Franchise Management - An Introduction

Franchising involves a contractual arrangement between a franchisor and a retail franchisee. The franchisor may be a manufacturer, wholesaler or service sponsor. A franchise or the contractual agreement allows the franchisee to conduct business under an established name and according to a given pattern of business. To get a franchise, a franchisee has to pay an initial fee to the franchisor. Thereafter, the franchisee pays a monthly percentage of the gross sales in exchange for the rights to sell goods and services of the franchisor in a particular area and location.

There are various aspects involved in managing a franchise management. A franchisee must understand and learn these various aspects of franchise management in order to manage his franchise business well.  A franchisee must use an effective marketing plan for the application of marketing resources to achieve marketing objectives. The various components that need to be considered for formulating a successful market plan are:

•Strengths of your franchise Weakness of franchise

•Design for creating value

•Market Needs

•Wants

•Existing competitors

Expected competitors

Advertising covers any communication that is paid for, from and cinema commercials, radio and Internet adverts through print media and billboards. Hence, it is mass communication efforts through media. The following are the financial documents that a franchisee should maintain for effective management of his franchise business:

Balance Sheet/Statement of Financial Position:

This document is filled out at the end of each period and lists the franchise’s assets (current, fixed, and net) and liabilities (current and long-term).

Income Statement/Profit or Loss Statement :

This is a report of the franchise’s revenues, expenses, and change in net assets over a fiscal year. It will denote whether the franchise realized a profit or incurred a loss for the period.

Statement of Cash Flows:

This is prepared by an auditor at the request of the franchisee. It provides information on the flow of cash in and out of the franchise.

Other documents as required by state:

This can be better understood by consulting a Certified Public Accountant or tax advisor.