March 2008

From The Desk of David Cahn: Convention Tid Bits

While attending the 48^th Annual International Franchise Association (IFA) Convention last month, I heard a couple of presentations that I thought would be of interest to you.

• “Shining the Light on Franchisee Profitability and Cash Flow,” emphasized the importance of accurate and timely review of profit & loss records. Among the speakers was Phillip Campbell, CFO of Franchise Analytics and author of the book, “Never Run Out of Cash.” Campbell expressed, “You can’t improve what you can’t measure.” He demonstrated the effectiveness of having a software tool, such as his Excelcias product, to track the profitability of a company.  This program keeps track of sales and gross profit measures, as well as expenses.  Franchisors can purchase a tool like this for about $700; it  can be integrated into any franchise program by using it in training and for ongoing support of franchisees.
  
  Adam Scott, COO of Wing Zone Franchise Corp., suggested that franchisors review P&Ls from actual units during the initial franchisee training—showing successful units and those with problems, and using the session to highlight the difference and the impact of inefficient operations on the bottomline.  He also suggested that franchisees explain the P&L to managers, illustrating how significant seemingly small decisions can be to a company’s profitability; he also suggested tying managers’ bonuses to the unit’s profit.
  
  Scott also stressed that franchisees should review their units’ P&Ls in a timely manner with the franchisor, so any suggested adjustments to operations can be made as quickly as possible after the figures are available, particularly if they are not as strong as they should be.

• “Do As I Say, Not As I Did: A Smarter Way to Grow Your Franchise System” provided advice on how franchisors can effectively manage their relationships with franchisees –highlighting mistakes franchisors often make and how to avoid them and have for a more successful system.
  
  For example, franchisors should set clear expectations for franchisees and establish open lines of communications with them.  An e-mail newsletter and webinars were two suggestions to apprise franchisees of changes and developments in the franchise system.  A section of the newsletter that celebrates the success of individual franchisees was also recommended.  Providing a forum, such as a blog, where franchisees can openly express their opinions will provide an opportunity for a franchisor to respond proactively and for franchise owners to share ideas.
  
  Additional recommendations for franchisors included listening carefully to complaints from franchisees plus thoughtful, timely responses.  Avoid miscommunication by maintaining thorough documentation such as a contact log.