Micro Case Study Expanding Multi-Location Franchise Business

It’s All About the Covenants

Hidden Risk of Breaching Lender Covenants

This was a high-performing, fast-scaling business with ambitious leadership, a proven model, and detailed internal reporting — over 180 Excel tabs of it. But like many successful teams, the complexity of their reporting masked emerging risks. When we were brought in to support the next budgeting cycle, a critical issue surfaced: the business was drifting dangerously close to breaching its lender covenants — performance agreements with the bank that ensure sufficient revenue and liquidity relative to debt.

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Cracked lightbulb illustration — a hidden risk coming to light

Real client, real numbers

180+

Excel tabs of reporting masking the emerging risk

Days

from discovery review to a comprehensive bottom-up revenue model

penalties — lender confidence maintained throughout

Why had this not been spotted?

The team had done an impressive job pulling together forecasts, but their revenue planning had been based on top-down assumptions rather than detailed modelling. It wasn’t a lack of capability — it was a visibility gap, masked by sheer data volume and the speed of growth.

What we did

After an initial discovery review, completed in a matter of days, we implemented a comprehensive, bottom-up revenue model that incorporated vendor timelines, promotional activity, churn, marketing spend, and member growth.

This allowed us to:

Accurately model when covenant compliance would be restored
Identify levers to bring that timeline forward
Equip the leadership team to present their plan confidently to the bank

Why it mattered

By surfacing this issue early, they avoided penalties and maintained lender confidence. Just as importantly, they were able to demonstrate control and foresight, strengthening their credibility in financial discussions.

Highlight

This was not a case of poor performance, but of hidden risk in a complex, high-growth environment. The team had built a great business. We helped them see it more clearly.

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It’s All About the Covenants

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