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
