How to Optimize Profits by Enhancing Franchisee Operations: TreeAMS Event with Hsien Naidu

Franchise industry professionals, ranging from operations experts to newcomers, gathered at the recent event titled “Learn How to Optimize Profits by Enhancing Franchisee Operations,” led by TreeAMS founder and Astreem Consulting CEO Hsien Naidu from Singapore.

As you know, franchising is a powerful business model for rapid expansion and market presence. It depends on a mutually beneficial partnership between franchisors providing brand identity and support and franchisees managing day-to-day operations. Operational excellence at the franchisee level is key to maximizing profits for franchisors.

Hsien Naidu guiding franchise industry professionals in the Philippines to learn How to Optimize Profits by Enhancing Franchisee Operations

Franchise Profitability Challenges

Inefficiency in Royalty Collections

Royalties are vital revenue for franchisors, but inefficiencies can disrupt cash flow, impeding reinvestment, franchisee support, and operational expenses. Reliance on franchisees for manual sales reporting and the use of POS systems, which require extracting and emailing sales data, contribute to slow invoicing and extended payment cycles.

Accuracy in reporting and compliance with franchise agreements are critical, as delays or errors in royalty collection can strain franchisee relationships and increase administrative burdens for tracking and resolution.

Underreporting of Sales

Underreporting of sales is another significant challenge, stemming from various factors. Manual reporting processes or insufficient systems can result in unintentional errors or omissions in sales reporting. Franchisees may feel disconnected from the franchisor or perceive reporting as burdensome, leading to inconsistent or incomplete reporting.

Therefore, this poses a significant threat to the financial stability of franchise systems, diminishing royalty income for the franchisor and affecting operational support for franchisees. Detection of underreporting can lead to disputes or legal consequences. Some franchisors implement physical or video camera audits, and even AI-powered vision technologies, though these can be costly.

Supply Chain Restocking

Franchisors and franchisees commonly face challenges with supply chain restocking, involving inventory monitoring, order placement, quality control, and efficiency. Traditional practices in franchise systems often rely on tools like WhatsApp, replenishment apps, and ERP systems, which can present significant hurdles to optimizing profits.

Some franchisees use WhatsApp to submit orders to franchisors, who then manually process these orders. This manual process is prone to human error and can lead to issues with tracking and control. Replenishment apps may encounter disruptions and delays due to integration challenges.

In addition, inaccuracies in data input from other systems can cause errors in order processing and inventory management. ERP systems entail substantial costs, and their complexity and detailed data requirements often result in system abandonment or underutilization.

The Solution: Automation and Digitalization

Digital transformation is a transformative process that reshapes how organizations operate and deliver value to customers by embracing digital technology. It involves Mindset, Skillset, and Toolset.

Mindset, The collective attitudes, norms, and behaviors that shape the organization’s work environment.

Skillset, The combined abilities, expertise, and competencies of its workforce or members.

Toolset, The software, tools, and resources used within the organization.

Hsien emphasizes that achieving a balance among mindset, skillset, and toolset is crucial for successful digital transformation, noting their interdependence.

Franchise System Automation

Automation should be implemented to reduce delays in royalty reporting. Franchise Automated Systems minimize the risk of human error in data entry and calculations, streamline the reporting process, and enable franchisors to make more informed decisions regarding business strategy, marketing, franchisee support, and financial gain. Thus, making royalty collection efficient.

Moreover, this solution will also notify franchisees of any audit discrepancies in sales, which serves several critical functions.

First, it helps franchisees identify instances of employee theft, allowing them to address and mitigate such issues promptly.

Second, it discourages franchisees from underreporting sales or royalties, even if the initial response is merely a warning.

This proactive measure promotes honesty and transparency within the franchise network. If underreporting continues despite warnings, the franchisor must take corrective measures to ensure compliance. Failing to do so may lead to persistent problems with accurate royalty collection, which could negatively affect the financial stability of both the franchisor and the entire franchise network.

Automated Supply Restocking

Finally, to reinforce supply chain restocking, an independent hybrid solution is the ideal choice. It functions without relying on ERP or POS systems, simplifying setup processes and providing full ERP automation. Benefits of a franchisor-managed supply chain include maintaining brand control, supporting franchisee dependence, achieving economies of scale, generating revenue, differentiating offerings, and enhancing agility.

Franchise Profitability Pain Points can be arrested by using automated Franchise Management Systems like TreeAMS

Indeed, digitalization and automation are most effective when implemented across the entire organization. Solutions designed for individuals at every level of your organization ensure inclusivity and participation. By embracing technology for efficient franchisor revenue management operations, it ensures that no one is left behind, nurturing a cohesive and productive environment.

The event united a diverse group of franchise industry professionals, including seasoned operations experts and eager newcomers, who left with practical insights and renewed motivation to apply innovative strategies in their franchise operations. They are now prepared to excel in the ever-changing franchise environment, improving profitability and operational efficiency.