This blog is the fourth of 5 blogs about how as a franchisor you can support your franchisees to manage their business finances.
In earlier blogs, we have talked about the importance of good financial habits and systems being utilised by each of the franchisees and how Head Office can help them to manage their financial matters in their business well which should lead to better profits and performance.
So this blog is about how franchise HQs can best support franchisees to do this.
You have a real mixture of people to work with in your franchises. They are all individual business owners, with very different approaches and attitudes to finance and they will also be at different parts of their journey with you in the franchise and with more or less experience than others. You may therefore need to find different ways to engage so that you can meet the needs of all types of your franchisees.
So here is a list of 7 elements we would recommend that you put in place for your franchisees which will help them to be pro-active with their financial management, will provide discipline and will not allow them to bury their heads in the sand if things aren’t going well for any reason.
1. Realistic budgeting & business planning
Work with them to set a realistic budget for the first year which corresponds with their business plan. Get them to create it themselves using a template you have provided and support them with this. Even if they have done budgeting before, you can help them apply those skills to the business and sector you are in and with the experience you have of how other franchisees financially perform in that first year.
Budgets should then be set annually by the business owner and form part of a discussion with yourselves at one of your review meetings with the franchisee.
As you know, budgets are a great tool for planning ahead, for decision making and measuring how the business is performing against what was expected.
2. Preferred suppliers
Franchisees may already have their own contacts that they want to use to support them in their business with the financial management. However, if you can introduce them to preferred suppliers for the franchise, it means that they don’t have to find their own suppliers if they don’t want to and your preferred suppliers will also be familiar with your franchise and sector and may also be able to offer reduced fees because of the volume of franchisees they work with.
So, preferred suppliers may include;
- Accountants (to provide accountancy expertise, tax advice and year end accounts for franchisees)
- Bookkeepers (to help with training of franchisees to do bookkeeping, set up of bookkeeping software and regular outsourced bookkeeping services)
- Lenders (to provide lending for new franchisees to purchase a franchise or existing franchisees for further investments they may need to make in their business)
- Printing companies (to provide printed materials for operational use in the business or for marketing)
- Human Resources consultancy (to provide HR expertise for franchisees taking on employees)
- Business coaches (to help franchisees develop their business skills in growing a business)
Of course, in addition to preferred suppliers, there may be some suppliers which franchisees are required to use as it is a critical part of their producing the product or service and would affect what they are providing and the franchise’s brand if they sourced this elsewhere.
3. Great financial induction
As a core part of the induction training for new franchisees, we have seen some franchises that do an excellent financial induction for new franchisees covering topics such as;
- Financial systems to be followed within the franchise
- Good financial habits
- Bookkeeping processes
- Understanding financial data
- Chasing customer payments
- Managing cashflow
Some franchises will also include provision for accountant support for the first 12 months of trading as part of the franchise fee so that franchisees have professional accountancy support to call upon.
4. Franchise financial procedures
As you know, franchises usually have standard operating procedures for running and managing the franchise. It is important to cover the franchises’ standard financial procedures within this as there are some elements of how money is handled in the franchise that you may need to be standardised.
Franchisees will be expected to provide regular financial information to HQ and so how and when this is required should also be documented within the standard operating procedures.
5. Monthly financial reporting
As a franchise, it is of course important to be able to see the financial performance of each franchise on a very regular basis so that you can identify any issues or trends needing some attention or support. If it is a franchise which calculates the management fee based on turnover or profits, then this is also vital information for collecting payments from the franchisees.
Full and up to date accounts should be made available to HQ at least monthly. However, depending on the type of franchise and the systems you have, there may well be other sources of information which you can obtain regarding sales particularly on a much more frequent basis.
With franchise systems or cloud based bookkeeping softwares, this enables HQ to be able to access information themselves without needing to get the franchisee to provide this for them. It also provides transparency which can help to avoid franchisees not declaring all their income to HQ.
6. Monthly/Quarterly financial review with a member of HQ
What franchisee review meetings do you have within your franchise and do you have financial matters as a standard part of your agenda?
If not, then introducing these agenda items will help to focus the franchisee on key financial elements such as;
- Review of profit & loss accounts and actions needed
- How financial performance compares to the budget
- Cashflow issues and actions needed
- Key financial decisions/investments to be made
7. Regular updating and training on financial management
Like with any area of the business, regular updating and training is critical.
Webinars, development day training and franchise events are great opportunities to keep reinforcing the financial management habits you want your franchisees to have as well as keeping them up to date with Government, sector or franchise changes or factors which will affect the finances in their business.
We hope this blog illustrates how Franchise HQ can support all franchisees in different ways to manage their business finances well because there are obviously significant benefits for both the franchisees and the franchisor.
This blog is part of a series of 5. Please see the links below to all 5 parts of this series of blogs on how you can support your franchisees with their business finances.
We have previously been franchisees as well as now being in a position as a bookkeeping practice of supporting franchisees and franchisors with their finance and bookkeeping needs. The Bookkeeping Department are committed to helping those in the franchise sector to manage their business finances effectively. If you have any comments on this blog or think we can help in anyway, please do get in touch www.thebookkeepingdepartment.co.uk or email email@example.com
If you are running a franchise business or in the research stage of buying a franchise, you should register for our next webinar – 6 Simple Steps To Great Financial Management.
The webinar is run by ourselves and Emma Austin FCMA CTA from Enterprise Tax.
It’ll be an informative and interactive session to help business owners manage their finances more effectively and to make more profit.
Register for free here: https://zoom.us/meeting/register/1ab71e5f370284eb66858a512be5123a
Please contact us for further details or for the dates of future webinars.