Why franchisees should consider outsourcing

November 01, 2019

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As a franchise owner/operator, there are limits on what you can do yourself. That is why an increasing number of franchisees are turning to service providers to outsource a growing number of non-core functions. Outsourcing has the potential to save business owners money while removing some of the day-to-day responsibilities from their never-ending to do list.

Outsourcing can also allow key team members to focus on critical priorities in their business, such as growing revenue, delivering high quality products or services, and providing excellent customer experiences.

Many factors make the decision to outsource non-core functions more attractive than in the past. Indeed, the decision has traditionally been considered a challenging and costly endeavour. Often, outsourcing back office functions resulted in additional trips away from the business to drop off records and long delays in receiving financial reporting in return, rendering the process largely impractical.

But, significant developments in technology and new innovative solutions from outsourcing partners has increased the opportunity for local/on-shore accountancy services delivered over the cloud. These developments have created better opportunities for franchisees to move away from traditional on-site or in-house solutions to find industry experts across the country that meet their unique business needs. This can provide the best opportunity to realize personal ambitions.

There are many different functions of the business that can be outsourced, including but not limited to cleaning services, human resources, IT, bookkeeping, and payroll.

Understanding bookkeeping

For many franchise owners/operators, bookkeeping is an afterthought. They often leave it to the last minute because they are either too busy with day-to-day operations or are overwhelmed by the volume or complexity of keeping their bookkeeping up-to-date. This last minute preparation creates the risk of late or inaccurate financial submissions, including bank or franchisor reporting requirements, or more costly risks due to the potential for severe penalties - tax filings.

Adding more difficulty, new franchisees often find that the operations training delivered by their franchisor provides a solid foundation for operational excellence in delivering services or providing exceptional guest experiences. However, this focus on menu and quality too often does not extend to finance and accounting; franchisees report too little time spent on the demands of financial reporting or how to properly analyze financial statements.

Keeping the books up-to-date and making business decisions on trusted financial reporting is essential in today’s increasingly competitive markets. It is more important than ever before for franchise owners to gather a timely, relevant picture of how their business is operating. This will allow the owner to make decisions using real-financial data, identifying trends or outliers in operations, allowing franchisees to adjust purchasing and scheduling decisions, and spot theft or make investment decisions on an informed basis.

Payroll confusion

Change is a constant when it comes to employment law. Regulations around minimum wage, termination pay, paid statutory holidays, and overtime are ever-evolving. This can make payroll processing confusing for many, especially if they are operating a franchise in more than one province where the laws will vary.

Due to the nature of many franchise operations, with low-wage labour covering various shifts, there is often a higher employee turnover rate than other businesses. For every departure, owners must complete a record of employment (ROE) for both Service Canada and the former employee. Additionally, all employees during the year require T4’s to be issued by the end of February.

Non-compliance can be costly with fines and penalties for late or delinquent filing, or failing to make the proper deductions.

HR functions

Franchise owners often lack the budget to support human resources (HR) personnel on a full-time basis. Even having an employee take care of HR on a part-time basis may be a bad idea if they don’t have an HR background or are unfamiliar with the workplace legislation and employment standards. HR mistakes can lead to fines or a decline in employee engagement.

Functions such as employee recruitment, employee relations, termination support, return to work programs, and workplace harassment investigation are often better left to a professional to ensure that they foster an engaged, productive workforce and a legally compliant workplace.

When to hire a service provider

Some indicators that a business requires a professional includes if the franchisee or his/her business partners do not have the relevant expertise or experience to perform a task themselves, or there are critical deadlines or requirements or risks involved.

The franchise owner should look to outsourcing if they want the convenience of someone else taking care of certain business needs, but not the cost of hiring in-house. Outsourcing also removes the need to cover off illness or absence requests, removes the risks of any potential fraud, and reduces errors involved in having an on-staff provider.

The ultimate goal with outsourcing is for a franchise owner to have their needs met with high quality, timely and relevant services from trusted professionals that bring deep knowledge of the industry in which they operate.

The bottom line

Outsourcing certain functions has a cost, but with pre-determined rates, and efficiencies derived from service provider’s experience, the ultimate fee charged can be quite reasonable compared to hiring someone full- time. Furthermore, outsourced service providers are often more knowledgeable than in-house personnel, especially with industry nuances, since they perform these tasks on a daily basis. The benefits of outsourcing will generally outweigh the cost in the long run, giving franchise owners more time to grow their business and to spend time with their family.

For more information on how we can help, contact us today.