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Bird’s Eye View

BY CSA STAFF

More strategic. That’s how Greg Esgar, CFO of Massage Envy Spa, the nation’s largest therapeutic massage chain, sums up the evolving role of today’s CFO. Esgar joined the Scottsdale, Arizona-based business as financial chief in 2004, two years after it was founded. As part of the executive team, he helped spur the company’s growth from 17 locations to its present total of nearly 1,000 sites in 49 states. With its membership-based, monthly-fee business model, Massage Envy Spa eschews the luxury amenities and high prices of traditional day spas. Its hallmark is convenience, with shopping centers and busy street locations, accommodating hours and scheduling flexibility.

Chain Store Age contributing editor Michael Fickes spoke with Esgar about his role in the rapidly growing business.

How has the role of a CFO changed over the past decade?

The role of CFO has definitely expanded to be more strategic. More and more CFOs operate as business advisers to CEOs and COOs. Traditionally, a CFO had a background in accounting and managed strictly financial matters. Today, it’s much more than this and much more than this in franchising.

As Massage Envy Spa has grown, for example, my role here has grown to include profit coaching for the three levels of our model: regional developers, franchisees and clinics.

I play a key role in reviewing and approving franchise applicants. I am involved in helping franchisees and regional developers find and obtain the financing they need to open new locations and grow their current locations. I also need to establish and maintain good working relationships with financial institutions that can affect the finances of new and developing franchises.

Do you expect the CFO’s role to continue to evolve? How?

It’s constantly evolving as business changes, particularly as a company turns in a new direction. The CFO role must align closely with the current needs of the business.

This is especially true in franchising. My work in helping franchisees and regional developers find and obtain financing is an evolutionary change that occurred in recent years, as our industry has encountered financing challenges like never before. It has become necessary for CFOs of franchised companies to become heavily involved in helping franchisees navigate these challenges. In addition, governmental mandates affect the role of the CFO. A CFO must remain flexible and able to adapt to both external and internal influences.

Of all the areas of a CFO’s responsibilities — including real estate, technology, operations, inventory, finance and so on — what area changed the most? In what ways?

Without a doubt, technology is the area that has changed the most. Technology has given us tremendous amounts of new information and countless new capabilities. And we can access this new information and apply these new capabilities using mobile tablets and smartphones.

Technology is helping us to become more efficient and effective in our jobs. Technology has its challenges, too. It changes so often that it can be challenging to stay current — and that is essential.

Technology has enabled us to provide precise metric reporting, allowing our franchisees to focus on relevant and accurate data. We provide multi-level comparisons based on year opened, region to region, clinic to clinic and so on. Technology not only offers incredible forecasting tools but also the ability to evaluate where the strengths and weaknesses are in a business. This helps create a healthy competitive environment.

What challenges does this evolving role create for current and new CFOs?

CFOs must be increasingly well-rounded individuals. The days of just understanding accounting are over. You have to understand so many different facets of the business and serve as an adviser in so many areas that affect the bottom line. It can be daunting at times.

You really have to be current in every aspect of the business, provide a clear vision for the future and provide encouragement for the executive team, as well as the franchise support center staff and the franchisees. Finally, of course, you have to communicate the C-level visions and strategies effectively.

What are the most important initiatives that you will implement this year and next year?

I will continue to work hand-in-hand with our executive team and franchisees to grow the Massage Envy Spa business throughout the U.S. We are also exploring the potential growth of Massage Envy Spa into other countries.

So far this year, Massage Envy Spa has signed 26 new franchise agreements, which brings our total franchise agreements to 1,237.

”CFOs must be increasingly well-rounded individuals. The days of just understanding accounting are over.”

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What the CFO Needs to Know

BY CSA STAFF

As the key cog in the wheel of a retail chain’s financial structure, today’s retail CFOs find themselves caught in the crosshairs of senior management and stakeholders demanding maximum profit and measurable growth amid increased consolidation and tightened revenues.

But that’s nothing new. Financial chiefs have always had to balance profit and loss with expansion strategies. What has changed is that a whole host of added responsibilities has now entered the mix.

In fact, according to Alison Paul, vice chairman, Deloitte LLP and retail and distribution leader, today’s CFOs are expected to play four diverse and challenging roles — operators, stewards, strategists and catalysts — of which the latter two are new.

“As strategists, CFOs are shaping the overall direction of a retailer’s business, working directly with the CEO, Paul said. “They are vital in providing financial leadership and aligning business and finance strategy to grow the business. CFOs also are becoming catalysts and taking on an additional responsibility of instilling a financial approach and mind-set throughout the organization to help other parts of the business perform better. These varied roles make a CFO’s job more complex than ever.”

