Profit Management Workshop - 1400+ Franchise Opportunities · 2019. 12. 16. · Profit Management Workshop • Three nuggets: 1. Learn useable information that highlights missed opportunities

Profit Management Workshop

How do Franchisees maximize profitability in the

face of regulatory changes, a reduced, more expensive labor force and rising cost of goods sold?


Developed by the Franchisee Forum

Presenters:

Rod Bristol, EVP, Profit Mastery

Jeffery Tews, Multi-Unit Franchisee, BrightStar Care

Chuck Stempler, Pres. & CEO, AlphaGraphics Seattle

• Who is here today? Are you a:

Zee?

Zor?

Vendor?



• Three nuggets:1. Learn useable information that highlights missed opportunities for

Profit

2. Discover data analytical tools and financial processes that will uncover potential savings

3. Take away universal best practices for developing a profit driven mentality throughout your company

Who Eats Where?(and What’s More Important?)

________ eats off of ________line

You EAT off the ________line

In order to improve THAT,

You have to Improve YOU.

What Two Things are Critical?

Profits and Cash Flow

How are they achieved?

Understanding how a business makes $.

1. Gaining Control of Your Business

2. Charting a Course for the Future

Manage Better!

Measuring…

FINANCIAL PERFORMANCE

WHAT GETS MEASURED, GETS MANAGED

andWhat Gets Managed

Gets Done!

Profit Mastery Basics

Profit Management WorkshopEducation

- Individual Franchisee- Network-wide programs- Profit Mastery University

Web Based Hi-Def Streaming Video (Self-Study)

Information- Industry Benchmarking Studies

RMA, Fintel, Qvinci, FRANData, Profit Gap, Profit Keeper- Bookkeeping Services

Accountability- Performance Group Facilitation

Provides the FOUNDATION

Creates the YARDSTICK

Establishes the DISCIPLINE

Profit Management Workshop1. Plan Properly 2. Monitor Financial position

The Scorecard The Roadmap

3. Price, Volume, Cost 4. Managing Cash Flow 5. Managing Growth 6. Borrow Properly/Dealing With Banks 7. Planning for Transition

Assets = Liabilities + Net Worth

Efficiency

Sales

Balance SheetIncome Statement

To pay for new assets

To pay off debt

To pay out to the owners

Net Profit

Uses of Profits:

Net Profits Cash Flow

Sales = $2,160,000

Buy

Pay

.99 :1

A Quick Quiz!!

The item you are selling costs $4.00 and you want a 26% Gross Margin. What is the sales price? What do you sell it for?

What is the range of answers? Hi to Low…


=“causes”

= “is caused by”

No Cash Discounts on Payables

Low Productivity

Poor Inventory

Control

ShrinkageBookkeeping

ErrorsPoor

BuyingPoor

Pricing

Low GrossMargin

Low Gross Margin (Ratio #4)

the wrong hotel…

What is their Low Gross Margin costing?

Their Margin in Year 3: 18.5%

Their Peers’ Margin: 22.2%

Difference +/- 4%

Sales in Year 3: ~ $2,000,000

X margin difference: ~ X .04

Margin $ Left on the Table: $80,000

Primary Impact: Profit

=“causes”

= “is caused by”

$80K (P)

Low Gross Margin (Ratio #4)

X .05 Low Productivity

$38,000 Inefficiency

No Cash Discounts on Payables

COGS $1,760,000 - 760,000 Labor

$1,000,000 Purchases$500,000 Extend discounts

$10,000 in missed discounts

X .02 Discounts

COGS $1,760,000 - 1,000,000 Purchases

$760,000 Labor

Low GrossMargin

Low Productivity

Low GrossMargin

• If he can manage just a 1% improvement in each of these areas:

• Buying: 1% x $1,000,000 = $10,000

• Pricing: 1% x $2,160,000 ~ $22,000


$80K (P)

$60K (C)

$10K (P) $22K (P)$38K (P)

$10K (P)

$16K (C)

$19K (P)

$7.6K

$126K (C)

Who is resp. for what? Can he do it? Cash NPBT

1. Inventory

2. Accounts Receivable

3. Hidden Costs

4. Interest

5. Gross Margin

Labor Productivity

Buying

Pricing

Cash Discounts

6. Refinance Building

Totals

$60,000

$19,000

$16,000

$ 7,600

$38,000

$10,000

$22,000

$126,000

$202,000 $106,600

$10,000


VC = 70%

FC = $144,000

TP = $60,000

1) Needed Sales:

2) If FC $1.00, what sales required ______

Sometimes the Tests Come First!

Answer these two questions:


Monthly Break-Even____________

Annual Break-Even________________

Your employee breaks something that costs $50, how much in sales do you need to do to cover those lost $$$?

You are hiring a new sales person for $45K. How much in increased sales do you need before they actually contribute anything?

You’re going to open a new location for $250,000. What sales will you need to recover and make a return on your investment?

Sales-COGS=Gross Profit-OE (-VOEs)Net Profit

Sales

With Net Profit at 0, you are at Break-Even

Accountant’s P&LManaged or

Break-Even P&L

-Var. Costs

What’s Left-Fixed CostsNet Profit

Contribution

Margin

=

Sales

Contribution Margin

Variable

Cost

Cup Fixed

Cost

Cup Net

Profit

Cup

The Cup Theory

What happens if you never fill

the Fixed Cost Cup?

What happens if you never fill

the Variable Cost Cup? You’re _______


If Fixed Costs Go Up $1.00?

