How to Make Sure Your Restaurant Brand Survives

From immediate response to resolution and recovery, maneuvering a crisis with any sort of certainty can be challenging. With COVID-19, “challenging” is an understatement. Brands had to think quickly to respond to the crisis, without any real historical precedent. As shelter-in-place orders are being lifted, we begin a new phase. But, as with the shutdown, the path forward is hazy.

We can create some signposts along the way, however — with detailed sales data and a broad view of profitability, solvency and liquidity across your brand.

In a recent post, RMS CEO John Oakes shared recommendations about what metrics restaurants can and should look at, given the absence of comparable YOY data and sales figures. Here, Nick Ferrer, Senior Vice President, Development at RMS, touches on the benefits that come from complete financial transparency.

Data can shape your survival

When brands understand the financial pressures that individual stores face and how they affect the health of the entire organization, they can make critical cash flow projections. This knowledge empowers brands to:

  • Gain an accurate picture of fixed costs to identify where to make changes to keep franchisees in business. Examples include deferring payments and/or royalties.
  • Understand franchisees’ financial health and determine how long they can sustain depressed sales. In the past, RMS clients have used data to successfully manage crises that lingered for more than a year. Using this same approach, restaurants can project the impact of declining sales over the recovery period and respond proactively.

In the past, brands may have been hesitant to ask franchisees for anything other than P&L statements, says Ferrer. Regularly requesting information like balance sheets, debt information and short-term obligations was not common. Today, that information is a must to maintain financial health of the entire organization and to find the best ways to support individual franchisees. The information, which can be collected and analyzed by RMS’ metiRi helps franchisees by:

  • Modeling the impact of the Paycheck Protection Program (PPP) to the franchisee. Borrowers can use the gathered data to ensure they are meeting loan terms — and determine where to make any needed adjustments.
  • Freeing up available cash by negotiating interest-only loans for those that qualify. Armed with projections based on actual data, franchisees can anticipate the effects of various scenarios (like paying interest only) and make sound decisions.
  • Creating reliable projections with a true understanding of liquidity. Brands then can assess the right level of support to offer, using techniques such as fee deferments and other subsidies.

Recovery starts now

“When the pandemic began, brands had to make quick decisions based on the information on hand at the time,” says Ferrer. But, he says, now is the time to make new decisions. Access to real-time, data-driven insights enables brands to see the best way forward. For example, if a brand deferred franchisee fees short-term, they may find that forgiving these fees is best for the franchisees’ financial health. Or they might realize that fee deferments were unnecessary, given actual performance (like the surprising success of locations that were well positioned to capture the increased demand for delivery and takeout).

As Ferrer explains, “With the aid of consistent and transparent reporting, you can evaluate, simulate and reproject, and tweak and optimize decisions made early on during COVID-19 for the long term.”

Ferrer goes on to say: “The ability to save restaurants is there, but tough decisions need to be made. We can help with insights-driven data to guide the way.”

Create a strategy for growth

  • RMS is an expert at providing data-driven answers to your brand’s questions. For the past 25 years, we’ve been helping some of the world’s largest brands drive sales and profitability. In these uncertain times, we remain committed to helping you navigate your path to recovery. If you’re interested in creating a strategy based on your brand’s true financial health, we’d like to help. Request your strategy consultation today.