Franchises in focus: what’s your biggest challenge?

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From little things big things grow, and the story of Hai Trang, founder of OneLedger is no exception.

“My lessons in business started from watching my parents run their bakery when I was a child,” Hai explains. “I didn’t realise it, but back then I was learning some great business lessons that exposed me to the reality and the reward of running your own business.”

Now Hai runs his own fast-growing Australian accounting firm that looks after franchises and franchisors in the hospitality sector; people who share plenty of passion and vision.

“It’s about growing the top line as well as the bottom line,” he says. “That’s what makes it so rewarding.”

Making the break

After growing up around his parent’s small business, it’s perhaps no surprise that Hai left his role in a corporate accounting department to start his own business in 2013, with fellow business partner, Andrew Hubbard. The decision was as personal as it was professional, as he explains on the OneLedger website.

“In 2013 we were fed up with just being the corporate tax guys or the number nerds. We wanted to be more. A lot more,” Hai writes. “We dreamt of a time where we would not only provide accounting services, but we’d be partners with our clients, helping them learn and grow their financial position or business to be greater than they ever imagined.”

With their purpose defined, Hai and Andrew established OneLedger. Their first client? Hai’s parents. “Yep, my parents were our very first clients, as I was already looking after their books,” he says.

Since then, the Melbourne, Perth and soon-to-be Sydney-based firm has grown to eighteen full-time staff across three offices; an impressive trajectory in three years. Over this same period, the firm has attracted a lot of food and beverage franchise clients along the way. And while the hurdles of franchising are clear to Hai, so are the solutions.

“Two of our franchise groups have over 50 sites across Australia, and we work with a handful of franchise clients across two to five sites each,” Hai explains. “Because we are working at this scale, I see the hurdles large franchises face first-hand.”

Franchise challenge #1 – Benchmarking

You need to understand the key drivers of a good location in order to compare strong-performing examples with those that underperform, Hai explains. Only then can you implement effective strategies to keep all locations performing effectively.

“It’s not purely about the dollar value, though,” he says. “Ratio analysis must be taken into account, and key ratio benchmarking is crucial.

“The larger the franchise group, the more complex the task becomes due to varying factors, which are dictated by demographics, climates, locations and operators,” Hai believes. “The task of the franchisor or head office is to standardise reporting across the group; to compare apples with apples.”

With the hurdle of benchmarking offering a real challenge, Hai suggests that head office is well positioned to create a transparent picture for everyone involved. “Franchisees understand what’s happening operationally on a local level – with things such as sales and staffing factors – but it’s really hard, from a financial point of view, to get a crystal-clear picture at a macro level. This needs to come from head office.”

Franchise challenge #2 – Timeliness of reporting

Historically, accounting information was recorded retrospectively – based on data collected by accountants and bookkeepers, Hai explains.

“Xero’s innovative technology allows timely reporting, which is of utmost importance. Rather than record and report on past data, Xero allows us to predict, forecast and budget for the future. The business landscape is in a constant state of flux – so the relevance of data is essential.”

Managing cash flow and improving profitability can be a complex task for any small business owner, but the transparency available from a cloud-based system can support and educate franchises on best practices.

“Xero now allows us to publish the P&Ls in real time with all the relevant information required to make timely business decisions.”

Franchise challenge #3 – Compliance

A big challenge for many franchise groups is striking the right balance between growth strategies, cash flow management and compliance.

“In my experience, Xero helps franchises to manage business cash flows and keep on top of their external compliance requirements – such as BAS, IAS, GST, PAYG, Superannuation and other employment requirements,” Hai says, stressing the importance of external reporting requirements.

“We often see franchise groups leaving compliance behind growth, but that only tends to lead to cash flow problems later. Functions such as ClickSuper allow franchises to pay Superannuation with ease compared to the old method of using BPAY and reference numbers.”

Franchise challenge #4 – Controlling cash flow

They say revenue is vanity, profit is sanity and cash is king – and Hai couldn’t agree more.

“Cash flow management is arguably the biggest problem for many fast-growing franchise groups,” he says. “Unless, the franchise group you’re working with has a blank cheque on hand, there’s only a limited pool of available funds to work with, and so you must prioritise.”

Understanding the past and present is important if you want to plan, budget and forecast for the future.

“I’d recommend that you prioritise any future expenditure – in terms of growth, capital expenditure and operational cash flow – using a list, to enable your franchises to understand, manage and control the cash flow of the business,” Hai says.

“Knowledge sharing empowers franchises to be proactive rather than reactive in their decision making.”

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