Financial Forecasting and Modelling

As part of creating a Franchise Development Plan, it is essential to ensure that the proposal is financially viable by preparing financial forecasts for a potential franchisee based on the performance of the franchisor’s existing business unit. As part of this activity, consideration must be given to how the initial and ongoing fees will be structured. This may involve developing a number of financial scenarios before a suitable balance can be determined. Once it can be shown that the proposed franchise could produce acceptable returns for a potential franchisee it will then be possible to develop the franchisor’s financial model.

This will take into account

• The development costs associated with taking the franchise to market
• The number of franchisees and the timing of their establishment
• The growth rate of each franchised unit and their contribution to the franchisor’s income
• Ongoing franchising costs such as Marketing for and Recruiting franchisees
• Recruiting and training franchise support staff for the ongoing support and development of the franchised network

At this point the potential franchisor will be in a position to take an informed decision on whether franchising is the correct strategic route for them to follow. They will be aware of the likely investment levels of both financial and management resources and will have a clear idea of the potential profitability of the proposed operation.

If the decision is made to proceed the Franchise Development Plan complete with this full financial analysis can be put into action.

For more information contact The Franchise Development Centre by completing the form below.