Multi-Unit Franchisee Magazine Issue II, 2014 | Page 78
FranchiseMarketUpdate
BY DARRELL JOHNSON
Franchisees Unite!
Manage uncertainty through cooperation
T
he Affordable Care Act (ACA)
implementation, potential minimum wage increases, and likely
overtime rule changes add to
the ongoing challenges of managing
the expense side of any business. For
multi-unit operators, the implications
are increased costs. However, there are
a few efficiencies to be gained from the
scale multi-unit operators enjoy that can
lessen the impact.
The ACA represents one opportunity
for efficiency for larger multi-unit operators not shared with smaller franchised
and most non-franchised SMEs subject
to the 50-employee trigger. Managing
a larger pool of hourly labor employees
allows greater flexibility. It also comes
with additional costs in the form of
management time; but therein resides
the efficiency, in that incremental additions to labor, in theory, should not
have similar incremental additions to
management time if management is
operating efficiently.
A common thread with all these potential changes is that we often don’t
know how to most effectively minimize
the impact these costs have on our businesses. In other words, we have uncertainty. We should tackle uncertainty
with two sequential solutions. The first
is ideas. We’re pretty good doing that.
The second is measuring outcomes that
ideas create. We’re less proficient with
this step.
Let’s use the ACA as an example. We
already have a number of “experts” telling
us all its implications and how to change
our business models. Some will be right,
others will be quickly forgotten. Who
should we listen to? In franchising, we
are fortunate to have people living their
experiences and willing to share them.
At Franchise Update’s upcoming
Multi-Unit Franchising Conference
(Las Vegas, April 23–25), there will be a
general session panel of multi-unit op-
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MULTI-UNIT FRANCHISEE IS S UE II, 2014
erators clarifying misconceptions about
the ACA and explaining how they are
preparing for the changes it will bring.
This exchange of ideas and initial approaches starts us down the path toward
tackling an issue shared by all multi-unit
operators. That’s a necessary first step,
but it is not enough to promote universal
action. Which ideas should we adopt?
How much will they cost? And what are
we saving by doing so?
We should tackle
uncertainty with two
sequential solutions.
The first is ideas.
The second is
measuring outcomes
that ideas create.
Answers to these questions can be
developed only over time. Unfortunately, we tend to miss the opportunity
that sharing this type of information can
provide. As an example, administering
changes to the ACA will cost money.
How much should you budget? What nuances of administering required changes
will produce the most cost savings? We
can answer those questions only with
facts—facts that can come only from
shared multi-unit experiences.
If we have a common challenge we
all have to deal with, wouldn’t it make
sense to build a way to share outcomes,
so that all could benefit? It seems as if we
are being confronted with a challenge that
has cooperation written all over it.
The path is pretty straightforward:
Develop a set of common definitions,
contribute actual data against those
definitions, and benchmark each against
the whole. Multi-unit operators have so
many common challenges I’m surprised
that such common sense solutions don’t
already exist. Then again, multi-unit
operators are almost all entrepreneurs,
which means, among other things, that
they have to learn for themselves what
doesn’t work to find out what does.
Some franchise systems do quite a
bit of performance data sharing. For
those systems, I would expect that addressing the new labor cost challenges
will be a central topic. For systems that
don’t do a good job of performance
data sharing (and for those that don’t
address the additional needs specific
to multi-unit operator performance),
what should multi-unit operators do?
Is there any reason they can’t reach out
to other multi-unit operators with other
brands? There are some non-franchise
cooperatively grouped businesses that
pool performance information (look up
CoopMetrics as one example). Perhaps
multi-unit operators should form their
own group.
What role should franchisors have
in assisting such efforts? Historically,
franchisors have focused their training and performance systems on lesssophisticated operators. In most cases,
that’s what multi-unit operators prefer,
leaving them to manage their expanding
businesses based on their own experiences. Unfortunately, when confronted
with a common new challenge like labor cost changes, that leaves multi-unit
operators to figure things out on an individual basis.
Is it time to address common challenges in both the ideas and facts phases?
Will multi-unit operators find ways to
share actual performance results that
lead to individual improvement for all?
Perhaps that would be worth a separate
discussion at the Multi-Unit Franchising Conference. I’ll see you there.
Darrell Johnson is CEO of
FRANdata, an independent
research company supplying information and analysis for the
franchising sector since 1989.
He can be reached at 703-740-4700 or [email protected].