Best of The Franchise Blog 2009
Joel Caws - Technical Director, Select Your Franchise
I think it goes without saying that for the vast majority, 2009 hasn’t been the easiest of years. With the country gripped in recession and unemployment reaching record levels, many have been left high and dry or at the very least feeling the pinch in their purse or wallet. Franchise businesses are not immune to the effects of the recession, however, their proven structures and systems help to minimise the impact in times such as these (see my post on recession proof franchises for further reading). Even in 2009 the annual British Franchise Association still reported around 90% of franchisees trading were profitable, a statistic that has remained fairly static for years. I will be looking out with interest for the 2010 report.
As 2009 draws to a close I thought it a good opportunity to look back over the year and pick up some of the posts on our blog which have really stood out to me. So without further rambling here is 8 of the best…
- Interested in a franchise but not sure where to start? Our 10 point guide helps you to understand the process and get you started….
Read more in How to Select a Franchise - Many franchises can be home based – We look at the advantages and disadvantages of Working from Home…
Read more in Work from Home Business Opportunities – Pros and Cons - Have an existing successful business and considering franchising as a route to growth?
Read more in Franchising your business… - A Molly Maid franchisee wins the BFA Franchisee of the Year Award 2009…
Read more in Winners of Franchisee of Year Awards 2009 - Are you all set for 2010? It pays to plan ahead…
Read more in Franchisees – Planning for the year ahead - Interested in expanding an existing franchise and taking it further afield?
Read more in Franchising in Developing Markets - What is franchising all about anyway?
Read more in Franchise Definition: What is a franchise? - Views on the recession, its recovery and its effects on franchising…
Read more in: Franchising and recession recovery
Finally, I’d like to wish all our readers and visitors a very Happy New Year and a prosperous 2010. See you all in the New Year!
Tags: franchise, franchise blog, franchise news, joel caws
Franchisees – Planning for the Year ahead
Carl Reader, Dennis & Turnbull Ltd
As we are now heading into the festive season, it is often an ideal time to review the performance of your business for the previous year, and to set some targets for the year ahead. Even though your official financial year end for your franchise might not coincide with the calendar year end, the end of December and the resultant quiet period will give you an ideal opportunity to take stock of 2009 and to focus on your business for the next year.
To be able to do this, it is essential that you have an adequate set of management accounts to review. Ideally you will have a profit and loss summary, broken down over the months of the year, so that you can review the turnover for the year, costs of the business, and also the seasonal trends that are inherent within your business. 2009 has been a difficult year for many businesses given the economic climate, however an interesting phenomenon that I have noticed across some of the businesses that I look after is that seasonal trends have differed slightly this year, which I can only speculate is due to whatever the current public opinion is following media reports on the economy.
This is also an ideal opportunity to review the balance sheet of your franchise, ensuring that your financial position is adequate, and if not to review your options if additional funding is required, or restructuring advice is necessary.
Once you have taken a look at the figures for 2009, it would be worthwhile setting out a budget for the year ahead. I would suggest that you follow the same format of your management accounts, and prepare a monthly budget of both turnover and costs. Although this can be a lengthy task, it allows you to focus on each individual line of the P & L and as such every cost is considered. A useful approach is what is known as “zero based budgeting”, where effectively you start with a clean sheet of paper rather than last years figures. This can of course lead to unrealistic budgeting, however provided you are sensible with your estimates this will allow you the opportunity to reconsider every profit and loss item and to ensure that you strip out any unnecessary costs to maximise your profitability.
Another approach for some smaller businesses find useful is to start with the end in mind. This is where you would start with your desired net profit, and then work upwards towards the turnover figure. Again, if your expectations are unrealistic you will find that this will result in budgets that are impossible to meet. However, provided that a sensible approach is taken to the budgeting, this approach will allow you to see exactly what level of turnover is required to generate your desired net profit. You can then use the known statistics of your business to work out what marketing activity is required, what pricing changes are required, etc. to generate that level of turnover.
Finally, once you have prepared the budget for the year, it is worthless unless you regularly monitor and review the budgets against your actual management accounts. There is no point preparing a budget for it to be put in a drawer and ignored for the rest of the year, as you will almost certainly not meet your budget. However, if you monitor the budget against actual performance, you can identify any differences that result. It might be that any differences result from unrealistic budgets, however this will then give you an opportunity to amend the budgets accordingly on a rolling basis. This process of monitoring will also allow you to fully understand variances between budgets and actuals, and will allow you to interrogate any differences which might have been missed had the monitoring not been performed.
Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.
The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.
Franchise business plan examples
Cathryn Hayes - HSBC Head of Franchising
Lenders always worry about the ability of a new franchise to provide enough income for the owner to live on and service any borrowings they have, particularly in the early years. Luckily, many franchisees have a supportive partner behind them who often continues to earn a regular wage.
The additional household income reduces the franchisee’s dependence on the profits of the business. It is therefore important that a franchisee includes a summary of all their domestic income and expenditure in the business plan. This demonstrates just how much money needs to be taken out of the business for them to survive.
Understand the figures
Franchisees often present figures given to them by their franchisor without really understanding what they mean. As a franchisee it is important to take ownership of the figures – particularly the cashflow forecast.
If a franchisee cannot explain them in a convincing fashion, they are likely to be turned down for the finance they need to get the business off the ground.
It’s not just a cashflow forecast
In contrast to the above, we are sometimes presented with a cashflow forecast and little else. The bank won’t just focus solely on figures. The business plan needs to demonstrate that the franchisee has fully researched the local competition and that they understand their market. Whilst the cashflow forecast tells a lender what will happen, the business plan explains how it will be achieved.
It’s not just about the franchisee
With over 800 franchises active in the UK, it can be a mistake to assume that the lending manager knows all about every single franchise, although our specialist franchise units minimise this risk. It is therefore helpful for the franchisee to explain exactly what help they will be receiving and the track record of the franchised business when they present their business plan.
Whilst the majority of business plans are perfectly adequate, we hope these few pointers will help make it easier for franchisees to obtain the finance they need.
