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How McDonald’s Owner/Operators Can Manage Cash While in Growth Mode

Posted by Concannon Miller on Thu, Aug 18, 2016

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bigstock_Money_money_house.jpgCash flow is the life-blood of any business, be it quick-service restaurants, retail, professional services, construction – it’s what keeps the lights on and ultimately separates success from failure.

While positive cash flow is always the goal, there are myriad degrees of positive cash flow. Clearly, working to maximize the level of positive cash flow coming from your business’s normal operations is key, but almost as important is how you deploy (or accumulate) this cash flow.

Depending on your current stage in the lifecycle of your business, the “how” will most likely vary. This article will examine a few different strategies that can and should be employed by a McDonald’s Owner/Operator who is in the early stages of their business life, or otherwise known as “growth mode.”

Spend time in your restaurants: At first glance, the concept of spending time in your restaurants may seem like a no-brainer. However, if you’re green and growing (as our friend and founder Ray Kroc was known to say), then you’ll most likely be spending that time running a register or working the grill during lunch time rather than simply being present and overseeing things.

But even if you’re not working in the kitchen, spending time alongside your people will serve to energize the crew and engender the kind of increased accountability that is often lacking in passively managed restaurants. As you know, a more energized and engaged crew, coupled with increased accountability from stronger controls, will almost always translate into more of those hard-earned sales dollars filtering through to your bottom line.

READ MORE: McDonald's Owner/Operators Can Increase Cash Flow Through Tax Reductions

financial viability Avoid non-essential, cosmetic improvement spending: One of the more important lessons of business that a new (or newish) McDonald’s Owner/Operator will need to learn is how to evaluate and make capital expenditure decisions based on function vs. form. In other words, in order to succeed in the long term, or perhaps grow an organization as quickly as desired, it will be critical that you re-invest in your restaurants smartly and not fall for the latest and greatest everything that comes along.

The “form” of any certain piece of equipment may be lacking in aesthetics, while the “function” may still be sound. Replacing an asset before it’s useful life has been reached may provide a visual boost but the use of that precious capital, especially in times of growth, without the corresponding, requisite return on investment, is a fool’s errand and could potentially set you back and delay you from reaching your goals.

Divert excess cash to non-operating business/savings accounts: As your working capital balance begins to swell as a result of your sound business decisions and strong operational prowess, so will the temptations to spend. As the old saying goes “Out of sight, out of mind” – it may be wise to syphon off some of those cash reserves into non-operating business or savings accounts so as to systematically maintain your strong working position while at the same time not subjecting those funds to the day to day temptations of normal business operations.

Those funds will still be there and available in case of emergency, and more importantly, they will more likely still be there and available if and when that next restaurant or solid investment opportunity presents itself.

READ MORE: McDonald's Financial Viability: Understanding Your Cash Flow Coverage Ratio

Whether you’re a brand new McDonald’s Owner/Operator or you’ve been in the business for 50 years, driving sales and managing cash flow will always be of primary concern and focus. What is important to remember is that the decisions you make early in your career can and will have far-reaching effects throughout the remainder of your working days (and after). Setting yourself up for success by way of sound fiscal decision-making from the very start will pay dividends (literally and figuratively) for years to come.

Topics: McDonald's management

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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