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CHAPTER 3:THE FRANCHISOR BUSINESS PLANDetailed Blueprint of Operation

FRANCHISOR BUSINESS PLANFEASIBILITY STUDY- Sufficient information to enable either a franchisor or franchisee to make a go or no go decision.-THE SECOND COMPONENT OF A FRANCHISE BUSINESS PLAN IS AN ARTICULATED FRANCHISE RECRUITMENT PACKAGE.FRANCHISE RECRUITMENT PACKAGE-THIRD COMPONENT OF THE FRANCHISEE PLAN IS THE FRANCHISEE OPERATION PACKAGE,WHICH GENERALLY CONTAINS OF THE FOLLOWING ITEMS:-OPERATIONAL MANUAL-FINANCIAL AND BOOKKEEPING SYSTEMS -ADVERTISING AND PROMOTIONAL PACKAGES-SALES MANUALS-THE FRANCHISOR OR FRANCHISEE SUPPORT PACKAGE-TRAINING MANUALSFRANCHISEE OPERATIONS AND SUCCESS PACKAGEExecutive SummaryMarketingManagementFinancing and AccountingLegal AspectAppendixFRANCHISE FEASIBILITY STUDYStory of franchise ventureAttachments: Proposal or Business PlanCompany name an descriptionKey PersonnelStart up ScheduleFundsI. Executive SummaryMajor Marketing ObjectivesMarket Plan and Pricing StrategyFranchise Recruitment Plan and FlowchartFranchise ProspectusFranchise Sales and AdvertisementFranchise Location Criteria and SelectionGrand Opening PlanCustomer Advertising

II. MarketingThis explain what the franchisor ultimately wants to do and when the franchisor plans to do this.

EXAMPLE:A. The definition or description of activity (SALES).B. Quantitative measurable number.C. Time period of one year.Major Marketing ObjectivesIt is an encompassing step in the business plan.

Describe and discuss the target market.WHO? WHERE? and HOW MANY?Market Plan and Pricing Strategyit is to identify the target market and analyze that markets primary characteristics, to determine the potential buyer power available through that market.AgeGenderFamily IncomeGeographical area of the cityEducationNo. of children living at homeMarital StatusTarget Market AnalysisThe price at which a product or service is offered must cover relevant costs and endure an adequate profit for the franchisee and the franchisor.Pricing StrategyIt is the one of the easiest forms of price determination, which may explain in part why it is popular.

Markup PricingA basic description of the franchisee profile describing who you trying to recruit.

Franchisee Recruitment Plan and FlowchartThis is basically the sales brochure or the franchisee prospectus which the franchisor has put together to explain to prospective franchisees what the business is about and encourage them to become franchisees of the systemFranchisee Prospectus-Explains how to promote the franchise opportunity to prospective franchisees. The franchisor explains the different methods theyll use to promote the sale of franchisees to the prospective franchisees.

Franchisee Sales & AdvertisingAllows the franchisor to describe where they are going to locate a franchise. This also includes the demographics of the target market customers. Looking for the best possible location closer to the customers is important.Franchisee Location Criteria SelectionTwo, three or five alternative sites is recommended to be analyzed before picking the best site for the franchise. Looking out for competitors near that site is also important.

Site LocationThe grand opening should explain who is doing what, when, where, how and why. This would also include the information about how many representatives from the franchisor will be on site and all the advertisements and promotions which will be used at that time.

Grand Opening PlanThis section includes all:PromotionsDirect SellingPublic RelationsAdvertisements

Customer advertisingPromotionSales promotion is associated with specific time-related efforts to improve sales of a specific product, line of products, or services. AdvertisingAdvertising is concerned more on general factors of the brand, trademark, or product and service of the business.

Promotion and advertising-TO HAVE A SUCCESSFUL FRANCHISEE RECRUITMENT PROGRAM,A FRANCHISOR SHOULD DEVELOP A RECRUITMENT BOOK DESIGNED TO PRESENT TO PROSPECTIVE FRANCHISEES THE BENEFITS OF THE FRANCHISEE WOULD GAIN BY JOINING THE PARTICULAR FRANCHISE SYSTEM.MARKETING TO THE FRANCHISEE-IT CAN BE SIMPLY DEFINED AS GEETING THINGS DONE THROUGH PEOPLE.MANAGEMENTHeadquarters organizationBOARD OF DIRECTORSPRESIDENT / OWNERVICE PRESIDENTOF SALESVICE PRESIDENT OF OPERATIONSPOLICIES serves as guidelines for employee actions.

PROCEDURES these are the steps or elements within a process that are considered appropriate for performing assigned tasks.

Policies and proceduresThe franchise organization should have job descriptions and policies relative to the operations and functions of each employees.Personnel managementIncludes the organization structure, policies and personnel management. The franchisee will often have employees or subordinates which is why these people needs to know the companys policies and organization structure.

Franchisee OrganizationOPERATIONS MANUAL describes the functions of the franchisees business in detail.

TRAINING MANUAL may be separated from or part of the operations manual.

Operations manual and training manualThe project evaluation review technique (PERT) chart is a delineated set of related events presented in sequence. PERT charts can be used as a guide which can help the franchisor determine the steps essential for the development of the franchise unit.

PERT ChartThese records can be valuable tools for assistance in making effective management decisions.

Finance and AccountingGenerally include items such as land, building, furniture, fixtures, equipment and personnel costs which are required to start a business.Start-up or Turnkey costsThe statement status of the assets, liabilities and owners equity of an organization, as reflected in its financial statements.

Financial position-THE BALANCE SHEET IS A SNAPSHOT OF THE FINANCIAL CONDITION OF THE FRANCHISED BUSINESS.BALANCE SHEET-(PROFIT AND LOSS STATEMENT)

-THE BUSINESS WILL REAP A PROFIT IN A GIVEN PERIOD IF REVENUES EXCEED EXPENSES.INCOME STATEMENT Inflow and Outflow of CashFlow of cash through the business across timeEquity, Collateral and LoansCASH FLOW STATEMENT- Revenue exactly equal expensesBreakeven AnalysisRatio AnalysisProvision for taxationFinancial Records for the Franchisee

Typical factors covered in the legal agreement include:Business StructureLicenses, contracts, and permitsTypes and anticipated costs of insuranceDisclosure Documents (Uniform Franchise Offering CircularUFOC)The franchising agreement itselfConditions integral to the franchisor-franchisee relationshipPossible Termination

Legal requirements-Start-up/turnkey costs-Financial Position for starting franchisors system-Pro forma balance sheet-Pro forma income statement-Pro forma cash flow statement-Breakeven analysis-Ratio analysis-Provision for taxation

Major Accounting Records:Sole ProprietorshipPartnershipCorporationL.L.CHolding CompanyBUSINESS STRUCTUREFranchise RuleDisclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity VenturesUniform Franchise Offering Circular (Rule 436)

Disclosure DocumentsTHE FRANCHISE PERT CHARTPHASE 1PHASE 2PHASE 3PHASE 4PHASE 5PHASE 6RESEARCH AND ANALYSISORGANIZATIONAL DEVELOPMENT (INTERNAL AND EXTERNAL)START UP AND FEEDBACKSITE (BUILDING) AND TRAININGFRANCHISEE SELECTIONMARKETING TO FRANCHISEE- END THANK YOU