What do we need in increased sales to cover

that cost?

Fixed Costs increase = $1.00 = $2.50C.M. % .4

Operating Leverage…


1. _________________

2. _________________

3. _________________

4. _________________

Sales ($)

Variable

Cost

CupFixed

Cost

Cup Net

Profit

Cup

Contribution Margin


Why Don’t More Owners Do This ?

“Don’t have the time”

“Don’t know how”

“If it was important, my CPA would do it”

“It’s not fun”

“I’m more of a crisis manager”


Jeffrey Tews, Franchisee, Madison, WI

•4 Territories of BrightStar Care

•1 Medical Staffing Division

•1 BrightStar Senior Living

•1 BrightStar Senior Living under development

•35 Managers, 450 Direct Care Staff

•$12M per year revenue.

Branch Profit Bonus Plan

• The Branch team earns 1/3 of the EBITDA over 6% to their bonus pool.

• Revenue on Quarterly basis 100% $985,272

Minus Cost of Goods Sold 58% $572,443

Gross Profit 42% $412,829

Administrative Expenses 31% $303,464

EBITDA 9% $109,365

Base line in the bonus plan is 6% EBITDA -6% = 3% * .33 $9,853

• 3% over the base the team earned 1% of sales bonus for this quarter.

Branch Profit Bonus Plan Outcomes• Revenue Only bonus plan left us vulnerable to paying bonus

when we did not make expected EBITDA

• Team focused upon revenue and costs has resulted in higher earnings.• Overtime use reduced.• Cost of goods sold saving ideas have been generated –

background checks and drug screens.• Advertising effectiveness research intensified.• Management effectiveness improvements to reduce adds.• Increased attention to Direct Care Staff retention.

AlphaGraphics Seattle

• AlphaGraphics is a full service commercial print company with locations in Seattle, Fife, Renton, Bellevue and Lynnwood WA. Our full time employee count is 102. AlphaGraphics provides customer facing service from 8AM until 6PM Monday thru Friday. AlphaGraphics production facilities run from 6AM until 12AM Monday thru Friday and extend to 24x7 based upon client demand.

AlphaGraphics Seattle• Areas of specialization:

1. Pre-press, pre-flight, value engineering, design.

2. Sheet fed digital color and monochrome printing (up to 14.33”x26”), paper and synthetic substrates from 16# to 24pt.

3. Offset printing up to 24”x29”, 5 colors plus in line and off line coating.

4. Specialty digital printing – envelopes, spot and textured UV.

5. Signage and grand format ink jet printing up to 128” x 150’ for rolls and 128” x length of material, up to 2” thick. 8 colors plus white, UV ink. Latex and eco solvent printing is also available. Complete automated finishing – hemming, grommet setting, CAD cutting, custom assembly, custom on-site installation.

6. Fulfillment – pick, pack and ship; print on demand, pack and ship.

7. Ecommerce – customized web-to-print ordering systems.


Client Base:

1800+ clients, primarily located in the Pacific Northwest.


A. Cash flow is the prime metric to measure and manage.

I. Operationally P&L is likely structured on an accrual basis

II. Balance sheet is cash oriented


B. It is vital that owners make an honest assessment of their financial knowledge base and skill set.

I. If you have gaps, do you have personnel or outside resources who will fill them?

II. Set your pride aside – acknowledge your gaps, seek help – fellow franchisees, peers, network leaders, your franchisor


C. You Manage What You Measure

I. Annual plan / budget versus actualII. Waste – labor and materialsIII. Price – selling prices versus cost


D. Labor supplyI. Train and develop your team from the

foundation up.II. Promote from within


“In my honest opinion, this program is BY FAR (Zors) most valuable initiative. As confident as I was about my ability to manage and control my office’s financial and operational metrics, I was veryhumbled as soon as I saw my financial and KPI results compared to the other owners in our group, as well as once I learned more about how I could improve the various metrics of the Profit Mastery model.

The improvements in our business have been dramatic across the board – financial improvements, operational improvements, process improvements, quality improvements and employee satisfaction improvements. The breadth and extent of the improvements are both humbling and inspiring!

The following data will give you a sense of the benefits of the program in only one of these areas –owner profits (arguably the most important metric to most owners):

Do These Tools Work?

Our 2011 ODP (owner’s discretionary profit) was 11.6%In the 4 quarters since we started the Profit Mastery program (2012 Q2,Q3,Q4 and

2013 Q1) our ODP averaged 15.4%This increased ODP % equals an actual increase in $170K in ODP dollars for the prior 4 quarters (compared to what my ODP dollars would have been if I was still at my 2011 ODP % level).And, in the past 2 quarters (2012 Q4 and 2013 Q1) my OPD % increased to 16.7%, which equals an annualized increase in ODP dollars of $238K (compared to 2011 ODP % levels).

Thank you, thank you for introducing this program to franchisees!”

Do These Tools Work?


• Three nuggets:1. Learn useable information that highlights missed opportunities for

Profit

2. Discover data analytical tools and financial processes that will uncover potential savings

3. Take away universal best practices for developing a profit driven mentality throughout your company

Questions??

Thank you for coming!


Rod Bristol, EVP, Profit MasteryJeffery Tews, Multi-Unit Franchisee, BrightStar CareChuck Stempler, Pres. & CEO, AlphaGraphics Seattle

Documents

Profit Management Workshop - 1400+ Franchise Opportunities · 2019. 12. 16. · Profit Management Workshop • Three nuggets: 1. Learn useable information that highlights missed opportunities