When a technology startup looked set to disrupt the back-office accounting services they offered franchisee clients, a group of accounting firms banded together to form an organization that served up invaluable services that technology just could not duplicate, giving rise to National Franchise Consultants and Accountants -- a network of nine accounting firms working side by side to offer business strategies to the franchisee owners and operators of fast-food giant McDonald's.
NFCA serves about 1,200 McDonald's franchises in the U.S. and has a reach to more than 5,000 restaurants, out of the roughly 14,000 throughout the country. Prior to the creation of NFCA, the nine firms were in direct competition with each other, until a bigger competitor arose.
In 2000, McDonald's partnered with the technology-focused private equity firm Accel-KKR, and invested in an Internet procurement site called eMac Digital. The site was set up to offer McDonald's owner/operators supplies at a discounted price, as well as automated accounting services such as bill pay and monthly financials. "EMac Digital's automated accounting services directly competed with the monthly accounting services provided by the individual NFCA firms," explained Martin Magida, who is vice president of NFCA and a partner at Lincolnshire, Ill.-based member firm Chunowitz, Teitelbaum & Mandel Ltd.
"The technology company then started interviewing the nine firms," Magida recalled. "They were seeking information about how we did things and what we do. It appeared that we were about to be replaced by a technology company that would provide a lot of the financial reporting for the individual and independent McDonald's operators. We saw this as a potential threat and we decided to form an alliance as a defense mechanism so we could find strength in numbers," Magida explained. And so NFCA was created.
[IMGCAP(1)]"We thought if we pulled together that we would have a chance to survive the potential threat," said Magida. As the founding firms grew more confident in their expertise, they tried to figure out a way to stay ahead of eMac. "Everybody gained more respect for their fellow competitors and we formed this alliance. We went to our very first worldwide convention together where we had nine competitive firms sharing a tent with booths." Having nine booths under one tent at a business exhibit was a little tight, but Magida said that it was well worth it. "It was an uncomfortable feeling but it was a feeling that brought people together. Because of that we thought, 'Why not keep this together and look at this as a positive experience?'"
In 2003, McDonald's sold its remaining stake in eMac to Accel-KKR, which made NFCA member firms, and other independent accountants, breathe a sigh of relief. "The nine of us and all the other independent accountants that deal with different franchise operators throughout the country were still left intact," said Magida.
"Accounting firms are already using the latest technologies to help deliver services to their clients more quickly," said Magida. "We are functioning in a paperless environment, and use technology to help us gather information efficiently. For example, we use software programs that enable us to have direct access to our clients' information, such as sales, cash receipts, labor receipts, inventory, deposits, etc., instead of waiting for our clients to deliver this information to us. The earlier we have this information, the shorter the turnaround time for getting P&L statements done. This allows us to not only meet the monthly deadlines (the 25th of each month), but helps our clients run their businesses more efficiently."
The multi-billion-dollar fast-food chain continues to work with NFCA, which provides a level of service that owners and operators value. NFCA firms have more than 40 years of experience specializing in accounting for McDonald's franchisees.
"With this extensive experience comes great knowledge and insight into the inner workings of the McDonald's system," said Magida. "NFCA members provide more than just accounting and tax services. They help owner/operators understand their financial viability. They help them with their financial compliance, purchasing and selling McDonald's restaurants, business valuations, guidance on health care reform, succession planning, next-generation planning, retirement planning, estate planning and more. They also have established solid relationships with national lenders, helping owner/operators in times of cash flow issues."
Like many organizations, NFCA holds an annual meeting. Each year, one of the nine firms agrees to host the event. In 2014, the annual meeting was in Huntington Beach, Calif. The year prior it was in Asheville, N.C., and before that the group met in Georgia. "Each time we go, we invite [McDonald's] corporate people, which is beneficial for them because they have nine accounting firms that work with more than 5,000 owner-operated stores all in one place. This makes it easy for them to communicate a message that they want to get out to their operators by just telling it to only nine firms. It's a very official way to send out their signal," said Magida.
