How do you control franchise expenses?

While the above comments are true, you need to know your fixed fees that are charged by your franchisor, that is only part of the equation. COGS and labor are generally your to largest controllable expenses. My advice is, if you don't measure it you can't move it. So many businesses just operate and pay bills. Few actually take the time to analyze inventory costs and labor on a regular basis and employ strategies to fine tune these important numbers. Start weekly, then when confident move to monthly. Remember, if you dont measure, the numbers will still move, but unfortunately the wrong way. Remember your business is not a nickel and dime business but rather a business about nickels and dimes.

Why Buy a Franchise vs Create Your Own Concept? Franchisees are entrepreneurs (or what I like to call "intra-preneurs"). They will borrow money, sign leases, purchase supplies, hire, train and fund all of the opening costs the same as a founder. The difference is the franchisor can provide a history of performance, expected costs and learnings from operating the brand. Expected costs (item 7) and expected revenues, COGS and earnings (item 19) will provide averages from locations operating a full 12 months in a prior year. This info is a great start, but should not be where you make your final projections or decision to become a franchisee.

Forecast Conservative Sales and Agressive Expenses. For franchisees, it is very important to really look at the actual costs reported by the franchisor in their FDD, but also have as many conversations as possible with existing franchisees to learn where they may have incurred unexpected/ preventable expenses. When making your financial forecast, don't assume that you will perform in the top tier of the franchise set, allow yourself and your business time to grow and become efficient. Your cash plan should reflect this type of forecast.

Follow the Systems Provided by the Franchisor Many times, franchisees believe that they have "figured it out" and choose to navigate away from the proven processes provided by the franchisor. You joined a system for a reason, work with your franchisor, their support team and other franchisees to maximize top line revenues, minimize expenses and drive bottom line results!

For the franchisor, they must always be looking at the unit level economics for their brand and make sure the franchisees are making money. Driving positive top line sales (and even more important guest/ transaction counts) must be the focus. For food brands, a systematic review of with menu optimization and looking for operational efficiencies should also be a focus. A franchisor's revenue comes off the top line sales, where the franchisee lives off the bottom line. The franchisor focus should always be to help the franchisee drive profitable and sustainable sales and guest count. A wise franchisee once told me.. "when you start signing the front of the check and not the back, you'll understand what it's like to walk in my shoes".

Scott, unfortunately this is not the case with most Franchisors! The franchisee is your #1 priority. Thanks for pointing this out.

Relying on the systems in place from the franchisor will often reduce expenses for franchisees. As a franchisor, we are focused on creating and building systems that can reduce work time and therefore payroll. The franchisor is also highly focused on streamlining which helps all businesses control costs.