Businesses big and small, new and old have been feeling the pinch recently from the slowing global economy, and franchise businesses are no different.
During an economic slowdown, it’s important for franchisees to use the strength of the franchise system to their advantage. Doing the basics well by taking control of operating costs and keeping the business’ finances in good shape will help boost its resilience and keep profits turning over.
There are many benefits to being part of an established franchise brand. It brings with it the security of a tried and tested model, with robust processes and procedures that are handed down through the network. Buying power is also greater due to well-established supply chains giving access to lower stock prices.
No matter what the economic climate, franchisees should conduct a regular financial health check on the business to ensure its financial efficiency. Having a model in place to track business costs and non-wage costs as well as current cashflow and cashflow projections is critical. Remember, one of the major causes of a failing franchise business is the under utilisation of the resources available.
Specialist franchise business bankers and other financial advisors play an integral role in helping to manage a profitable franchise business. It’s important for all franchisees to remember that working on the business rather than just in it is the key to success. By adopting a proactive approach, franchisees should be well placed to succeed in any situation.
– Rod Nuttall is the National Executive Manager of Commonwealth Bank’s franchising division.