2021 Planning: Financial Data will Repair the Cracks

In a recent TED Radio Hour episode on resilience, Esther Perel stated, “a pandemic, a disaster, highlights the cracks. It will also reveal light shining through.” While she was speaking to interpersonal relationships, her analogy also applies to our business, which is weathering its share of cracks.

Her point was this: stressors illuminate what’s not working. But more light illuminates the opportunities for change. While the pandemic has cracked us, we aren’t completely broken. We believe brands can survive and even thrive in the future. The key is committing to repairing the cracks. And the glue is data.

“Stressors illuminate what’s not working. But more light illuminates the opportunities for change.”

“Having a clear understanding of your brand’s entire financial picture will allow you to make tangible decisions,” said RMS’ CEO John Oakes. “For example, when your brand knows the product and value it brings (or doesn’t) to key markets, you can move quickly to make changes within the organization,” Oakes comments. “But to do so with any degree of certainty requires data and complete transparency. When your brand can leverage your company data to inform outcome, impact and ROI, the path forward is clear.”

Three questions to ask today

Data is constant, but how we use it has changed substantially in the last year. Here are some of the common questions data is answering as brands move forward into a very different 2021.

Risk management: If my system took a 10-20% shellshock next month, what does that mean?

Many brands rely on guesswork to assess and manage risk. But one location might be down 40% while another is up 20%. How do you manage for diversity among your stores?  

Over the past six months, we know that many brands provided support to their -zees. We also know that how they estimated support needed varied greatly. Some provided support to every franchisee in the system. Others guessed at which markets or franchisees needed the most help. Clients that had a system, such as our metiRi, that provided up-to-date financials on every franchisee in the system identified the need and responded in kind. For example, one of our global franchise clients could accurately forecast which -zees needed financial assistance, such as loans or fee deferments, as well as how to adjust the support as the months wore on.  

With transparency of data, brands can also assess individual franchisee solvency with the most up-to-date estimates. Say you have one franchisee who owns 100 establishments, but only 20 belong to your brand. Perhaps the -zee expanded slowly over time, but because getting their data was never a critical requirement, obtaining a solvency estimate from them when you absolutely need it may be problematic. When that franchisee’s financial data is uploaded automatically at regular intervals, as it is with metiRi, you can easily get a picture of what types of support that franchisee might need during tough times, or how they can invest in growth or innovation in good times.   

Identify opportunities: Are there opportunities that our brand may be overlooking?

More than likely, yes! Along with exposing potential risk, data can surface potential opportunities, too. Utilizing a financial system that is regularly accessed by your -zees can create an opportunity for the brand to track and understand investments being deployed across the system, such as new technology or equipment. When these investments are intended to increase sales or drive cost savings, the data will allow you to communicate the actual value of these initiatives to the -zees. This level of transparency can lead to increased buy-in across the organization and result in a higher level of adoption for investments that drive brand value.      

Benchmark and measure: What should we measure? What if we don’t have any benchmarks? Is it too late now?

Traditionally, it’s the franchisor asking these questions, but lately, RMS is hearing from more franchisees asking for a solution that allows them to benchmark their financials against their peers and provides transparent financials from the company.

We consider this a positive sign and even a sea change. Now is an excellent time for the franchisor and -zee to work together. Beyond a doubt, all operators and brands have the right to ask for financials in the franchise agreement, but here’s the rub: Not all franchisors insist or even ask for it. Brands that ask for – and use – the information have an accurate picture of franchisee viability in “normal” times and during times of crisis, when the information is invaluable. A lack of data can hinder progress, both corrective and proactive.

When you can identify each line of your P&L for every franchise location, the course becomes clear. Don’t panic if you don’t have this data. It’s not too late to obtain it. Acting now will help stave off the day when it could be.

If you’re interested in the recovery and success of your entire organization, please contact us about how metiRi can unlock financial data for every market, location or franchisee in your system.