CEO of Revenue Management Solutions
We’re in a time of great opposites. On one hand, you’re required to engage in the quickest thinking of your career as we rapidly change course to meet the needs of the day. On the other hand, the COVID-19 crisis will begin to subside, and that time will require a very different approach than the one that got you through the crisis. Are you planning for it? You’d better start.
When so many in our industry are struggling to get through the week, much less the next month, it may sound ludicrous for us to suggest that it’s time for long-term planning, especially for a future that’s so hard to envision. But it’s not ludicrous. It’s necessary.
RMS is making it a priority to strengthen your ability to manage the impacts from COVID-19 with resources intended to help you. As such, we spoke with RMS CEO John Oakes and industry pro Jim Rand, who, among his many other accomplishments during his 32-year tenure at McDonald’s, opened 1,800 restaurants each year. While they’re both the first to admit they’ve never seen anything this severe in their years of industry experience, they have thoughts and suggestions for how to best plan for and survive a recovery.
We’ll cover those conversations in a series of three posts, starting with franchisee support. The subsequent two posts will address how to shore operations, and the importance of marketing to attract customers post-recovery.
Transparency is key
You can’t put out a fire without knowing where it is. The same goes for franchisors offering assistance to franchisees. Before you can help, you need to know how much help to give. It’s no secret that while every franchise system is required to submit financials, John says, very few do this on a systematic basis. If you are fortunate to have that information, you’re ahead of the game. If not, it’s time to start.
Many franchisees are in need of relief. But what is the best course of action? Royalty relief? Fee waivers or deferments? There’s no good answer – unless you have financials.
The lack of numbers can be a common problem. “Even the most sophisticated franchise brands need more financial transparency,” says John. Both John and Jim agree that an easy-to-use, SaaS solution like metiRi, which already is used by 24,000+ units, can help.
“Even in ‘normal’ times, businesses that know their numbers are more successful than those that don’t,” says John. metiRi offers the financial transparency needed to identify critical short-term actions to take. It can establish a foundation for long-term planning that will be crucial for both brand and franchisees to successfully deal with the long-tail effects of the crisis.
With a deep understanding of financial data from all points, franchisors can quickly make informed decisions about specific locations and respond accordingly, taking into account historical revenue and current sales.
A detailed understanding of individual franchisee/location’s key financial metrics allows franchisors to make decisions as franchisees request relief. Many franchisors and franchisees are just guessing at what assistance will be most useful. It will differ. For some, relief might need to be immediate in the form of cash payments and rebates. For others, it may mean freeing capital by granting rent relief and deferrals. With detailed data, you’ll know how to act and for how long.
Ultimately, franchisors need to balance the franchisee’s unit economics with their own reliance on royalties and fees to survive. To do so, you’ll need projected income of franchisees and the entire system. In this situation, year-over-year projections won’t help. You need data for the past week, and the past two weeks, so you can estimate what the immediate future will look like and make decisions for cash flow while maintaining skeleton operations.
Finally, a good understanding of financials will help to determine short-term pricing tactics, says Jim. For example, if you use price too aggressively now, it may backfire. You have to be flexible, with the ability to change weekly or even daily. To make those decisions, you need a thorough understanding of your financials.
“Make sure you have a strong insights partner like RMS,” says Jim. “They have the skillset and the tools to help you make instant decisions today and to bring you back fast.”
RMS is here to help. If you’re interested in learning more about metiRi and how it can help you manage today’s constant flux while you prepare for a strong comeback, we want to help.
Reach out today to schedule a free demo of metiRi.