Going forward, the CFO’s involvement in defining and executing an overall strategy will continue to increase, according to Paul.

“They will also continue to change organizational behavior by partnering with other executives and senior management to achieve their financial and strategic objectives,” she added. (For more with Alison Paul on the expanding role of the CFO, see chainstoreage.com.)

In light of the expanding role of financial chiefs, CSA editors spoke with retailers and industry experts/consul-tants to identify insights and trends to help broaden a CFO’s understanding in six key areas: construction, data security, cloud computing, facilities management, sustainability/energy management and real estate. CSA also spoke with Massage Envy Spa CFO Greg Esgar about his expanding role in the fast-growing chain.

As the key cog in the wheel of a retail chain’s financial structure, today’s retail CFOs find themselves caught in the crosshairs of senior management and stakeholders demanding maximum profit and measurable growth amid increased consolidation and tightened revenues.

But that’s nothing new. Financial chiefs have always had to balance profit and loss with expansion strategies. What has changed is that a whole host of added responsibilities has now entered the mix.

In fact, according to Alison Paul, vice chairman, Deloitte LLP and retail and distribution leader, today’s CFOs are expected to play four diverse and challenging roles — operators, stewards, strategists and catalysts — of which the latter two are new.


Related stories:

What the CFO Needs to Know: Bird’s Eye View

What the CFO Needs to Know: Energy & Sustainability

What the CFO Needs to Know: Real Estate

What the CFO Needs to Know: Facilities Management

What the CFO Needs to Know: Cloud Computing

What the CFO Needs to Know: Data Breaches

What the CFO Needs to Know: Construction

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Summer Buzz

BY Marianne Wilson

Unlike most consumers, the retail industry doesn’t take a holiday in the summer. As we head into July, three very different retail companies are very much in the news. One has the industry all abuzz over who will be its next chief, while another has launched a pioneering employee initiative. And the newly appointed chief of the third wants to turn a cult L.A. brand into a global powerhouse. I’m fascinated by all three:

• Target: At press time, there is no clear front-runner to replace ousted CEO Gregg Steinhafel. Industry analysts keep adding candidates to the list of would-be successors, with the most recent being Sam’s Club CEO Rosalind Brewer.

Other names being floated as possible fits include HSN’s Mindy Grossman, Victoria’s Secret’s Sharen Turney, Foot Locker’s Ken Hicks, Tractor Supply’s Co.’s Greg Sandfort, Ralph Lauren’s Roger Farah and Gap Inc.’s Glenn Murphy — and that’s just a small sampling.

Target isn’t the only big retailer shopping for a new chief. J.C. Penney, American Eagle Outfitters, American Apparel and bebe stores are all being led by interim CEOs. And The Bon-Ton Stores’ Brendan Hoffman steps down in early 2015.

• Starbucks: It didn’t take long for the knives to come out over Starbucks’ new program to pay its employees college tuition. There was criticism that students face potentially long waits for reimbursements. And some don’t like that the program requires students to get their education online (from Arizona State University).

I get it: The program isn’t perfect. But give credit where it’s due. The Starbucks initiative is unique in its size and scope. It’s open to part- and full-timers, and comes with no strings attached. Employees are free to choose any course of study, and they don’t have to stay with the company for a required amount of time after earning a degree.

In a low-wage service industry, Starbucks has been a trailblazer, providing health insurance, even to part-timers, and giving its employees stock options. Who knows whether the coffee giant has been so successful because of the perks or in spite of them? I’d like to think it’s the former.

• Fred Segal: Can Fred Segal, the legendary Los Angeles retailer and epitome of California cool, transform itself into a global luxury retail brand? That’s the game plan of Sandow, which acquired Fred Segal in 2012.

Sandow has assembled a diverse team for Fred Segal that includes veteran retailer Paul Blum (late of Juicy Couture) as CEO and equity investor Evolution Media Partners (a joint venture that includes Hollywood powerhouse Creative Artists Agency). The goal: to reinvent the luxury shopping experience under the Fred Segal brand by building lifestyle stores that combine fashion, dining, entertainment, cultural events and wellness programs. Digital- and mobile-friendly, the stores will offer an immersive, engaging experience, with unique merchandise.

“We’re not going to retrofit our stores to make them experiential retail. We’re integrating that from the beginning,” said Blum at a press event.

Blum is looking at both street and mall locations; each store will be individually designed. There is no word yet on when the new format will make its debut. Personally, I can’t wait.

Marianne Wilson

[email protected]

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