THE FRANCHISOR BUSINESS

PLAN
CHAPTER 3
Expected Learning Outcomes
 Understand what is meant by a Business Plan
 Identify and understand the elements of a
franchisee recruitment package
 Learn about the elements essential for a
franchise operations package.
 Learn why it is important to do a feasibility
study of the franchise concept, resources to
be utilized, and market sought.
 Learn how to do a franchisor business plan
feasibility study.
Understand what is meant by a
Business Plan
 It is a written document that says:
◦ Why the franchise business exists
◦ Where the franchise is and where it plans to
go
◦ Know the franchise competitive advantage
◦ Know the strategies that the company plans to
follow to get from here to there
◦ Know how the business generates enough
profits to:
 Service debt
 Provide adequate return to attract investors
 Provide adequate return on investment and
equity
The elements of a franchisee
recruitment package
 Package is designed to show a
prospective franchisee what the
franchisor has to offer, expectations and
responsibilities of each party – the
franchisor and franchisee.
 The package includes:
◦ Disclosure Documents
◦ Recruitment and advertising brochures
◦ Franchising agreements and contracts
The elements of a franchisee
recruitment package
 Items of the Package:
◦ Objectives of the Franchisor Firm
◦ Initial capital and expected investment
required of a potential franchisee.
◦ Personal and other qualifications a potential
franchisee must have
◦ The training provided by the franchisor to the
franchisee
◦ Anticipated benefits and responsibilities of
becoming a franchisee.
Elements essential for a franchise
operations package
 Operations package:
◦ Operations Manuals
◦ Financial and Bookkeeping systems
◦ Advertising and Promotional packages
◦ Sales Manuals
◦ The Franchisor or Franchisee Support
Package
◦ Training Manuals
Franchise Feasibility Study
 A Feasibility Study shows:
◦ Profitability of the prospective franchisee
given the results of market analysis.
◦ The proposed products or and services and
their benefits
◦ Business Operations Plan at the Proposed
location.
◦ Marketing plans
◦ Financial Plans
◦ Legal Aspects
Six Sections of the Feasibility Study
 1. Executive Summary
 2. Marketing Segment
 3. Management Segment
 4. Finance, Accounting, and Taxes
 5. Legal Requirements
 6. Appendix
Franchisor Business Plan
 1. Executive Summary
 2. Marketing
 3. Management
 4. Financing and Accounting
 5. Legal Aspect
 6. Appendices
  See Appendix on pages: 96 - 99
Marketing
 Major Marketing Objectives
 Market Plan and Pricing Strategies
 Target Market Analysis
 Pricing Strategies: Markup Pricing
 Franchisee Recruitment Plan and Flowchart
 Franchisee Prospectus (Business Analysis of Opportunities to
the Franchisees)
 Franchisee Sales and Advertising
 Franchise Location Criteria Selection
 Site Location
 Grand Opening Plan
 Customer Advertising
 Promotion and Advertising
 Marketing to the Franchisee.
Management
 Headquarters’ Organization
 Policies and Procedures
 Personnel Management
 Franchisee Organization
 Operations Manual and Training Manual
 PERT chart
Finance and Accounting
 Start-up or Turnkey Costs
 Balance Sheet
 Income Statement
 Cash Flow Statement
 Break- Even Analysis
 Financial Ration Analysis
 Provision for Taxation
 Financial Records for the Franchisee.
Financial Records for the Franchisee
 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
 Break- Even Analysis
 Provision for Taxation
Legal Requirements
 Business Structure (Form)
 Licenses, contracts, and permits
 Types and anticipated costs of Insurance
 Disclosure Documents (Uniform Franchise
Offering Circular – UFOC)
 The Franchising Agreement itself
 Conditions to the Franchisor- Franchisee
Relationship
 Possible Termination
Disclosure Documents
 The Franchise Rule (16 C.F.R No 436)
states that: All franchisors must “disclose”
their business activities through a
disclosure document of Uniform
Franchise Offering Circular (UFCO).
 Purpose: to reduce fraudulent or
improper use of franchising concept to
the detriment of unwitting prospective
franchisees.
The Franchise PERT Chart
 Phase 1: Research and Analysis
 Phase 2: Organizational Development of
the Franchise Network(External and
Internal) and the Franchise Business Plan.
 Phase 3: Marketing to Franchisees
 Phase 4: Franchisee Selection
 Phase 5: Site Building and Training
 Phase 6: Startup and Feedback
Franchisee Application
 You want to run your own business
 Suppose you want to become a franchisee
to KFC’s Corp.
 Fill in the Franchisee Application on page
100- 101
Franchisor Feasibility Business Plan
Outline.
 Read the Appendix pages 96 – 98
Class Assignment
 Read Case study on pages 93-95.
 Answer the Case’s questions