Multi-Unit Franchisee Magazine Issue II, 2014 | Page 64

IN-HOUSE OR OUT?
for financial reporting, and different procedures and processes—which is where
outsourcing comes in.
And don’t forget the ongoing benefit
of freeing up your time for what you do
best. “As you grow, you don’t really outgrow the benefits of outsourcing, and you
retain the element of focus,” says Oden.

It’s a matter of getting your nose out
of the books and the computer.”
However, with the ever-increasing
complexity of doing business in 2014,
franchisees are seeing an increasing
number of suppliers and vendors offering to solve their problems through
outsourcing. But how do you perform
due diligence in contracting with one?
And how do you benchmark their perYes, technology too
“Outsourcing technology is very com- formance in your company?
mon in franchising,” agrees Keith Ger“When it comes to hiring outside conson, president of FranConnect. “Until sultants and vendors,” he says, “franchising
you get big enough, you’re going to needs the equivalent of an Angie’s List.”
outsource.” By definition,
One painful example of
he says, anyone who enters
why this would be a good
into a franchise relationthing to have: “We had a
ship is, to some extent, enclient who turned to us
tering into an outsourced
because they used a suprelationship, paying the
plier that was undercapifranchisor to help train
talized and failed after six
and support them and their
months. The franchisees
employees.
were in the process of inMany of his franchisor
tegrating the solution and
customers use FranConlost a lot of time when the
Keith Gerson
nect’s software and related
supplier failed.”
technology instead of building it on their
own. He notes that a lot more franchise Finance—the human factor
systems are passing down the technology “A major reason small businesses fail is
fee to their franchisees, $100 to $300 financial performance. It’s pretty much
per month—a pittance compared with a universal reason,” says Michael Sullidoing it themselves.
van at The Profit Experts, which proMulti-brand franchisees, however, vides automated financial reporting and
face a different set of challenges. “As management plus CFO-level expertise.
a franchisee organization gets larger
“There’s nothing new why these
or more complicated—especially with companies fail. We’re not equipped to do
multiple brands—it can’t rely on a single financials. Our brains aren’t wired that
franchisor across its different brands.”
way—otherwise we’d be a CFO,” he says.
Can the software you’re using be
“I’m a very typical entrepreneur and
configured across your multiple brands, small-business owner,” says Sullivan,
even your single brand? Do you have who has plenty of experience starting
to hire someone to roll up the data and businesses of his own. However, when
analytics for all of your locations?
it comes to financial management, he
Also, he says, as lead generation says, “Most small-business owners are
and brand building become increas- doing something, but it’s not the right
ingly automated and move online, thing.” His goal is to help them spend
many multi-unit operators are bring- less time and do a better job.
ing in a marketing consultant, espeAt the recent IFA annual conference,
cially for mobile and digital. “If I’m his first, he says, “I would hear franchia multi-unit operator that’s what I’m sors say, ‘We send them financial forms
doing. They could not on an annual- and they won’t fill them out.’ I asked,
ized basis do what those systems do ‘Why do you think they don’t?’” Beyond
for them,” he says.
the forms often being too complicated,
“What do you want to do as a fran- he thinks franchisors place unrealistic
chisee? Certainly not spend your time expectations on franchisees to do it all.
in an office doing analytics or keywords. “You’re asking them to manage opera-

62

MULTI-UNIT FRANCHISEE IS S UE II, 2014

tions, new hires, marketing, social media,
and by the way, financials. They don’t
have the skill set .”
Another part of the problem, he says,
is that small-business owners can get
by for a while without outside help by
using QuickBooks, an accountant, and
a CPA. “They tell me, ‘I’ve got a CPA,
they do this.’ No, they don’t. They’re
compliance people and seven months a
year they don’t think about you,” he says.
“Most people are on QuickBooks. Our
software automatically uploads their data
into the tool, populates the model for the
CFO, and tells them what’s missing,” he
says. “And every month we have a call.
Primarily we talk off one dashboard,
which even I can understand.”
The dashboard shows cash flow
by week going out 2 years, as well as
the amount of cash they need in the
bank so they can sleep at night. The
monthly phone call also enforces accountability, since it includes a review
of the previous 30 days and a check-in
to see if the customer did what they
said they’d do.
“One of the reasons we look out over
that time frame (2 years versus 60 to 90
days) is that when a problem happens in
the moment, you may not have enough
time to fix it, versus being able to see it
coming. Also, you may have eliminated
the best solution,” he says. “You have to
manage to reality, not the way you wish
things were, but the way they are. This
is a means for them to be able to do that
and have peace of mind.”
Paying a monthly fee of $300 to
$600 not only provides much-needed
expertise, it also allows franchisees to
acquire a broader perspective and develop financial discipline—if they want
to. Sullivan says there’s nothing they
need to learn. “There’s no webinar, no
course, and they’re immediately able to
use this,” he says. “And over time, they
can get as smart as they want, at whatever level they want.”
Says Sullivan, “It’s interesting to me
that small-business owners view paying
for financial services as discretionary. As
entrepreneurs, what drives us is generating revenue, but it doesn’t go to cash
flow. We are deadly focused on cash flow
and profitability.”