By Susie Salmon
Disruption brings both challenge and opportunity: After a somewhat turbulent time for the franchise sector, there’s light at the end of the tunnel for franchise leaders practising best practice franchising. By actively promoting a culture of transparency within their systems and turning towards the best technology tools to embed this transformation, these franchisors are building stronger, more future‑ready franchise businesses.
We acknowledge that franchising is a unique business relationship. With the franchisor/franchisee relationship being bound by a franchise agreement (of which there are often different terms across different agreements within the same network), change can not necessarily be forced upon your franchisees.
This can cause trepidation when considering large-scale, network-wide transformation change. However, the outcomes are highly rewarding and make strategic implementation well worth considering, particularly to keep pace with the future-focused franchise sector.
PwC is supporting franchisors to enhance trust and transparency across their networks through innovative technology and platforms, tailored to the sector need.
The focus is on high-impact, time-saving technology solutions which:
- provide dashboards to improve data accuracy, insights and benchmark performance across networks;
- deliver assurance around employee pay and benefits; and
- make processes such as tax returns more efficient.
Experience shows that there are broad rewards from investing in technology to strengthen trust and transparency in your franchise system. Efficiency, insights, the ability to protect and enhance your brand, more targeted support and increased enterprise value are a few that I will discuss in further detail.
Time savings can be delivered through the streamlining of individual regular activities such as payroll, monthly management reporting and cash flow forecasting. These efficiencies can be realised at both franchisee and franchisor level. A more complex – but more highly rewarding – transformation that brings the network together on a centralised technology platform.
The benefits include structured common accounts, accuracy in data and reporting, minimisation of risk exposure; and the ability to benchmark across the network. All of this leads to more efficiency within the system brought about by real-time decision-making, more proactive business decisions, insights that can only be seen once aggregation occurs; and more in‑depth data-driven conversations with field managers.
Aggregation and increased transparency of financial data through technology solutions provide a clear understanding of the financial position and performance of individual franchise units. This can be coupled with best practice tools (such as analytics or cash flow) that build the franchisee’s knowledge and understanding of their own business at their fingertips. Franchisees can be empowered to benchmark their performance to peers in their network through real-time tools.
Access to these insights allows for franchisees and their field managers to have more strategic conversations as their businesses evolve. You have invested heavily in your field managers, by giving them these tools, you’re able to capitalise more heavily on the investment by increasing the effectiveness of this vital support function.
Protect and enhance your brand
You can create a secure technology environment that enables your franchisees to have visibility of cashflow position, business performance; and compliance and taxation obligations. This transparency gives all parties greater peace of mind: for example, technology can be used to provide you with the assurance that franchisees are compliant with their Fair Work Australia obligations.
As networks strengthen their financial data transparency and reporting, lenders may begin to reduce the risk profile of the network due to confidence in financial data and adherence to compliance processes.
With an increased analysis of a franchisee’s business and benchmarking that performance against a group of relevant peers, the field support team are able to provide more effective, timely support to their franchisees. Shifting the focus away from purely sales-driven discussions, the field support teams will have better tools to help manage franchisee cash flow, supporting where their performance deviates from “the norm” against their peers, scenario plan key decisions; and align a franchisee’s personal and business goals.
Increasing enterprise value
Potential investors may be wary of systems where there is a lack of transparency as it limits their ability to assess the underlying value of the network and opportunities for them to impact performance. By having at your fingertips more detailed historical and up-to-date information, you have the opportunity to improve the value and attractiveness of your business.
A final word on transparency and opportunity
The push for further franchise system transparency is not going to go away. We think that this isn’t such a bad thing. It is an opportunity for you to build trust with your customers. It is an opportunity for you to repair and grow trust with your franchisees.
It is an opportunity for you to gain trust with the franchisee’s employees. If you succeed, your brand will come out the other side, so much more powerful and valuable than it ever was.
Five things to think about when considering technology change to drive transparency
- Seek advice & support from within your network
A transformational project to drive transparency will not work if it is ‘forced upon’ your franchisees. They need to know they are your partners, and you are working together to create solutions for mutual benefit. Take them along the journey by ensuring there’s ample opportunity for consultation so that any solutions that are developed are fit-for-purpose.
- Develop a clear set of project outcomes
Your franchise system is unique: what you are aiming to achieve might be different from other franchisors. Make sure you develop a project plan with clearly defined project outcomes. This will mean that throughout the project you’re able to have clear conversations amongst your team, with franchisees and with any external vendors you may engage.
- Articulate clearly how you wish to use franchisee financial data
Franchisees may be sceptical about how you plan to use their financial information. Establish and articulate early on in the process of how the data will be used. Planning to anonymise the data sets will instil confidence in your intent and aggregation should not be about auditing your franchisees but about benchmarking and insights.
- Establish the impact of transformational changes on your franchise agreement and other key documentation
You will need to consider whether these changes can be forced upon franchisees and whether wholesale changes in your franchisee/franchisor relationship may require changes to the legal documentation governing your system. Ensure that you are seeking legal advice on the best ways to navigate these changes. If you are making changes to your legal agreements, take the opportunity to make sure they are “future-proofed” for any other system-wide modifications you might want to make in the future (rather than having to go through the process of changing them again).
- Reach out to your peers and networks
You are not alone in thinking about how you can move the dial on transparency. Conversations around the opportunities to drive transparency are happening everywhere in the sector. Seek advice from your fellow franchisors, Franchise Council of Australia members and trusted advisors to learn from their experiences and hear about how you can successfully enact change in your business.