Capital Area Franchise Association founder and well known franchise attorney Warren Lewis led the important panel discussion:
How to Improve On Your Franchisees’ Unit Economics, on July 16th, 2013.
Joining Warren on the panel were Gregory Plotts, CPA of Yount, Hyde & Barbour an expert in franchisor/franchisee audit, accounting and consulting services and John A. Gordon of Pacific Management Consulting Group an analysis, advisory, expert witness and business intelligence aggregator focused on the franchise restaurant sector.
1. The Problem – Lack of Timely Reporting
There is great opportunity for better franchisee unit level performance reporting and corresponding franchisor support.
However, the audience concluded that less than 40% of franchisors get meaningful and timely reporting from franchisees.
Warren also pointed out that in 35 years of franchising, he has never terminated a franchise agreement solely because the franchisee wasn’t reporting on a timely basis.
2. Why it Matters Even More
John Gordon pointed out that the U.S. restaurant marketplace is overbuilt, yet still growing.
So, the competition for sites is intense pushing rents up for prime locations and requiring franchisee and franchisor operators to be focused on unit level performance like never before.
Those franchise systems that are better at getting their data have a competitive advantage. Popeyes is out muscling KFC, for example.
Greg Plotts emphasized that creating dashboards with Key Performance Indicators – KPI- in as close to real-time as possible enables both franchisees and franchisors to be nimble and act on what the KPI reporting is telling them.
3. The Opportunity for Franchise Systems
The audience asked how do you get to a point where a franchise system can get the reporting and KPI platforms built and adopted?
Every franchise systems need a Standard Chart of Accounts. (Restaurants can start with the National Restaurant Association’s uniform chart of accounts.)
Here are the 6 takeaways from the experts and CAFA audience:
A. Franchisors should:
1. Produce reports that are valuable to both the franchisor and franchisee. Franchisors need to find out what reports their franchisees need.
2. Get the franchise field consultants focused on the franchisee’s unit level P&Ls. To have onsite in the field meetings without good numbers with franchisees is not the best use of franchisee and franchisor time.
B. Franchisees should:
1. Understand that some of them will want to know how they rank, and that group should be the first to work on a standard chart of accounts together with the franchisor and service providers.
2. Understand that money spent on accounting platform now will pay off in future growth.
C. Service Providers/Suppliers Should:
1. Not push the franchise system to a cloud based platform or even dashboards until there is sufficient buy in by the franchisees.
2. Understand the different needs for reports, by franchisee and franchisor and tailor the product accordingly.