11 Aug, 2020
In this blog post we hear how franchisor, the O'Brien Group, was being held back by frustrating and time consuming processes, and how Fathom helped turn things around.
Franchises are incredibly popular business models, and for good reason. From food and hospitality to fitness and automotive, becoming a franchisee allows owners to start their own business without many of the risks associated with launching a new brand from scratch. And franchises make up a significant part of the Australian economy. According to The Franchise Council of Australia, Australian franchises are currently worth $182 billion with over 80,000 franchised businesses in operation.
Transparency, accountability and efficiency
For a franchise to work effectively, the franchisor must use their extensive financial knowledge, oversight and experience to offer insights and advice, while franchisees must be able to get their financial data to head office easily, as well as be able to enact the advice given back in a timely manner – in short, it’s a mutual, symbiotic relationship.
O’Brien Group is a collection of brands providing a range of services in the automotive glass, building glass, electrical and plumbing industries. Ashley Clemmett is the Network Systems & Support Manager at O’Brien, which uses Fathom in their Plumbing and Electrical franchise division. “Before Fathom, we only reported on P&L data, so we had little insight into cash flow and balance sheet information, without manually reviewing each one” says Ashley. “There was a lot of manual handling and this was very labour intensive. If one company's data got updated or changed, we would need to recalculate all of our averages again for that period”.
Not only was this tedious and time consuming, it also led to a lack of decision making as information couldn’t be acted upon. And even when they had the information, it was in a way that wasn’t easy to understand. “Data was presented in traditional spreadsheet formats, with limited dashboarding and graphs, which did not suit our teams very well, particularly those that are more visual learners” says Ashley.
You can see the problem; out of date information that’s time consuming to update and difficult to make sense of. It’s very hard to act on that.
What are the problems within a franchise group?
Ashley’s story is by no means unique. Franchise groups large and small across Australia face three main challenges when it comes to their financials. Let’s explore each of them in turn.
Franchisees can’t compare against their peers
Franchises have a unique opportunity to leverage a relevant, accurate, and rich set of benchmark data. With each franchisee delivering the same products or services and using the same business model, comparing the performance of franchisees within a single franchise brand is as apples-to-apples as it gets.
Comparing financial ratios across franchisees can help franchisors identify performance red flags and add value to franchisees. It also helps franchisees to understand how their performance compares to their peers, identifying where they lead and where they fall behind the pack.
However for the franchisor, gathering and compiling this comparative data into a usable format is incredibly difficult, because of disparate systems, different chart of accounts formats, and the manual nature of gathering financial data from franchisees. Without an efficient system for gathering this data and compiling it in a usable format, the reporting process is too labour intensive and franchisees won’t receive insights when they need.
“We moved to Fathom in late 2012,” says Ashley. “Before then, our processes for reporting and benchmarking involved a lot of manual spreadsheets. First, we would have to manually extract P&L data from each accounting system and collate these all together”.
This is not only inefficient and time consuming, it also doesn't scale. “As the business grew, our benchmarking data was only able to be updated quarterly, as the process was too time-consuming to prepare monthly reports and this often meant a lag in getting important data to our franchisees, our management and front line support teams”.
How Fathom helps: Fathom’s Benchmarking feature is built to solve this problem. The Benchmarking tools pull together results from each franchisee automatically each month. It allows franchises to compare locations across any financial ratio or KPI they choose. It also allows franchisees to view an anonymised data-set to see how they compare against their peers.
Disparate bookkeeping systems and chart of accounts
If a franchise has not mandated a single bookkeeping and accounting system and chart of accounts, franchisees often end up with completely different systems and reporting formats. This makes the process of gathering, analysing, and comparing financials time consuming and labour intensive. If franchisees use different systems, the outputs from those systems are different, and the franchise must manually stitch them together into a common reporting format.
This process is tedious, and prone to human error. It’s common that franchises track expense ratios such as Wages % of Sales. If each franchisee has a different chart of accounts, comparing the same ratio across every location becomes difficult.
How Fathom helps: With Fathom, everything is in one place: the cloud. Integrations with QBO, Xero and MYOB allow for seamless updates across every location. Fathom also provides a single reporting format across disparate systems, allowing the franchise to create regular reports in a universal format.
Most importantly, Fathom provides a common chart of accounts layout, allowing the franchise to track expense ratios across all locations, giving the both franchise and franchisees the most accurate and relevant comparison of performance. “Using Fathom, we are able to much more easily provide up to date financial analysis and benchmarking, including preparing professionally generated monthly and quarterly reporting straight out of the platform”.
Lack of access to timely data
If the franchisor is working from outdated information, coming from different systems, arranged in different formats, it becomes incredibly hard for them to turn that information into useful insights and advice for franchisees. Head office is supposed to provide oversight and guidance to a franchisee and share the learnings of the group. This is a critical breakdown for franchise organisations.
Typically, franchisors do not have shared access to the franchisees source accounting file. Although the franchisor doesn’t need to see every transaction and journal entry in the franchisees books, in the absence of direct access, franchisors must request financials and wait for the franchisee to provide them. This process can be tedious for both parties, and ensures franchisors never have all of the necessary data at their fingertips.
If this is the case, financial results are delayed, and may not be reviewed by the franchise until months later. Even if the franchise wants to add value by advising the franchisee, if that advice comes months after the actual performance, it may be too little too late. As Ashley says, “the lag between events occurring and then these being reported on, resulted in slow decision making”
How Fathom helps: At O’Brien group, PDF reports are generated and saved into a shared drive file for each franchisee each month as a reference. But where Fathom really excels beyond reporting is in live analysis and strategy. “Franchisees and Area Managers that support them access Fathom live during business planning and strategic planning sessions. Being able to quickly change time periods and having instant visual representations of trends and results has been really important to use as part of our business planning processes with our franchisees” says Ashley.
How Fathom can help you
If you’re a franchise group that’s growing, and you’re struggling with management reporting, benchmarking, analysis and providing insights, we’d love to help. You can sign up for a free 14-day trial of Fathom here, and find out more about what Fathom can do on our support pages.
Finally, if you’d like to speak to one of the team, please reach out to James Erving via email firstname.lastname@example.org.
Written by Andrew Webb
Andrew is Fathom’s Content Strategist based in the UK. He has a background in journalism and has worked for companies like the BBC and HuffPost, as well as start ups in education and technology. Andrew has also published 5 food books and makes a great pie.