Brian Duckett writes:
Your question provides an ideal opportunity to discuss the difference between profit and cash and how these are treated in the funding or business plan you prepare.
One way or another, you’ll need income from somewhere in order to pay your living expenses while everything gets going. Living expenses vary greatly from franchisee to franchisee. Some may have three teenagers at private school and a big mortgage to service; others may be individuals who simply need a roof over their head and something to eat.
If you include these expenses as salary to be drawn from the business, depending on the franchise model being operated, the latter case is more likely to be able to produce sufficient profits, almost from day one.
In my case, when I was a mobile service franchisee who was paid by clients on the day, it was just about possible. The former example above should build in the owner’s salary costs, but a borrowing facility will need to be in place to make up the shortfall before the funds start rolling in.
All this emphasises that every franchisee is a unique business set up that has its particular funding requirements. This is why every franchisee needs to have their unique business and funding plan prepared with the help of professionals who know the franchise in question and how it operates.
Brian Duckett is chairman of The Franchising Centre, part of the world’s largest network of specialist franchise consultants.
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