Franchisor Licensing Simulation: Integrated 3-Statement Model and Cap Table
Originally published: 03/01/2022 14:29
Publication number: ELQ-26646-1
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Franchisor Licensing Simulation: Integrated 3-Statement Model and Cap Table

Up to a 10-year financial model with all relevant drivers for a franchisor operator. Formal financial statements included.

A franchisor operator survives by on-boarding successful franchisees. Their revenue is derived from a percentage of each franchisee's revenue so the more successful each franchisee is, the more successful the franchisor is. This gives incentives to on-board, help, and support the franchisees over time. All of this cost money though and there are a lot of dynamics to model if you want to make a financial plan for scaling out a franchisor operation.

This model has all the primary assumptions needed to account for all major pieces of logic and cash requirements that take place. You will be able to define configurations for up to 3 location types, which could be a strategy for expanding into different regions/states/countries. All assumptions are defined for each type of franchisee location, some may be the same, while others may be different, but the model gives enough flexibility to account for what have you.

Start month of each franchisee location type, royalty rates, ad fee rates, one-time franchise fees, starting revenue and revenue growth are all configurable inputs.

On the cost side, the franchisor can input their average on-boarding costs per location type as well as their average monthly on-going costs per location type.

As far as the type of modeling that wraps all of these assumptions up, there is an exit month, startup cost schedule, capex schedule with integrated depreciation, terminal value logic, and financial statements.

Formal Reports:
- Monthly and Annual Income Statement
- Monthly and Annual Balance Sheet
- Monthly and Annual Cash Flow Statement
- Capitalization Table (cap table)
- DCF Analysis with IRR and a breakdown between project level vs. investor level

There are also more detailed reports that are less formal but show more information. This includes a monthly and annual profit / loss and cash flow detail that shows more of the assumptions over time and still derives EBITDA/Cash Flow as well as an Annual Executive Summary and lots of visualizations.

The model can be configured for any time frame up to 10 years and there can be an exit month at any point in the timeline or there can be no exit and the model will just run to the final month accordingly.

This Best Practice includes
1 Excel model and 1 Tutorial Video

Acquire business license for $75.00

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Further information

Create a comprehensive financial simulation of a franchisor startup operation.

Any franchisor that has up to 3 franchisee types they want to scale.

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