| The Business Plan - Finance | ||
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Equity, Collateral, and Current Loans Financial Statements Break-even Analysis
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 LSU's Tiger Stadium In a franchise system, it is important that proper financial records be kept by both franchisor and franchisee. In assessing the feasibility of a franchise, it is essential that financial projections be made for or by the franchisor to estimate income, expenses, cash flow, assets required at various levels of business activity, debt capacity, and equity requirements anticipated for each potential level of business activity. Financial figures should be developed for the franchisor and the prospective franchisee. Prospective franchisees need to understand what the total start-up cost of a new franchise will be, as well as the prospective gross sales, typical direct and indirect schedules, prospective profits at various levels of sales/output, the record keeping system required by the franchisor, and the filing requirements, as well as any financial requirements such as franchising fees, royalty payments, advertising cooperative payments, or consultant or service fees expected by the franchisor from an existing franchisee. The more information a prospective franchisee develops before the final decision is made whether to open a franchised unit, the wiser the decision.
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