Franchise business plan

Business Development Plan on the franchisor’s side

If the know-how is written in an operations manual, and is seriously cost-effective, standardized, substantial and secretive, it has compelling value in financial terms. It is an intangible asset.

The assessment of a company that is developing a franchise network requires some remarks.

The methods of evaluation may be the same as for ‘traditional’ companies, however the factors that need to be taken into account are significantly different.

In assessing the intangible assets of a franchisor, the decisive factor is the value of the brand, know-how, and the synergistic effect of the network; including the whole of the market share in regards to the competition. The more these elements are recognized and given greater importance the more the franchisor will be able to attract new franchisees, expand its network quickly and get royalties. Similarly, a franchisee who seeks to establish his case will apply more favourably to a franchisor who could provide know-how (management, marketing, management, training) and who has a reputation that might lead to an immediate, but not necessarily, business reserve.

In the market for candidates seeking franchises to join, there are young franchisors. Indeed, risk and safety are as incompatible as fire and water.
Entering into a young network is often more risky than becoming a franchisee of a worldwide franchise. But when you leave the network, the value will be larger.

The amount of royalty fees and the entrance fee that the franchisee will be willing to pay is largely based on the value of know-how and the brand of the franchisor and obviously the IRR of its invested capital.

This brings us to the following evaluation method: the intangible value of a franchisor is the total amount that the franchisees are willing to pay to acquire the know-how and the brand of the franchisor.

Below is a typical example of the method of a free budgeting: Financial feasibility of the franchise on the franchisor’s and franchisee’s side, click here
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