Franchise
A franchise comes with a proven model and a set of costs the owner does not control: royalties, marketing fund contributions, approved suppliers and required systems. Profit is made in the gap between the franchisor's model and the local reality of rent, wages and sales. We bring location-level finance to franchisees with one or many units, and franchisor-level finance to brands built in British Columbia, working alongside their CPA and their franchise lawyer.
How the money works
- Royalties and marketing contributions are a percentage of sales, so the franchisor is paid before the franchisee makes a profit
- Rent and labour are the largest local costs and the franchisor's model may not reflect local rates
- Multi-unit owners run several businesses with one back office, and the weak location hides behind the strong one
- Franchisors depend on franchisee reporting that is often late, inconsistent and hard to compare
The moves we make
- A location-level income statement in the same format for every unit, with royalties, rent and labour as percentages of sales
- A cash forecast across locations that shows which units fund which, and the low point of the group
- Labour scheduling and purchasing reviews against sales by daypart or by week
- For franchisors, a franchisee reporting standard and a benchmark pack that compares units honestly
Where cash and margin leak
Margin leaks in labour scheduled to a forecast that was never updated, in waste and shrink that nobody measures, in local marketing spent on top of the fund contribution without a result, and in a lease signed at a rent the model cannot carry.
Cash leaks in opening costs that ran over, in equipment financed at the wrong term, in royalties paid on sales that were discounted, and in a second or third location opened before the first one was producing cash. The multi-unit owner who runs on the group bank balance does not see which unit is draining it.
The numbers to watch every week
Sales by location against the same week last year and against the plan. Labour as a percentage of sales by location. Cost of goods or supplies as a percentage of sales. Rent and occupancy as a percentage of sales. Royalties and fund contributions. Four-wall profit by location. Cash by location and for the group.
In the same format every week, these make the weak unit visible in a month rather than at year end and tell the owner whether the next unit is affordable.
How pricing works in a franchise
Franchisees usually price within a range the franchisor sets, so the levers are mix, local promotions, labour and purchasing. The unit economics are known from the start and the owner's job is to run the location better than the model assumes.
Franchisors price their system through the initial fee, the royalty, the fund and the required purchases, and the system only grows if a franchisee can make a living inside it. We model franchisee economics from the franchisor's side so the fee structure supports both. Franchise disclosure and agreements are for your franchise lawyer.
Questions from franchise owners
We have three locations and one bank account. How do we know which one is profitable?
Build a location-level income statement with rent, labour, supplies and royalties attributed to each unit and shared costs allocated on a stated basis. Most accounting software does this with locations or classes once it is set up. We set it up and produce the first packs with you.
Should we open another location?
When the existing ones produce the cash to fund it and the model for the new one, built on local rent and wages rather than on the franchisor's average, shows a return and a payback you can carry. We build that model and the group cash forecast before the lease is signed.
Can you help a franchisor with franchisee reporting?
Yes. A reporting standard, a benchmark pack that compares units on the same basis, and the finance model behind the fee structure are the usual work. Disclosure documents and franchise agreements stay with your franchise lawyer.
Start with a finance review.
Ninety minutes with Ali on your cash, margin and pricing. You leave with the four numbers to watch and the two or three moves that change them, whether or not we work together.