Source: http://online.wsj.com/article/PR-CO-20131010-911027.html

La-Z-Boy recently acquired two franchised galleries of after their owners retired. What does this mean in terms of their business in general and, in particular, A/R management?

Well, La-Z-Boy corporate now owns these stores. Previously, they were managed by the franchise owners who would deal with daily management: A/R collections, payables, short-term funding, etc. As it works with most franchise businesses, the corporate offices provide basic services and the franchised stores pay an annual fee and/or a percentage revenues (or profits).

Now La-Z-Boy will have to install managers and fully integrate the accounting, purchasing, and distribution systems of these new locations to their existing systems. This, however, is the benefit of the franchise business model. Previously these two owners had to handle all these issues themselves. If customers aren’t paying, that is a meaningful loss to these private owners. But LZB corporate can diversify that risk over it’s entire store-base, which at this point is worldwide. This mitigates risk, allows them to access lower costs of financing, and essentially allows them to extend all their benefits of a large retailer to these two small locations.