular basis.

Why is benchmarking important?  Firstly, benchmarks act as your radar for success. Entrepreneurial franchisees seeking to own multiple sites tend to have a strong vision for their geographical location, and will have ambitious targets for success. With the right benchmarking, you can enable site managers to openly discuss the reasons behind higher (or lower) performance, which will help you identify best practice to speed up growth. 

Second, ranking sites by different benchmarks helps to identify which units need additional support or training. More successful units can share their experiences on how to optimise stock mix or reduce wastage and contribute ideas for others to implement locally. 

Third, benchmarks can help to drive down costs by optimising supplier terms. You already have the benefit of leveraging greater buyer power via the franchise model. However, deliberately benchmarking site purchasing patterns against supplier price breaks gives you an opportunity to further reduce costs with small changes in site by site purchasing behaviour.

Finally, benchmarks will give you warning signs. The worst case scenario for a multi-site franchisee is where a poor performing site brings down the rest of the group. Benchmarks help you to identify units which are likely to trigger any default or cross-default provisions in the franchise agreement.

How can you implement benchmarks in practice?

Setup phase

  • Define the strategy for your multi-site network and set clear goals
  • Define success benchmarks – what does good look like for financial and non-financial success?
  • Define warning signs – when does a unit start to look bad or present a risk to the group?
  • Get the infrastructure in place to capture and report on performance data – making this as automated as possible

Operational phase

  • Report and rank site-by site performance against key benchmarks, on a monthly basis as a minimum
  • Encourage regular peer mentoring or collaboration meetings – to help unit managers actively discuss performance, identify best practices and generate ideas for improving operations
  • Get commitment on actions, and encourage site managers to hold each themselves accountable to their peers

Investing in real time data to drive strategic decisions, and using automated reporting tools to manage working capital better will help to strengthen your multi-site franchise, create value for the franchise network, and increase your chances of securing a profitable exit in due course.

To speak to a member of BDO’s Franchise team on this topic, simply get in touch using the form below.

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