Understanding Franchise Unit Economics – why is it so hard?

Most people look askance when I tell them that franchisors represent a key market niche for SurvivalWare.  Surely they have everyone on a centralized accounting system and it is just a matter of spitting out the right reports.  But remember that each franchise location is a separate business, with a separate owner, its own accounting system, and its own set of books.  Even if you do publish a common chart of accounts (and most franchisors do!), they morph over time in real world usage.

Why is it so difficult for you, the franchisor, to get a handle on franchisee profitability and cash flow?

…Because trying to get financials from franchisees has been like beating your head against a wall full of sharp razor blades (ouch)! 

…Because you quickly found that once you did get some financials faxed to you that it was a painfully slow and incredibly labor-intensive process (not to mention error-prone) to manually enter the numbers into a spreadsheet so you could see the data and try to understand it. 

…Because you realized you needed a “common format” for the financial information BUT every franchisee has a different chart of accounts, many use a different accounting system, the reports are all in different formats (some are highly summarized and some are very detailed), and someone on your staff has to make sense of that in order to enter the data in your “common format”. 

…Because you had a nagging fear in the back of your mind that the data “translation” process was not consistent or accurate. (The fact that you brought in a temp to do the work didn’t help your sense of concern, right?) 

…Because  you quickly realized there was no way you could gather monthly financials from franchisees because this process was way too time consuming and costly to even consider doing on any kind of regular basis.

I’d love to hear back how franchisors have tackled the problem – whether using SurvivalWare or some other tool. 

Here’s what the CFO of AlphaGraphics has to say about how they solved the problem.

Learn more about Franchise Analytics and SurvivalWare’s Cash Flow Software  by clicking on the links.

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