Chapter 3 - The Franchisor Business Plan

Mojado, Hazelle Anne M.

 Franchisor’s Business Plan  Franchisee Recruitment Package  Franchisee Operations Manual And Success

Package.

Management, organization, and administrative policy Managing the marketing process Sales and marketing research Managing the operations process Location and site selection Accounting practices and fiscal responsibilities deemed appropriate, along with the realistic financial projections  Based on the strategy to be followed and the market conditions anticipated; management information systems  And legal documentation for determining the franchisorfranchisee relationship and anticipated activities of each party      

Includes disclosure documents, recruitment advertising brochures, and franchising agreements contracts. The business logical flow of topics:  The objectives of the franchisor firm  The initial capital and expected investment required of a

potential franchisee  Personal and other qualifications a potential franchisee must have  Training provided by the franchisor to the franchisee  Anticipated benefits and responsibilities of becoming a franchisee

and and

Contains elements of the following items:  Operations manual  Financial and bookkeeping systems

 Advertising and promotional packages  Sales manual  The franchisor or franchisee support package

 Training manual

Contain sufficient information to enable either a franchisor or a franchisee to make a “go or no go” decision. The six content sections of a feasibility study:  Executive summary  Marketing segment  Management segment  Finance, accounting, and taxes  Legal requirements  Appendix

Executive summary It tells the story of the franchise venture and sparks the interest of any outsiders. This summary must not be more than three (3) pages. Attached to it is the complete business plan or proposal. It consist company name, type of business, company description, key personnel, start-up schedule and competition, funds requested, funds use statements, and fund repayment ability.

Marketing It concerns the distribution of goods and services to existing and potential customers to satisfy some want or need.

Elements of Marketing to be analysed: Major marketing objectives Marketing plan and pricing strategy Target market analysis Pricing strategy Mark up pricing Franchisee recruitment plan and flowchart Franchisee prospectus Franchisee sales and advertising Franchisee location criteria selection Site location Grand opening plan Promotion and advertising Marketing to the franchisee

Management It is simply defined as “getting things done through people”. The two main reasons for failure in business are poor management and lack of capital. Elements:  Headquarters’ organization  Franchisee organization  Operations manual  Training manual  PERT chart

Finance and Accounting The major accounting records to be kept by a franchisor and a franchisee would at the very least include the following:   Start-up or turnkey costs (itemized)  Financial position for starting franchisor’s system  Pro forma balance sheet  Pro forma income statement  Pro forma cash flow statement  Breakeven analysis

 Ratio analysis  Provision for taxation

Financial records for the franchisee The important financial records or position statements for a franchisee would include:   Start-up or turnkey costs (itemized)  Financial position for starting franchisor’s system

 Pro forma balance sheet  Pro forma income statement  Pro forma cash flow statement  Breakeven analysis  Ratio analysis  Provision for taxation

Legal Requirements It must be Satisfied, such requirements usually rest on legal opinion versed in franchising law. Typical factors covered in the legal agreement include:     

Business structure License, contracts, and permits Types and anticipated cost of insurance Disclosure documents (uniform franchise offering circular – UFOC)  The franchising agreement itself  Conditions integral to the franchisor-franchisee relationship  Possible termination

Appendix It is an important visual aid containing illustrations, diagrams, analysis, and exhibits referenced throughout the franchise feasibility study. An expanded appendix would include the complete training manual, operations manual, advertising and promotion packages, sales manual, site and store layouts, franchisee recruitment presentations, charts, graphs, diagrams, layouts, and other materials which may enhance the franchise activities.

The Franchise Pert Chart It presents a visual sequence illustrating each development step and function to be completed before a franchisor should open a franchised business. A complete franchise PERT chart would include the following phases:  PHASE1 RESEARCH AND ANALYSIS

 PHASE2 ORGANIZATIONAL DEVELOPMENT  

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(EXTERNAL AND INTERNAL) PHASE3 MARKETING TO FRANCHISEES PHASE4 FRANCHISEES SELECTION PHASE5 SITE (BUILDING) AND TRAINING PHASE6 START-UP AND FEEDBACK