Published on the 31/10/2023 | Written by Raghu Rajakumar
Data standardisation and optimisation key to success…
In the fast-paced world of franchising, the future promises a blend of data-driven decision making, transformation and data innovation. I recently joined a panel of industry experts, including Kylee Valentine, Senior Partner in the Accounting and Tax division at Findex.
We discussed franchising’s evolving landscape and what’s on the horizon. From establishing franchise systems that enable consistent data flows and sophisticated management reporting to embracing technological platforms that keep your financial house in order, here’s a glimpse into the future of franchising.
Valentine highlighted a pivotal element that is is crucial for franchising success: data. “The businesses that know their numbers are the ones that are doing better than the others,” she shares. “Businesses have a lot of financial data that they produce each week and each month, but it’s just data until they do something with it.
“Having the ability to pull that information out of whatever accounting system you’re using and turning it into something that helps you make proactive decisions as you go is key. You’re making decisions that are based on the right information and not on gut feel alone.”
There’s been a notable shift in Australia’s AU$172 billion franchising industry’s mindset, moving away from a focus on franchise sales towards a growth mindset that places emphasis on innovation, integration of advanced systems and understanding customer behaviours. Franchise owners, from the smallest to the most sophisticated, are now educating themselves around solutions that can simplify operations, maximise profitability and create more modern ways of working.
Standardisation of franchise systems
Ensuring uniformity in financial reporting across different units within a franchise system emerged as a future trend.
Standardised charts of accounts, for instance, were identified as vital tools for aligning financial data, simplifying comparisons and facilitating more informed decision-making.
Valentine says, “A standard chart of accounts is really important because it gives you that ability to start to bring one business in line with another when you’re looking at financials.
“Additionally, putting expenses into categories, so you can micro-analyse every part and improve them can make a significant impact.”
Particularly when franchisees are running their own accounting systems, this aspect is one that is vital to unify and optimise reporting and build meaningful benchmarks.
Integration and adaptation to economic shifts
For franchisors, the current economic climate may lead franchisees to take longer to make purchase decisions. Therefore, it’s an opportune moment to reassess systems and information flows and get your house in order. Think about some tactical, cost-effective ways to ensure you have a consistent level of inquiry qualified and coming through the system.
It’s also important to understand demographics around franschising. The average age of the accounts that sign up on Eden Exchange is 58 years old. And the average buyer is in their 40s – an obvious mismatch. There’s a cultural mismatch as well. In terms of the background of the inquirer, more than half are ‘non-mainstream’ Australians. They come from different backgrounds. Whereas, the seller of the business tends to be the opposite – around 75 per cent are second-generation Australians.
To help support business buyers and sellers, we’ve begun working on innovative integrations to our platform that allow for valuations. The financial market is extremely hard on timelines and integrating a finance solution into the platform for buyers is gold.
We are transforming the way prospective franchisees access finance solutions. Through integration with finance providers and a network of brokers and preferred providers, Eden Exchange is streamlining the financing process, making it more accessible for potential franchisees.
The ‘Golden Age’ of franchising in a digital world
With the tsunami of retiring baby boomers and the subsequent transfer of generational wealth, alongside these data and digital shifts, business ownership is undergoing a seismic transformation.
As millions of baby boomers reach retirement age, a transfer of business assets, estimated globally to be worth AU$6.75 trillion, is expected in the coming years. This paradigm shift necessitates innovative solutions to meet the unique needs and challenges faced by aspiring entrepreneurs.
We expect to a significant rebound, in terms of deal pipeline, across the franchise market helped the maturity of systems in a digital and data-driven world.
ABOUT THE AUTHOR
Raghu Rajakumar is Founder & CEO of Eden Exchange which specialises in brokering franchise deals between buyers and sellers in Australia and globally including The Cheesecake Shop, Roll’d Australia and Poolwerx. Before founding Eden Exchange, Raghu held leadership roles at Computershare and LinkMarket Services.