Finance & Business Intelligence: optimize the return of your chain

When running a chain, growth does not always lead to profit. Although growth is important, an organization may expand too quickly or in the wrong locations, or inefficiencies may increase, putting pressure on the organization. When seeking ways to improve your chain's profitability and cash flow, it is essential to have a clear understanding of your company's results and to consider both top-line and bottom-line strategies. We invite you to explore these in our finance workshops.

Top-line techniques

Top-line, as the name suggests, focuses on achieving growth at the top of the profit and loss statement. This can be done by increasing revenue per customer or the number of customers. There are various ways to boost revenue, including the following examples:

• Intensifying promotional activities
• Adding new products and/or services to the current offering
• Increasing prices
• Improving product quality to enhance brand image and reduce return sales.
• Etc.

The best option for your chain depends on the industry you are in. For example, a beauty salon might consider staying open later on Tuesday evenings to generate more revenue and attract more customers, while this might not be realistic for a clothing store due to insufficient foot traffic. How to create better returns in franchising varies significantly by industry.

Bottom-line techniques

Many chains have a solid customer base and good revenue at their locations but still struggle to make sufficient profits because their costs are too high. Focusing on reducing costs, minimizing waste, and automating labor-intensive activities are ways to improve profit.

Automation

Automating routine tasks can significantly reduce the number of people needed to complete a service and manage a (franchise) chain. By automating essential yet repetitive and mundane tasks such as billing, scheduling, online payments, etc., you can reduce labor requirements and/or enable employees and possibly franchisees to focus their time and expertise on important aspects such as improving service quality.

With the right process automation tools, chains can benefit from processes that relate to:

• Marketing and sales, for functions like email, social media, reporting, and tracking to optimize efforts
• IT, such as automated maintenance and status reports and a ticketing system
• Administrative tasks, such as automation in accounting systems, financial dashboards with management information based on KPIs, KRIs, and KSIs.
• Logistics, where companies often seek support in routing, labeling, ordering, and tracking shipments
• Human resources & franchising management, for onboarding employees and franchisees, contract management, record keeping, and managing employee benefits and payroll

Ways to reduce costs

Besides automation, there are various ways to reduce costs as a headquarters or a location, including the following examples:

• Review staff scheduling. Examine rosters, staffing, and overtime, and consider where adjustments can be made without adversely affecting the customer.
• Optimize inventory management
• Analyze all current costs—are they still necessary/relevant, and is purchasing still competitive?
• Analyze marketing activities. Does the current marketing approach still consist of the optimal mix, or are there opportunities for optimization?
• Et cetera.

The duty of care of a franchisor

One of the reasons a franchisee joins is the advantage over a "regular entrepreneur" in terms of brand recognition. This often results in higher sales and a higher number of customers compared to the regular entrepreneur. On the other hand, a franchisee benefits from cost savings, efficient setup of processes and procedures, and the experience of the franchise organization. If these aspects are not well managed, it is your responsibility as a franchisor to address this due to your duty of care towards your franchisees.

This is also crucial because franchisees often work so hard in the business that they do not work enough on the business. They often have no idea what it means for their own income if additional revenue is generated. For instance, by helping just one extra customer per day or consistently offering a certain additional product or service to the customer. It's a shame, because often simple actions can significantly improve franchise returns.

Optimizing cash flow

Just as important as an organization's fundamental profitability is managing cash flows. A company can be very profitable on paper and still go bankrupt because the organization invests so much in growth that there is insufficient money to meet all financial obligations. In such a situation, there are three possible solutions:

1. Grow more slowly
2. Attract additional financing
3. Optimize cash flow

The last option is the best but also the most challenging. Slower growth costs money in the long run, and additional financing involves extra financial burdens. Optimizing cash flow is achieved by implementing strategies to get customers to pay earlier, which may require significant adjustments to the business model. Additionally, it includes paying suppliers later, which, if done incorrectly, can strain important partnerships.

Enhancing financial success

Success is a moment. You can lose it or further increase it. The development of a chain must always continue. New opportunities must be seized. By consciously monitoring your financial results using Business Intelligence and subsequently adjusting based on the data, this can be realized.