Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Are Using Outsourced CFO Services
Transcript
- Lucas: So I want to start with a number: 14 percent. That's the EBITDA lift a multi-unit franchisee in the fast-casual space reported to me after six months of working with a fractional CFO. Luna: Fourteen percent just from hiring a part-time finance person? That sounds almost too clean. Lucas: Right, I had the same reaction. But when you dig into it, the math makes sense. This operator had 12 locations. He was doing his own P&Ls on weekends, and he had no one doing forward-looking modeling or tax structuring. Luna: So the fractional CFO wasn't just crunching numbers—they were finding money that was already there but invisible. Lucas: Exactly. They restructured his debt, caught a missed tax credit tied to equipment depreciation, and renegotiated two leases that were coming up for renewal. The total savings? About $180,000 in the first year. The CFO's retainer was $3,500 a month. Luna: So that's a return on investment of over four times in year one. Why aren't more franchisees doing this? Lucas: I think it comes down to two things. One, the mindset that CFO is a 'corporate' role, not something a small operator needs. And two, they don't know how to find a good fractional one or what to expect to pay. Luna: The price range for a fractional CFO is typically $2,000 to $8,000 a month, depending on the complexity. Compare that to a full-time finance director at $80,000 to $120,000 plus benefits. Lucas: And you don't need a full-time person unless you're at 20-plus units or $10 million in revenue. For the 5-to-15-unit sweet spot, fractional is almost always the better call. Luna: What's the first thing a fractional CFO usually tackles when they come into a franchise operation? Lucas: Cash flow forecasting. Most franchisees run on gut feel. They know if they had a good month or a bad month, but they can't tell you with confidence what their cash position will be 90 days out. A good CFO sets up a 13-week rolling forecast. Luna: That alone can prevent a lot of those 'surprise' shortfalls that force franchisees into expensive merchant cash advances. Lucas: Exactly. And then they move to the debt stack. The franchisee I mentioned had three different loans at varying rates. The CFO consolidated them and saved about 2 percent on the blended rate. Luna: That doesn't sound huge—2 percent—but on a $2 million debt load, that's $40,000 a year. Lucas: Right. And that's before we even get to tax strategy. One of the biggest wins is the cost segregation study, which accelerates depreciation on the building improvements. A lot of franchisees don't know that's available to them. Luna: So the fractional CFO essentially pays for themselves through tax savings alone in many cases. Lucas: I've seen it happen. The other area where they add huge value is lease negotiation. Most franchisees sign whatever the landlord puts in front of them because they don't have a benchmark for what's standard in the market. Luna: A CFO with retail lease experience can walk in and know that the common area maintenance charges are 15 percent above market, or that the rent escalator is tied to CPI instead of a fixed percentage. Lucas: And that knowledge alone can save $10,000 to $20,000 a year per location. If you have ten locations, that's a six-figure savings stream. Luna: Are there any franchisors who are starting to offer shared CFO services as part of their support package? Lucas: Yes, and this is a trend I'm watching closely. Several large franchise systems, especially in the quick-service and home-services space, now have a 'cfo as a service' option where franchisees can buy in for a set fee. It's often $500 to $1,000 a month per unit. Luna: That's less than half the market rate for an independent fractional CFO. But you're getting someone who knows the system's specific cost structure and benchmarks. Lucas: The tradeoff is independence. A franchisor-provided CFO might not push as hard on royalty-related issues or system-mandated vendor markups. So you have to weigh that. Luna: Sure. The independent CFO can say, 'Hey, your franchisor's recommended supplier is 8 percent above market—let's find an alternative.' That's a conflict the in-house CFO can't have. Lucas: Exactly. And that gets to the core of why this episode matters. A fractional CFO isn't just a cost center—they're a profit center. But you have to hire the right one and give them the mandate to challenge assumptions. Luna: So what should a franchisee look for when vetting a fractional CFO? Lucas: First, experience with multi-unit retail or franchise operations. You don't want someone whose background is all manufacturing or tech. Second, references from other franchisees. And third, they should be willing to do a two-week diagnostic for a flat fee before you commit to a retainer. Luna: A diagnostic is smart—it gives you a concrete list of savings opportunities before you sign anything. Lucas: Yeah. I'd also look for someone who understands the specific financial metrics of your industry. In fast-casual, that means knowing food cost percentages, labor efficiency ratios, and average check size trends. In home services, it's revenue per van and customer acquisition cost. Luna: And you want someone who can communicate with you in plain English, not just spreadsheets. A lot of franchisees are operators, not accountants. Lucas: Absolutely. The best fractional CFOs are translators—they turn numbers into decisions. And that's ultimately what we're doing here on this show, right? Turning business concepts into something you can use. Luna: Speaking of which—and I don't want to break the flow—but if these conversations have moved your work forward in any small way, there's a simple way to keep them coming without any sponsor interruptions. Lucas: Yeah, we deliberately don't run ads on these episodes. No pre-rolls, no mid-rolls, no 'brought to you by' anything. That's a choice we've made from day one. Luna: And if that choice matters to you, the link is buy me a coffee dot com slash fexingo. That's it. No tiers, no perks, no exclusive content—just a way to say this show is worth keeping ad-free. Lucas: And we mean that. It's a small gesture that adds up. Now back to the numbers—I want to talk about a specific case where a franchisee used a fractional CFO to model a second brand acquisition. Luna: Oh, that's a good one. Because that's where the strategic value really shows up—beyond just cost savings. Lucas: Right. This franchisee had 8 units of one brand and was looking at buying a 5-unit franchise from another system. The fractional CFO built a pro forma that showed the acquisition would dilute his overall EBITDA margin by 2 percent in the first year but improve it by 4 percent by year three after cross-training staff and sharing supply chain. Luna: Without that model, he might have walked away because the first-year numbers looked weak. The CFO gave him the long view. Lucas: Exactly. And that's the kind of move that separates a surviving franchisee from a scaling one. The fractional CFO becomes a strategic partner, not just a bookkeeper. Luna: So if someone's listening and thinking, 'I have 6 units and I'm doing my own books,' what's the first action step? Lucas: Reach out to three fractional CFO firms that specialize in retail or franchise. Ask for a two-week diagnostic. And come with your P&Ls and your tax returns from the last two years. The diagnostic should cost no more than $1,500 to $2,000. Luna: And if they can't find at least $10,000 in savings or missed opportunities in that diagnostic, don't hire them. Lucas: Right. If they can't find low-hanging fruit in two weeks, they're not the right fit. But if they can, you're looking at a partnership that will pay for itself many times over. Luna: I've seen franchisees who hired a fractional CFO and within a year were able to open an additional unit using the freed-up cash flow. That's a real growth lever. Lucas: It is. And it's one of those moves that's still underutilized. My guess is that within five years, most multi-unit franchisees will have some form of fractional finance support. It's becoming table stakes. Luna: Alright, I'm sold. Next time I'm at a franchise conference, I'm going to ask every operator I meet whether they have a fractional CFO. Lucas: And if they say no, you can tell them about the 14 percent EBITDA lift and the $180,000 tax credit. That usually gets their attention.