The Franchise Centre

Anxiety rising in the banking-franchising relationship – learn how to manage the risks

By Centre Contributor

Successful franchising is all about fostering strong relationships with key stakeholders, including those with your franchisees and customers. However, one critical relationship that can often be overlooked is the one between a franchisor and its bank.

This relationship will have an enormous influence on the sustainability and future growth of your franchise network and requires dedicated attention to ensure potential risks are identified and managed.

As part of our ongoing commitment to promoting best practice throughout all aspects of the franchising sector, the Asia-Pacific Centre for Franchising Excellence has joined forces with BDO to present a special webinar on the banking-franchising relationship.

This unique learning opportunity, was held at 12.00pm on Wednesday 15 March 2017, and presented by BDO Franchise Partner Randall Bryson.

Watch the video above.

 

BDO’s tips to manage your risk

BDO has identified a number of alarming trends that are emerging in the bank-franchisor relationship, and will share valuable insights on the critical eye that banks are now casting on the franchise sector. Randall will also outline the practical steps that franchisors can take to ensure they are presenting their business in the best possible light to their financiers.

The anxiety of banks when it comes to franchising is rising, with concerns surrounding franchisee profitability, support levels and financial management. Some banks are even deregistering franchise groups with poor financial and risk management systems.

The growing perception of the banking industry towards the franchise sector is that many franchisors are overly focussed on simply growing franchise numbers rather than franchisee profitability. As a result, banks are now looking much more critically and deeply into franchise businesses and the systems that they have in place to support their franchisees.

For example, banks are particularly nervous when a franchise group has no Human Resources system in place and are also looking much closer at many other internal issues such as franchise agreement expiries and renewals, franchisee financial management systems and accounting and insurance compliance, to name just a few. 

 

What can you do now?

Against this backdrop, what can franchisors do to best manage the relationship with their bank? Whether your franchise group is accredited with a bank or not, the risks in this area are rising and can put a sudden handbrake on any future growth plans.

The onus is squarely on franchisors to reassure banks that they have a holistic approach to professionally managing every aspect of their franchise network i.e. it is not just about the number of franchisees, but ensuring they are profitable and sustainable and the systems are in place to support them.

The BDO webinar examined this in more detail, including the following risk management issues that you can focus on now:

  • Focus on franchisee profitability
  • Shared support functions
  • Process improvements
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