Simon Pullum of The Azura Group discusses management service fees and how best to calculate them.
“How Much Service Fee am I owed? – The perennial question asked by every franchisor.
Franchise networks use different MSF (Management Service Fee) methods to help ensure they receive all the MSF due to them. The common techniques are:
- Fixed Fees
- Percentage of Invoices Raised
- Percentage of Monies Received
Regardless of the MSF method, what techniques can we use to know what is due to us?
The first method of Fixed Fees stands on its own. There are a number of disadvantages with this method, however knowing what MSF is due is not one of them. This part is simple and everyone knows what is due when.
Both the other methods rely on the franchisor knowing what they franchisee has been up to and there are a number of methods that are used…”
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Cathryn Hayes of HSBC looks forward to 2013 and the need to constantly review best practices and make the most of the resources available to you now that we are all in a world of constant change.
If you look ‘change’ up in the dictionary it can also mean growth, replace, convert, innovation and much more.
In this ever changing environment, franchisors constantly need to adapt their business planning. Most changes in franchises are minor and incremental and making the necessary changes before they are forced upon you will bring competitive advantages. Creating a culture of innovation can transform your franchise.
Driving change means taking active responsibility rather than reacting to external or internal influences. Identify a need for change at an early stage.
- Think ahead to where your franchise needs to be in one, three and five years’ time. What do you need to do to get there?
- Monitor what your competitors are doing. Look at parallels in other sectors.Consider benchmarking your performance in key areas, such as customer loyalty.
Recognise that a key determinant of franchise success or failure is the quality of the franchisees
- Continuous training and development will ensure you get the most out of your team.
- As a last resort, you may need to replace ineffective franchisees if training/coaching support do not lead to improvement.
In the early months of the recession, companies took major action to reduce their costs, often in the form of large-scale redundancies. Now, for most companies, the focus is keeping the pressure on the business to keep the costs down.
The main way to keep a business or a franchise network running at the lowest cost possible is to streamline all expenses so that you’re not paying unnecessary amounts. It is important to look at every area of your spending in order to ascertain if there’s anything extra you could cut out. For example, are you paying for ‘luxuries’ for your staff, like expensive coffee?
It can be very productive to communicate with your staff and franchisees about the costs you’re having to cut. Employees know that when times are hard their jobs are at risk, so they can be very helpful in coming up with new strategies to combat expenses. By creating a cost-saving ‘culture’ within the network, you can ensure that every level of the business is focused on keeping the expenses from piling up, from your franchisees’ employees to your head office team. By encouraging your franchisees to keep their own costs down, you can generate more profit from your network.
When you’re looking at reducing your costs, it is important to make sure that you are getting value for money with everything that you buy. If you’re paying a higher price, are you getting a higher quality product or service? Shop the market and make sure you’re really getting what you pay for.
As a franchise network, it is necessary to remember that the market is constantly changing, so you will constantly need to review every level of your expenditure so that you can keep running at maximum efficiency.
Tags: business planning, economy, finance, franchise, franchise business, franchise development, Franchise Finance, franchise growth, franchise information, franchise success, franchise tips, franchising in the uk, recession, steve jones, uk economy