Financial advice
Tough times
What can you do to ensure your business and your franchisees continue to be successful and profitable? HSBC's Claire Field reveals
Faced with the toughest trading conditions for many years, the UK franchise market has remained resilient. In fact some sectors such as fast food and domiciliary care have continued to expand their operations and reported increased sales.
Planning ahead is good management practice. This is where the strength of franchising comes into its own - many franchisees would not be looking ahead to ensure that their business is in good shape in case of a downturn, without the help of their franchisor.
As franchisors, you will need to help them concentrate on these important issues. Building cash reserves will ensure that the business has the resources to offset a drop in income - it may however slow down expansion and franchisors need to help their franchisees manage the demands of growth against the need for continued investment.
Looking at overheads seems obvious - but many small businesses just don't do this, or don't do it soon enough. You are in a position to benchmark your franchisees, and help them consider how their business stacks up against their peers.
Building value by ensuring the product or service offered is different from that of your competitors is important - excellent customer service builds loyalty.
If your business deals with stock holdings, help your franchisees achieve greater efficiency. Are your own systems robust and effective?
Now is a good time to revisit data held about customers and past customers. Re-establish contact with dormant accounts or old leads. Send out information about the business, its goods and services, highlight any USPs your business has.
There are various financial issues to consider in a downturn - as usual, cash is the key here. Customers may delay payment - do your franchisees have the financial stability to survive if this happens? Managing overheads and identifying savings seems obvious - is it being done? How much are franchisees taking out of the business - do they need to consider their spending levels? Are they managing their banking facilities well - going overdrawn without agreement or exceeding limits can be costly.
Consider how IT is used in the business - can it be used to further cut costs and improve efficiency - what are your best franchisees doing that the others can learn from?
It is always vital to keep a close check on how much money the business is owed and whether franchisees are keeping on top of invoicing, chasing, credit checks, etc, if they are involved in doing this themselves. If the franchisee is very dependent on a small number of customers this could lead to major problems if one of these fails.
Are your franchisees working well with their bank? Look at your own requirements as a franchisor too - your bank can provide valuable advice and guidance to ensure you have the right finance in place for your business.
The overall message is, whatever the state of the economy, get the basics right to encourage and foster success.
Read more on what HSBC can offer your business.
