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Strategic Planning Questionnaire

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First Name

Last Name

Phone *

Email *

Brand Name *

Corporate/Business Phone #

Business Owner - Full Name (Please input a Full Name only and not a business name.)

Business Owner - Cell #

Business Owner - Email

Is the Business Owner the main contact?

Main Contact - Full Name

Main Contact - Cell #

Main Contact - Email

Business Address

City/State

Zip Code

Country

Website URL

Provide a brief “about us” statement to tell your company’s story. If you do not have one already prepared (for instance, the “about us” portion of a website), provide a statement of your business’ history.

Projected Initial Investment

When the complete set of numbers defining the projected initial investment of the franchise offering is finalized, they will become part of the Disclosure Document. Each prospective franchisee needs to know the expected range of initial investment required to become a franchisee in your business, and also be aware of the individual line items that make up the total initial investment. These numbers are developed in a range from low to high, which is designed to demonstrate both favorable and unfavorable circumstances for each individual line item.

We will want to approach the initial investment discussion with conservative estimates. Because there is a legal side to this franchise partnership, we would prefer to be conservative with our numbers so that a franchisee could never say that we “left something out” of the franchise estimations. Most of the franchisee’s individual circumstances in the program should fall within this range.

Will franchise owners be required to have an office/facility or are they able to start with a home office?

What is the range of square footage that would be required for a typical franchise location? This will vary depending on the location and market, but generally what space would franchisees need to look for? Please provide a range - Low to High.

What do you expect will be the range of rental expense for this facility? These rental rates are expressed in annual rent dollars per square foot of space. Please provide a range - Low to High.

Don’t worry too much about your current market vs. other markets, I will account for that after our initial numbers come into play.

If there are utility deposits, what is the range - Low to High?

What range of leasehold expenses would be required? These would be expenses for painting, plumbing, carpentry, electrical work, or any other trade related work to improve or remodel the facility. Please provide a range - Low to High.

What is the appropriate range of expense for required purchases of furniture, fixtures, and equipment? Please provide a range - Low to High.

Are these items going to be new or can they be purchased used? Can these items be leased?

What software will a franchisee use to run their business? ex: Toast, Hubspot, Quickbooks, MindBody, Clover

Please provide Software Name, Cost, and Billing Frequency for each item.

What is the initial implementation cost at the onset of the business for any hardware (or software)? Please provide a range - Low to High.

What is the range of initial inventory expenses that will be required from your franchisee? Required inventory can include product, replacement parts, hardware, etc. Please provide a range - Low to High.

What down payment will be required to initiate insurance coverage? This would include fire, theft, damage, and liability coverage along with any other coverage needed for business like this. Please provide a range - Low to High.

Usually, I would use the lowest down payment required to begin coverage on the low side of the range, and perhaps the entire annual premium cost as the high end of the range. (Liability, Workers Compensation)

What signage is going to be required? I understand the difference between the channel signs and the temporary signage, but we should have a dollar figure for both ranges. Please provide a range - Low to High.

Is there a delivery component to the business?

Should we require franchisees to have a specific kind of vehicle or a vehicle at all?

Please list the type of vehicle

Should these be new or used and what color would you like to specify?

Can they be leased?

To simplify the pro forma and reduce the average initial investment, the initial investment expenses for vehicles are often shown as a lease scenario both on the low and high end of the range. Please provide a range - Low to High.

What licenses, permits, and certifications would be required by the operation of the business and the range of expenses for each? Please list the description and range - Low to High.

What dues and subscriptions would be required for the franchisee’s business? Please list a range for each - Low to High.

Will you be requiring membership to a particular trade association, Chamber of Commerce, Better Business Bureau, etc.?

Which organization(s) would be required and what is the anticipated range of expenses for those organizations - Low to High.

What professional fees will be required? Please provide a range - Low to High.

These expenses would be the payments needed for the franchise operator to initiate a relationship with an attorney and an accountant. The franchisee will usually need to create a new legal entity and have an attorney review related legal documents.

What working capital will be required? Please provide a range - Low to High.

This will be the cash available to meet the needs of the growing business. The amount of required working capital varies widely due to the various lengths of the selling cycles, seasonality, and a number of other industry factors. However, a standard rule for most businesses is to have a cash reserve of, approximately, three months worth of the projected fixed operating expenses.

