Finance & Business Intelligence: optimize the return of your chain

Running a chain does not always mean growth leads to profit. While growth is important, expanding too quickly, in the wrong locations, or with rising inefficiencies can put pressure on the organization. To improve profitability and cash flow, it is crucial to have a clear view of business results and consider both top-line and bottom-line strategies. We guide you through this in our finance workshops.

Top-line techniques

Top-line growth focuses on increasing revenue at the top of the profit and loss statement. This can be achieved by raising sales per customer or attracting more customers. Some examples include:

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

Which approach works best depends on the industry. For example, a beauty salon could extend opening hours on Tuesday evenings to generate more revenue and customers, while this would not be realistic for a clothing store due to limited foot traffic in the shopping street. How better returns in franchise are created varies strongly per sector.

Bottom-line techniques

Many chains have a solid customer base and good sales at their locations but still struggle to achieve sufficient profit because costs are too high. Steering by numbers to reduce costs, minimize waste, and automate labor-intensive activities in the organization are ways to improve profitability.

Automation

Automating routine tasks can significantly reduce the number of people needed to complete services and manage a (franchise) chain. By automating essential but repetitive tasks such as invoicing, scheduling, online payments, etc., required labor can be reduced and employees or franchisees can use their time and expertise for important aspects like improving service quality.

With the right tools for process automation, chains can benefit from processes in:

• Marketing and sales, for functions such as 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 and financial dashboards with KPIs, KRFs, and KSFs
• Logistics, such as routing, labeling, ordering, and tracking shipments
• Human resources & franchise management, for onboarding employees and franchisees, contract management, recordkeeping, employee benefits, and payroll processing

Ways to reduce costs

There are also many other ways to reduce costs as a head office or at the location level. Some examples include:

• Review staff scheduling. Check rosters, staffing levels, and overtime, and consider adjustments without negatively affecting customers.
• Optimize inventory management
• Analyze all current expenses – are they still needed/relevant, and is purchasing still competitive?
• Evaluate marketing activities. Does the current approach still use the optimal mix, or are there improvements possible?
• Etc.

Duty of care for the franchisor

One of the reasons franchisees join is because they benefit from brand recognition, often resulting in higher sales and more customers compared to independent entrepreneurs. At the same time, franchisees profit from cost savings, efficient processes, and the franchisor’s experience. If these elements are not properly organized, it is your duty as franchisor to take action due to your duty of care toward franchisees.

This is also important because franchisees often work so hard in the business that they spend too little time working on the business. They may not realize how even small changes affect their income, such as helping just one extra customer a day or consistently offering an additional product or service. These simple actions can significantly improve profitability in franchise.

Optimizing cash flow

Just as important as fundamental profitability is managing cash flow. A business may be profitable on paper but still go bankrupt if too much is invested in growth without sufficient funds to meet obligations. In such situations, 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 difficult. Growing more slowly costs money in the long term, and extra financing brings added financial burdens. Optimizing cash flow can be achieved by implementing strategies that encourage customers to pay earlier, sometimes requiring major business model adjustments. It can also involve paying suppliers later, though poorly executed this can strain key partnerships.

Increasing financial success

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