Management - Missing in Action
During the last year we have been asked to assist a number of franchise groups gain a better understanding of what causes were underpinning an apparent deterioration in some of their Franchisees businesses.
While the last 12 months has seen some difficult business conditions, the businesses Avatar worked with had performance trends generally against the benchmarks of similar sites.
However, the Franchisor’s management initially thought it was a cash flow issue, why?
The Franchisor became alerted to some possible issues due to the increasing frequency of delayed payment of franchise fees, plus “friendly” cautionary advice from suppliers that payment terms were drifting out.
Was this interpretation correct?
Avatar believed that it was more the outcome of some deeper issues and investigated other factors.
By analysing a range of data we were able to identify a number of factors common to most of these businesses.
Sales had stagnated or were in the early stages of decline
Margin percentage had decreased
Labour productivity ratios had weakened
The net effect was lower operating profits and reduced bankable cash.
So what were the main contributing factors impacting the viability of these businesses?
The primary drivers of most businesses:
Customer Count
Average yield
In all these cases both customer count and the average yield had been trending down over recent months – even allowing for seasonality the trend lines were outside the ranges being recorded by similar sites. So what could be influencing these factors?
In discussing these findings with the Franchisees we identified a common occurrence – in the last 6 months or so an “employed” manager had been recruited allowing the Franchisees to take a much less hands-on approach. In some cases, Franchisees’ daily attendance had gone from 5/7 days per week back to 2 or 3.
That in itself was not the problem. However, in interviews with the managers, it was discovered that in many cases:
No detailed targets or goals were established with the manager
No clear and concise reporting procedures were implemented
The lack of management metrics and performance intelligence can affect the relationship between the manager and business owners. It can then become quite strained which only compounds the issues and erodes the trust.
It is similar to the pilots leaving the flight deck and hoping the aircraft stays on course – businesses, unfortunately, do not have autopilots.
Franchisees need to be in control of their business. If absent or missing in action survival becomes time relative.
Immediately understand the impact of management decisions on the key operating and profit drivers of the business by using our Business Mapping Program to assist you to identify performance anomalies for real-time adjustment.