Have you considered what a franchisee should allocate to a Market Introduction Program (often times, a Grand Opening)? Please provide a range - Low to High.

For the range, the low end should represent a required amount that a franchisee will spend during the first three months of initial marketing. The high end is a suggested number.

Are there any other items that have not been accounted for previously here that would be required for the startup of this franchise business? Please provide a range for each - Low to High.

What is the training expense for the franchise operator? Please provide a range - Low to High.

What is the overall training time? Please provide a range - Low to High.

How long do you need to allot to visit them? Please provide a range - Low to High.

What are the expenses for onsite training with the franchisee? Please provide a range - Low to High.

This would be their expense for food and lodging to come to your headquarters, or designated facility, to learn how to operate this business. Additionally, the franchise operator will need to pay the salaries of the employees they may bring with them for this training.

How many people from the franchisee’s operation will be attending initial training? Please provide a range - Low to High.

How long will they be staying? Please provide a range - Low to High.

What is the typical range for all expenses for the initial training session? Please provide a range - Low to High.

Do you have an anticipated franchisee fee in mind? I will be working with you to develop the right franchise fee for your program, however, I would like to know what expected amount you may have in mind. Please provide a range - Low to High.

Franchise Pro Forma

The numbers for this pro forma will be developed based on your existing prototype of the franchise business. It is designed to be used as an internal review of the projected cash flow and return on investment created by the franchise model. In addition, the franchisee pro forma is also employed as a platform to test different levels of royalty and advertising expenses.

These are numbers and discussions that we will have internally – we will not share these with potential franchise buyers.

Revenues

Revenues are typically the annual sales of products and/or services rendered by your company. In restaurant and retail businesses, revenues should be defined as sales without sales tax. In service businesses, leasing or rental businesses, or other businesses which don’t pay sales tax, total revenue would be the same as total sales.

What are the gross sales you would expect an average franchise business to do during its first 12 months of operation? Please provide a dollar amount.

What type of sales growth would you expect for the franchise business in years two through five? Please provide a percentage.

Variable Expenses

Variable expenses are expenses that change as the sales level changes. Strictly speaking, variable expenses are zero when the sales level is zero.
All of these answers should be expressed as a percentage of sales.

What is your cost of goods/cost of service? Please provide a percentage.

What is your variable labor expense? Please provide a percentage.

What payroll tax and benefits would be needed for the franchise model’s variable labor? (as a percentage of your labor - usually between 8-10% of labor).

What are your credit card costs as a percentage of sales?

Expressed as a percent of sales, what level of local advertising will be required by your franchise operators?

I need to learn how advertising has been historically used in your prototypical business, and then make some decisions on how advertising will be used in a franchise model, to benefit both the franchise operator and the franchise system, in general. After this discussion, there are two specific questions to answer.

What level of corporate or system-wide advertising contribution will they be sending to you for system-wide advertising expenses? Please provide a percentage of gross sales.

Royalties

Are you expecting to charge an ongoing royalty? If yes, what is that amount?

What frequency of royalty collection have you considered?

How will royalty payments be paid to you? (Generally, the preferred method is an Electronic Funds Transfer to an account established specifically for franchise revenue)

Operating Expenses

Operating expenses are defined as fixed monthly, annual, or other periodic expenses, which are incurred in the operation of your business. Depending on location and agreement.

What is your annual rental expense? Please provide either a per year dollar amount or percentage of gross sales.

What utility expenses would be encountered on an annual basis? Please provide either a per year dollar amount or percentage of gross sales.

What annual license or permits would be required and how much would they cost?

Please list your monthly software costs.

Will your franchisees be required to be the Owner/Operator on site? (An Owner/Operator is the franchisee who is involved in managing the business.)

What annual salary represents the management or other function performed by the franchise operator? (This is obviously a moving target when dealing with an Owner Operator, but if you hired a manager to run your business, what would you pay them?) Please provide an amount per year.

What level of taxes and benefits should be applied to the franchise operator’s salary, expressed as a percentage of that salary?

Are they going to receive health insurance coverage?

What is the annual cost of general insurance coverage? This would be required coverage to run the business, any insurance needed for the business, in addition to fire, theft, loss of contents, and general liability coverage. Please provide a dollar amount.

