Bud­get­ing and fran­chis­ing

Like any busi­ness, when it comes to fran­chis­ing there are plenty of con­sid­er­a­tions to give thought to; things that both fran­chisors and fran­chisees must think about in or­der to be suc­cess­ful. Some of these con­sid­er­a­tions will be sim­i­lar for both par­ties,

Business First - - CONTENTS - by Stan Gor­don

Acritical el­e­ment to any busi­ness is plan­ning – fi­nan­cial plan­ning and fore­cast­ing – as well as map­ping out all the var­i­ous el­e­ments you need to cre­ate a sound project. With­out a good plan and a proper budget, you’re not al­low­ing for the va­ri­ety of sce­nar­ios that you may face: what­ever your busi­ness or project could be.

If you want to suc­ceed, it’s ab­so­lutely cru­cial to es­ti­mate, plan and con­sider the vari­ables. It’s even more crit­i­cal that this is done of­ten. Num­bers aren’t al­ways the most fun thing when it comes to busi­ness (and it’s of course a good idea to hire some­one who can help you with this), but you need to at least un­der­stand and re­spect them well enough to fool proof yourself – as best as any busi­ness can – for the rainier days that can come.

Busi­ness and change go handin-hand, and rapid change can be dev­as­tat­ing if you’re un­pre­pared. Bud­get­ing and fi­nan­cial map­ping when you’re in fran­chis­ing is just as crit­i­cal as in any busi­ness and can be the key dif­fer­ence be­tween one per­son’s suc­cess and an­other’s fail­ure. So, when par­al­leled with a stand­alone busi­ness, what are the main dif­fer­ences for those work­ing with a fran­chise model when it comes to bud­get­ing?

Strictly speak­ing, the prin­ci­ples are the same, but fran­chis­ing isn’t nec­es­sar­ily as daunt­ing as tak­ing the leap on your own. In a fran­chise you’re (hope­fully) work­ing with a recog­nised brand with sup­port mech­a­nisms, and ul­ti­mately there is less to deal with alone. It’s not a bad op­tion if you’re will­ing to take a leap, but not quite ready to go sky­div­ing.

On the pro­viso that you a) have fund­ing to get you there in the first place, and b) get the top line and plan­ning right, fran­chis­ing can be one of the more rel­a­tively con­trol­lable busi­ness mod­els. There are strate­gies in place for fran­chisees to fol­low, bench­marks for com­par­i­son and ad­vice just a phone call away. Not many businesses have the lux­ury of tap­ping into the net­works that fran­chisees do, so those that fol­low the ma­trix and use their ad­vice av­enues wisely, find the bud­get­ing re­quire­ments much eas­ier be­cause there’s a map al­ready in place. These are the fran­chisees at the top of their game.

Fran­chisees gen­er­ally have a yard­stick to work with. They have a rea­son­able idea of their fixed over­head cost (rent); cost of goods per­cent­age, ad­vice on how much labour is nec­es­sary (usu­ally as a per­cent­age of sales), so all that is nec­es­sary is the fore­cast of sales.

The bot­tom line is that fran­chisees must be ‘real’ in terms of the ex­pec­ta­tions of sales and what they want to achieve.

As a fran­chisor, one must also en­sure bud­getary ex­pec­ta­tions are real­is­tic. There’s no point plan­ning for huge growth via fran­chisees alone – it’s got to be more than that. For us at Fran­chised Food Com­pany we plan to grow via an in­crease of store sales; or­ganic sys­tem ex­pan­sion and ac­qui­si­tion.

Some­times suc­cess in bud­get­ing comes down to gaz­ing into the busi­ness crys­tal ball, rid­ing the waves as they come and get­ting a feel for those waves, as well as prep­ping for the times that are a bit un­pre­dictable AND pre­dictable. Two of our fran­chise brands sell ice cream - hugely sea­sonal when it comes to profit. These fran­chisees must squir­rel money away so they’re pre­pared for a down­turn in the cooler months, and on the flip­side, be ex­tremely dis­ci­plined in the sum­mer months when prof­its are typ­i­cally at their peak.

Fi­nan­cials can be a hard task to mas­ter, and with this, per­sonal bud­get­ing is also im­por­tant. It’s very easy to spend and be friv­o­lous with your cash when it’s com­ing in quickly; but not so easy to cut back when things take a turn in the op­po­site di­rec­tion.

Just like ev­ery busi­ness model, there will al­ways be things with fran­chis­ing that need iron­ing out. If ev­ery­thing was peachy and hugely prof­itable, ev­ery busi­ness idea would take off and we’d all be mil­lion­aires.

My part­ing words… Do your best to utilise the av­enues you have at your dis­posal, and plan. With­out a plan you can’t fore­cast, you def­i­nitely can’t budget and more im­por­tantly, there’s prob­a­bly no way out for you ei­ther. When you cre­ate a budget and set your fore­casted plan, with a sound busi­ness plan and map in toe, sud­denly you will feel like you have more money, and more con­fi­dence to keep press­ing on, and you will have more fun… And that’s al­ways a good thing.

Stan Gor­don is the CEO of Fran­chised Food Com­pany, the um­brella or­gan­i­sa­tion en­com­pass­ing the brands Cold Rock Ice Cream­ery, Tram­po­line Gelato, Mr Whippy, Pret­zel World, Nut­shack and Europa Cof­fee drive thru. www.ffco.com.au

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