In 2014, the organization put a spin on their annual meeting. NFCA aligned its meeting with McDonald's Corp.'s finance meeting, and for the first part of the meeting, which runs for at least three days, McDonald's finance directors and assistant controllers meet amongst themselves. Then the last two days of the conference were spent with members of NFCA. "It's a combined meeting, and it's something we've been trying to do so that we can increase our audience with them. They saw the benefit in this and both sides agree that it would be nice to move forward with this format," said Magida.
"Instead of [McDonald's] going to meetings multiple times, in various regions throughout the country, they can just attend our annual meeting, talk to the nine of us, and we relay their message to the 5,000 franchisees we work with. That's almost half of their operator stores. They let us be the messenger," Magida explained. "We are the sounding board for them. They tell us and we relay the message to their operators. The operators know that we are familiar with all the trends happening with McDonald's because we're so involved. And they see the added value in using one of our nine firms."
Magida and the NFCA board started planning for the 2015 annual meeting last fall, and have decided to host the event in Chicago to make travel more convenient for attendees. "It's not just the regional finance directors attending; we also get some corporate officers that come. This makes it easier to coordinate the travel and the attendance of corporate officers we have in Chicago." The conference is usually held during the summer and for 2015 Magida said they are planning for the week following Memorial Day.
Specifics for NFCA's 2015 board meeting were still being ironed out at the time Magida spoke with Accounting Today. "[Chunowitz, Teitelbaum & Mandel] may act as a host for the NFCA firms and arrange for a meal or a cocktail hour. We are kind of changing directions with it. In 2014, the California firm wasn't so much the host anymore because McDonald's usually takes the lead with their own event planner."
NFCA is heading into its second year with the new format and is trying to tweak what McDonald's Corp. wants. "We did a survey of what the corporate people and NFCA firms liked and didn't like. And now we are trying to react to those impressions."
Attendees gravitated more toward the informative educational pieces that the organization presented, rather than some of its marketing presentation of why they should be affiliated with NFCA. Firm members spoke on the financial matters that McDonald's operators were facing and gave them a point of view from an accountant's perspective. "We had one of our tax people there, who represented one of the NFCA firms, and we also had a tax representative from McDonald's Corp.," shared Magida.
NFCA is open to the idea of adding more members to its network, so that it can accommodate more of the owner/operators throughout the U.S. Owner/operators pay the individual firms for their services. "Whatever our fee structure is has nothing to do with the NFCA," Magida explained. "Our firms pay an annual fee which is generally used for the upkeep of our joint Web site we have with McDonald's."
"You have to have an interest," said Magida, in describing the kind of firm that could be a member of NCFA. "We tried to come up with a criterion but we don't have anything that is structured." It's more about what a firm brings to the table in terms of their in-depth experience, knowledge of the McDonald's brand, and having a positive presence within their community. "They are not just doing accounting for the McDonald's owner/operators, but they will also be involved with the advertising co-ops that they are in. They should also be involved with McDonald's charities, whether it's time or money."
The member firms make it a point to share best practices with each other. For example, if there's an important update from the Internal Revenue Service on how audits should be conducted, NFCA members share the news with each other promptly, Magida noted. "All nine firms are very committed to the McDonald's brand and that is one of the things that keeps us together. In the end, the strength of each firm's relationship with their clients as well as quality of services helped NFCA prevail."
AT A GLANCE
Network: National Franchise Consultants & Accountants
Year founded: 2000
Bodine Perry Robinson (Columbus, Ohio)
Chunowitz, Teitelbaum & Mandel (Lincolnshire, Ill.)
Concannon, Miller & Co. (Bethlehem, Pa. / St. Petersburg, Fla.)
Foelgner, Ronz & Straw (St. Petersburg, Fla. / Durham, N.C.)
Gray, Gray & Gray (Canton, Mass.)
James Howard, an Accountancy Corp. (Mission Viejo, Calif.)
Landau Arnold Laufer (Babylon, N.Y.)
Mize, Houser & Co. (Topeka, Kansas)
Richard L Sparkmon & Associates (Conyers, Ga.)
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