Owning a franchise is just like owning any other business, only more demanding of your time and efforts. Developing strategies to avoid being cash strapped is imperative to the continued profitability and growth of your enterprise. Businesses are cyclical and this includes franchises too. Guarding against cash flow issues will guarantee a smooth and prosperous fiscal year, year after year.
An important key to avoid cash issues begins with understanding the difference between cash and profits. Profit is the total amount of money your franchise earns minus all the costs incurred in running it. Cash flow is the actual movement of money in and out of your business bank accounts. This being said, it is important that you begin building cash reserves immediately to ensure that the cash flow works perfectly, every time.
A few of the pitfalls of cash flow problems are: 1) Poor marketing plans; 2) bad accounting management; 3) Bad overhead controls; 4) ineffective customer credit controls; and 5) inept supplier management. Anyone of these issues can spell disaster for a franchise owner; therefore it is critical to have effective plans and measures in place for each of these cash flow control areas.
Ideally, the franchise owner will institute cash flow forecasting programs designed to predict the highs and lows of your cash balance in order to determine when to borrow money and when to sock it away. The forecast is often required by banks prior to any loan consideration and is a value tool and weapon to stave off cash flow issues.
Taking your franchise overseas has even more advantages, too, especially if you’re looking for a franchise for sale or complete takeover.
Overseas Franchising Advantages
The advantages to franchising overseas are phenomenal. The branding is already set. Many, many franchise opportunities are completely set up in international markets due to television, print ad, and Internet advertising from the parent company. Overseas customers are crying out for U.S. businesses to invade their country so they too can partake of a Big Mac, Old Navy clothes, or Marble Slab ice cream.
Financing an overseas franchise is much easier because the business model is tested and successful. Banks are willing and able to loan money to a franchisee that has established a history of success in the international markets. Besides, you’re probably ready to bring on the four day work week that is often enjoyed while owning a franchise.
Parent companies offer franchise owners exclusive rights to an area thus guaranteeing no competition of another McDonald’s or Hardees store just down the block. Additionally, the support provided by the franchisor includes training, initial set up and ongoing help throughout the life of the business. Plus there is a greater flow of communication between franchise owners in the international arena due to the complexity of foreign investing and other mitigating factors that are involved.
The greatest impetus to overseas franchise investment comes from the support of the host country. Many foreign countries offer incentives and support to franchise owners and bring them to their shores. This includes tax breaks, financial support, and protocol help. Overseas franchising offers a win-win situation for everyone involved and, should are continue trends of starting new franchises continue, you’ll see many more excellent franchisee – owner relationships flourish. Franchisers that wish to continue to branch out with more locations are also encouraged, too.
Knowing When to Purchase a Second Franchise Location
Current market trends show that ownership of multiple franchises, including different business categories, is the smart way to go with your business enterprise. Knowing when to purchase a second franchise location however, is a tricky endeavor that should be timed perfectly. Expanding at the wrong time spells certain disaster.
Prior to any additions to your franchise, a very thorough analysis of your financial statements is in order to determine your cash flow and money stability during expansion. Just because you have ample cash reserves and good steady business does not mean a successful expansion. Your new franchise will be in a different location and the current economic trends of that area come into play. Instead of forcing finances to appear out of thin air, ride the economic franchise trends until you are able to jump in when the interest rates are low or cost of goods is slightly cheaper.
Ideally, you want to expand into a second franchise when you are ready to expand your headquarters management team, have chosen a solid area to build, are ready for more competition, and can easily meet the cash flow needs of another store. Expansion means increased responsibilities, more employees, more cash outlays, and of course more profits.
The final key to a successful opening of a second franchise is a well-developed marketing campaign that will bring in the customers and get your new business the support of high visibility and traffic. Hiring an experienced marketer is essential when planning the opening and will ensure continued growth and profits.
Remember, for a company to be productive, it requires hard work from the employees and also a keen attention over the processes in the company from the owner. As an owner or the boss, it is your responsibility to keep your staff motivated towards work and make it possible to continue and improve the productivity within the business.