Finance - Case Example
Client
The client is a large European retail organisation operating under several labels known to the general public, of which some are run by staff, and others are franchised. Typically, a group of franchised shops is managed by an experienced person, capable of applying the franchise contract in a positive manner. Their role is to ensure shops turn over well, are competitive in their market, are profitable for both the owner and the franchisee, and adhere to standards and formats that have been tested. The interests of both parties are largely aligned as both make more money if more goods are sold.
Situation
Due to changes in the market, more and more retailers experience flat sales, but not necessarily flat costs. In quite a few cases sales volumes have stabilised or gone down slightly. The cumulative effect over several years can be considerable, in particular if costs do not change. As these franchisees are both the sales channel for the retailer, and their clients (credit risks), it is important to understand their financial condition. Often, their balance sheets’
largest liabilities are outstanding suppliers, in this case, meaning to a very large extent, the franchiser. Understanding the financial position of each of their clients is important to the operational managers, as well as those taking credit decisions.
ATC’s value
Many of the managers focus on the operational activities in the shops and should be able to coach and guide the owners in improving the operational efficiency and excellence of the shop. Often they are highly involved with deblocking deliveries or solving operational problems, which they have done for many years in one of the retailers’ own shops. Typically they have limited knowledge of financial statements and sometimes have difficulties reading statuatory accounts. We have developed training programmes for them, focusing on the interpretation of financial statements by intelligent staff that has never learned to evaluate balance sheets or financial statements. Typically, we use real cases (published accounts of their clients) and invite them to provide names of clients that we can use as online examples.
We have had several participants who have come back more than once to add to their knowledge as it proved useful in discussions with clients. Some use it to stop franchisees leaning on their organisation for financial resources, increasing the credit risk. Others discuss refurbishment of stores on the basis of what they have learned, and in a limited number of cases participants have used it to make their clients aware that the value at which they would want to transfer their shop to a new owner was financially not realistic.