Franchisees, set up a steering system that creates value.
L. Dubernais and C. Bergaud
To ensure financial guidance of their operations, many franchisees find themselves left to their own devices. This is hardly surprising, given the background and profile of most of them, and the fact that franchisors are keen to avoid the risk of interference. Nevertheless, piloting remains a the lever for success of a franchised unit. So how do you help franchisees to become more autonomous in this area, so that they reap the desired benefits at every stage?
Launching your business: the business plan
In addition to established success, proven know-how and a certain notoriety, franchisees expect their franchisor to provide ongoing support. This is particularly important when it comes to drawing up the business plan. While it's up to the franchisee to draw up this document, it's in his or her interest to be supported on two levels:
- by the franchisor, who can provide a dedicated tool containing the brand's specific ratios, supplemented by reports from existing franchisees in the network, and establishing averages, item by item, for example. This helps them to ask themselves the right questions. Intersport systematically provides its franchisees with a tool to help them from the very start;
- by his chartered accountant, who, using this same tool, will be all the more familiar with the specifics of the company's concept, and will be able to validate or correct forecasts, and help him prepare for meetings with bankers.
During development: budgeting and monthly reporting
With competition sparing no sector, operating conditions are becoming more complex, tougher and cycles shorter. Franchisees are therefore well-advised to monitor their business closely to detect any deviations - whether these be a source of dissatisfaction with projections, or even reveal potential risks - and then implement an appropriate action plan.
The definition of a budget at the start of the year (forecast, growth assumptions, stock rotation, margin rate, etc.) and the preparation of monthly financial statements will enable the franchisee to gain a more detailed understanding of his business. Franchisees can also compare their performance with other network members. This benchmark enables them to challenge themselves and identify areas for improvement. The franchisor, as practiced by the Midas brand for example, can then support the franchisee in steering his or her network by proposing a course to follow and providing a specific tool consolidating financial and commercial data for the outlet and the network. This data is also invaluable for the chartered accountant, who can adjust the franchisee's projections and help him immediately appreciate the implications for future earnings.
Prevention: risks of failure
While franchising helps to secure a business start-up project, the franchisee must not lose sight of the risk of failure to which he is exposed, like any other entrepreneur: lack of cash flow and WCR, or the number of unpaid bills are common examples. To limit this risk, he can equip himself with a tool enabling him, for example, to define thresholds, by key indicator, and to set up alerts or notifications for each of them. Supported by the franchisor and the chartered accountant, the franchisee thus equipped can identify at an early stage the weak signals that could - if not dealt with in time - lead to a risk of default.
Franchising endures through concepts that can be replicated and passed on. The handover phase requires the franchisee to be able to objectively and accurately assess the way in which his or her business has continuously increased in value. It is vital for him to acquire the tools he needs to set up and run his business on an almost daily basis, and to optimize not only the financial but also the commercial management (purchases, sales, stock rotation, customer satisfaction, etc.) of his business. It's a low-cost investment that will enable him to engage in a beneficial exchange with his franchisor and his chartered accountant, and run less risk of deviating from his own objectives of creating asset value.
THE AUTHORS
An entrepreneur since the age of 26, Laurent Dubernais has been involved in network management for over 20 years, and is President of Synergee. He is also a member of the FFF's College of Experts and an expert with the Conseil Québécois de la Franchise.
Synergee supports and advises over 75 networks (franchised, cooperative or independent) in France and abroad. Synergee is a sales and financial management software designed for commercial and service networks, particularly franchises and cooperatives. From financial management to business monitoring, Synergee provides the collaborative platform and support a network needs to replicate its success.
Catherine Bergaud is a chartered accountant and partner at Mazarsand responsible for the Organized Commerce market in France. She has extensive experience of outsourcing and business process outsourcing for international groups, and promotes the implementation of best practices in this area.
innovative management and financial control systems for networks.
Article published on Les Echos de la Franchise. com on 20.11.2015 written by Laurent Dubernais and Catherine Bergaud.
