Franchise Q&A
[Q] How do I know if a franchise is suitable for me fi nancially?
[BIO] CARL
READER is a partner in accountancy fi rm Dennis and Turnbull.
[A] When choosing a franchise there are a range of things that you need to consider
to ensure that the opportunity is right for you, including the type of work involved, the industry, and suitability of your territory. One of the main criteria is in relation to the fi nancial implications of investing into the franchise. The immediate concern usually tends to
be around the initial costs of a franchise. You should establish all initial costs from the franchisor, not just the franchise fee. This will include launch marketing, any stock required, together with any other costs to launch the business, and a working capital fund. This should also include any provision for cash defi cits over the fi rst periods of trading. To establish the likely cash defi cits, you should prepare a monthly cash fl ow projection, which will demonstrate your total exposure each month should the business not generate surpluses. Often we see that franchise businesses need at least one year to become self-suffi cient, and the patterns within your business will become evident within your projections. These projections, together with the calculation of the initial costs, will help you ascertain the total funding requirement for the franchise.
Q&A 16 |
Businessfranchise.com | December/January 2012
[Q] What support should a franchisee receive?
[BIO] JONATHON
WAGSTAFF is Managing Director of UK high street kitchen franchise In-toto.
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