What is the annual telephone expense? Please provide a dollar amount or percentage.

What is the annual expense for the professional fees of accounting and attorneys? Please provide a percentage.

What annual office expenses would be encountered for office services and supplies? Please provide a dollar amount.

Franchise Structure Questions

These questions relate to how I will structure your franchise business. Some of these questions contain relatively complex issues, which will require some discussion and analysis by Franchise Marketing Systems. Please complete as many preliminary responses as you can. All of these areas will be investigated, discussed, and approved before final decisions are made.

Ownership Structure

What is the legal entity that owns your operating prototypes?

Have you created a legal entity to act as the franchisor? If yes, what is the name?

Do you have any trademarks registered?

What person or legal entity owns your trademarks?

If you have not filed these trademarks, we will assist you in completing this work. Who would you like to own the trademarks/service marks? In addition, would you like to establish a separate entity to have ownership over your intellectual property?

Franchise Owner Profile

What type of personal characteristics would identify and create the most successful franchisee?

What type of previous personal or business experience would they have?

What sort of jobs have they held?

What type of business skills will they have?

Will the best prospects have been a small business owner in the past?

Will they have large corporate experience?

Will they have had experience in your particular type of business in the past?

Will they be required to participate in the day-to-day operation of the business?

Territory

The issue of territory has a wide range of potential designs and applications, which will require some discussion and analysis. On a preliminary basis, I would like to get first impressions from you on the following questions:

What population do you intuitively feel it takes to adequately support the business?

What is the population of the immediate metropolitan area where you operate? (Zip codes are the best measure)

How many additional operating franchise units do you think could be located in that particular metropolitan area?

What is the median household income of this population?

What type of personality do most of the customers have? What are their interests?

What is the average age of your typical customer?

Training

Phase 1 training refers to the time period where the new franchisee will come to your headquarters, or designated training facility, to learn how to operate the franchise business. The new franchisee is going to have to learn all aspects of the business, and be prepared to open and manage their own, remotely located, business. This means that the new franchisee needs to master a wide variety of subjects including:

The fundamentals of how to operate the business
How to effectively do local marketing and advertising
Purchasing functions required of the business
Management and human resources functions
Learning required operating software
Obtaining financing and mastering necessary bookkeeping and reporting
Prepare and maintenance procedures, etc.

Phase 1 training needs to be comprehensive enough to allow the new franchisee to master these areas. In order to accomplish that objective, Phase I training should include a liberal amount of on-the-job training, so that the franchisee has fully mastered these areas.

How long should the franchisee be required to attend Phase 1 training?

Who should attend Phase 1 training with the franchise operator?

Would it make sense to train both spouses in a husband and wife team or the franchise operator and their business manager?

Should you train any other additional employees?

Please explain what other employees would need training.

Phase 2 Training

Phase 2 training is on-site training, which typically takes place just before and after the franchise starts their new business. The franchisor’s responsibilities here are to help the franchisee set up, organize, and begin their new business and, then be available for a few days to ensure the business is operating correctly. The typical time period for Phase 2 training is 2-3 days for most franchises.

How long would you estimate this time period for your business?

Refresher Training

Periodically, franchisees will be called back to the franchisor’s headquarters, or another designated location like a hotel, meeting facility, or other location, for refresher and update training. It is the franchisee’s responsibility to pay for food, lodging, and salaries of the employees they may bring with them.

The franchisor’s responsibilities here are to provide the facility and materials. Typically I would require the franchisees to attend up to two (usually one) refresher and update meetings per year, and that the meetings may last up to two days each. I think the most important thing we can do for the franchisees is visit their territory periodically to make sure they are comfortable and running efficiently. .

What level of refresher and update training would you feel is appropriate for your specific business?

Franchise Agreement Term & Renewal

Usually the term of a franchise contract is related to the size of the initial investment. In general, a franchisee will need a sufficiently long term (or first renewal period) to allow them to recover the initial investment out of the cash flow created by the business. The standard practice, at this time, is to create a contract term of 10, 15, or 20 years. This term is divided by a number of renewal periods, which are generally set at five-year intervals. At the renewal period, the franchisee will sign the current version of the Franchise Agreement. This is a distinct advantage for the franchisor and builds a great deal of flexibility into the Agreement.

What term and renewal periods do you think are appropriate for your business?

