CHAPTER 3:

THE FRANCHISOR
BUSINESS PLAN
- Detailed Blueprint of Operation

FRANCHISOR BUSINESS PLAN
FEASIBILITY 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 MANUALS
FRANCHISEE OPERATIONS AND
SUCCESS PACKAGE
I. Executive Summary
II. Marketing
III. Management
IV. Financing and Accounting
V. Legal Aspect
VI. Appendix
FRANCHISE FEASIBILITY STUDY
- Story of franchise venture
- Attachments: Proposal or Business Plan
- Company name an description
- Key Personnel
- Start up Schedule
- Funds
I. Executive Summary
1. Major Marketing Objectives
2. Market Plan and Pricing Strategy
3. Franchise Recruitment Plan and Flowchart
4. Franchise Prospectus
5. Franchise Sales and Advertisement
6. Franchise Location Criteria and Selection
7. Grand Opening Plan
8. Customer Advertising


II. Marketing

This 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 Objectives

It is an encompassing step in the business
plan.

Describe and discuss the target market.
WHO? WHERE? and HOW MANY?
Market Plan and Pricing Strategy
it is to identify the target market and analyze that markets
primary characteristics, to determine the potential buyer
power available through that market.
Age

Gender
Family Income
Geographical area of the city
Education
No. of children living at home
Marital Status
Target Market Analysis
The 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 Strategy
It is the one of the easiest forms of price
determination, which may explain in part
why it is popular.

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

Franchisee Recruitment Plan and
Flowchart
This 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 system
Franchisee 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 & Advertising
Allows 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
Selection
Two, 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 Location
The 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 Plan
This section includes all:
Promotions
Direct Selling
Public Relations
Advertisements

Customer advertising
Promotion
Sales promotion is associated with specific time-
related efforts to improve sales of a specific
product, line of products, or services.
Advertising
Advertising 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.
MANAGEMENT
Headquarters organization
BOARD OF DIRECTORS
PRESIDENT / OWNER
VICE PRESIDENT
OF SALES
VICE PRESIDENT OF
OPERATIONS
POLICIES 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 procedures

The franchise organization should have job
descriptions and policies relative to the
operations and functions of each
employees.
Personnel management
Includes 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 Organization

OPERATIONS 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 manual
The 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 Chart
These records can be valuable tools for
assistance in making effective management
decisions.

Finance and Accounting
Generally include items such as land,
building, furniture, fixtures, equipment
and personnel costs which are required to
start a business.
Start-up or Turnkey costs
The 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 Cash
- Flow of cash through the business across
time
- Equity, Collateral and Loans
CASH FLOW STATEMENT
- Revenue exactly equal expenses
Breakeven Analysis
Ratio Analysis
Provision for taxation
Financial Records for the
Franchisee

Typical factors covered in the legal agreement include:
1. Business Structure
2. Licenses, contracts, and permits
3. Types and anticipated costs of insurance
4. Disclosure Documents (Uniform Franchise Offering
CircularUFOC)
5. The franchising agreement itself
6. Conditions integral to the franchisor-franchisee
relationship
7. Possible 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 Proprietorship
- Partnership
- Corporation
- L.L.C
- Holding Company
BUSINESS STRUCTURE
- Franchise Rule
- Disclosure Requirements and
Prohibitions Concerning Franchising and
Business Opportunity Ventures
- Uniform Franchise Offering Circular
(Rule 436)

Disclosure Documents
THE FRANCHISE PERT CHART
PHASE 1
PHASE 2
PHASE 3
PHASE 4
PHASE 5
PHASE 6
RESEARCH AND ANALYSIS
ORGANIZATIONAL DEVELOPMENT (INTERNAL AND EXTERNAL)
START UP AND FEEDBACK
SITE (BUILDING) AND TRAINING
FRANCHISEE SELECTION
MARKETING TO FRANCHISEE
- END
THANK YOU