While owning a franchise is an excellent option for aspiring entrepreneurs, it is far from simple. While you may have a well-established business plan to guide you, you still must run and maintain a successful company.
If you have made the decision to open your first franchise location, it’s easy to get caught up in the excitement of this next big step in your entrepreneurship path. Channeling that excitement into a strategic opening is a great first step. A “strategic opening” is one in which the launch of the business sets you up to prosper in the long run and ensures that you can drive profit to your bottom line. You have so many things to do, and you have a checklist (often provided by the franchisor), that will help you get there. Below, we cover some of the important best practices you should consider when it comes to budgeting and tracking performance for your franchise.
Minding your budget.
Do I have all the capital I need? In most cases, there’s most likely some work to do before there is enough. While it’s important to have sufficient cash in the bank, it’s also essential that you prepare a budget to guide you through your first year.
Throughout my career, I’ve worked with several franchise brands and watched as new franchisees joined those brands. I have seen some common trends in watching those brands grow and wanted to share the following critical points that are often overlooked.
- Financial planning starts before you open the doors. It really begins the moment you sign your franchise agreement.
- Take the time to lay out a budget and forecast based on the franchise model. Project your franchise revenue curve over the next 24 months, using historic franchisee startup revenue data as a benchmark.
- Align your budget with your cash flow.
- Ask yourself, have you enlisted the help of a bookkeeper, who understands your business and has worked with similar concepts? Is there a system set up so you can quickly and efficiently move documents back and forth to get your books done?
Know your numbers & embrace your KPIs.
From day one, be prepared to measure your success and your franchise against Key Performance Indicators (KPIs). During those first three months of being open, most franchisees are solely focused on keeping the doors open, maintaining a full staff, providing products and services, and generating excitement. However, it’s important that you are aware that this can be a critical time when cash is wasted. Here are a few ways to ensure your cash is being put to good use:
- Measuring yourself daily against your KPIs, such as hourly labor is critical. In opening a new franchise, there is typically a huge labor bump for training and the grand opening period. It is imperative, for example, that labor costs are measured to establish labor-management best practices from day one.
- Your KPIs are generally sent from your franchisor based on experience, history, and know-how. Everyone on your staff should know those KPIs and understand what they stand for. Share your KPIs with your staff. Let them know of their successes, their challenges, and how they can overcome those challenges.
- Make it a practice of watching your KPIs, sharing them with your team, and celebrating great performances. When there are obstacles, meet the challenge with a plan.
- It may be a pain, but this is the time to get your financials done as quickly as possible and review immediate results. Do the numbers from the start, and you will profit from the resulting numbers on your bottom line.
In the franchise arena, profitability and growth are critical focus points to prioritize from the start. The above tips are to ensure that your franchise hits the ground running and stays successful in the long run. If you’re overwhelmed by the thought of keeping track of these metrics on your own, there are plenty of tools to support them.
ProfitKeeper by PrimePay is here to support you.
The process of collecting and analyzing data does not have to be manual. With ProfitKeeper by PrimePay, franchisors can take advantage of the cloud-based software to automate financial tasks that help increase profits.
Imagine a service that not only does the work for you but ensures the data is accurate and useful: That’s ProfitKeeper by PrimePay.
Please read our disclaimer here.