Since the renewal period arrangement is very favorable for you as a franchisor, I recommend that you do not charge any renewal fee. Any fee related to the renewal process could be viewed as an impediment to renewal. It is in your best interest, as a franchisor, to encourage renewal of each franchise operator.

A transfer is the process of a franchisee selling their business to another person, or legal entity, who becomes the new franchise operator. In this situation, your responsibilities as franchisor are to review, perhaps approve, and train the new franchise operator.

You want to have a free and unencumbered transfer process, which allows the sale of a franchise to another party with minimal interruption of the operating business. Therefore, I recommend a minimal transfer fee of $5,000 to $15,000, to cover your costs for review, approval, and training the new operator.

What transfer fee do you think would be correct for your business?

Do you have any plans for new elements (ideas for the future of your business that are not in place today) of your franchise program, which would require an additional investment of the franchise operator? If yes, please describe.

These new components could be new products or services, new software or equipment, or any new practice, which would cost the franchisee more money. If you have plans on any specific items of this nature, what do you think these new items would cost the franchise operator?

If there are no new components on the planning horizon, should I put in an additional investment number as a placeholder?

If you do come up with something new, which will represent a substantial investment for the franchise operator, what would a typical additional investment number be for the average-sized initial investment franchise program? Please provide a dollar amount.

Business Support Programs

Part of your responsibility as franchisor, and also as a prudent business manager, is to provide the correct level of support for the franchisees that are operating out in the marketplace. This means that you will be providing a great deal of support in the early stages of your relationship with the franchise operator, and then reduce this frequency to an ongoing maintenance level.

Typical retail and restaurant concepts will often have an occurrence of a weekly to monthly visit, initially, and taper off to a monthly, bi-monthly, quarterly or other appropriate interval for a visit. Sales and service concepts have a less frequent schedule.

What do you think the frequency should be of initial visits?

What do you think the frequency of visits should be on an ongoing basis?

What do you think is the correct job description for the field support person in your business?

What are the salary, benefits, and related expenses of this job position?

If your business is site specific, will it be important for you to be doing site approvals for the franchise operators?

Will you have financing available for the franchise operator from your company or another source?

Are there any other support programs that will be needed for the franchise, i.e. Internet-based, phone-based, etc.?

Supplier Programs

Often franchise concepts are developed to create a distribution channel for proprietary or non-proprietary products. The following questions will help us understand how this may apply to your concept.

Please list required suppliers, their service, and contact information.

Please describe any proprietary or non-proprietary products and supplies.

Are you going to be receiving any type of payment (commission, rebate, etc.) from a supplier who is supplying required items?

How much do you anticipate this commission will be, related to the sales of those products?

Are you, as franchisor, going to be supplying required products to the franchise operator?

What type of profit margin do you anticipate making on those products?

If there will be required items for the franchise operator to purchase, what portion of the franchisee’s total initial investment will be for those required items?

If there will be required items, what portion of the franchisee’s ongoing expenses will be for those required items?

Advertising

One of the distinct advantages of franchising is that it puts the power of combined advertising together to benefit the individual franchise operators. The four types of advertising in franchising are grand opening, local advertising, cooperative advertising, and corporate advertising. To understand how the advantage of franchise advertising can be applied to your business, I would need to answer a number of questions.

Historically, how has advertising been used in your business?

What types of advertising have worked well?

What types have been ineffective?

How will the franchise program adapt your advertising?

What percent of your sales have you spent on advertising efforts?

What percent of sales do you think is correct, for total expenditure of advertising by your franchisees?

Will a large budget of advertising be required for the franchise operators to speed the ramp-up of their sales and also bring in customers in new geographical markets, where you will not have repeat and referral business in the beginning?

What level of advertising do your competitors spend? Please provide a range - Low to High.

Of the total amount of projected advertising spent by your franchise operators, what portion should be required to be spent in their local market?

What portion of total advertising expense should be allocated for system-wide or corporate advertising contribution? These funds would be submitted to you to be held and spent only for system-wide advertising expenses.

Other

What markets would you like to focus the growth of the franchise program towards?

Please provide us with your mission statement.

What would you say are the biggest opportunities from a market perspective in areas around the U.S.?

Please list your top 5 competitors.

Please list your top 5 franchise competitors.

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