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Franchise Candidates Need To Use Financial Tools
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One of the most important tools a franchise candidate can use is a financial model. With more franchisors providing a financial disclosure in Item 19 coupled with the fact that franchisors can provide cost data to franchise candidates, there should be sufficient  information available to do a cash flow projection, ROI and pro forma income statement. Despite this fact, there are still a number of franchise candidates that fail to utilize financial models.

Using these financial tools aids a candidate in establishing a strategy for launching and operating their new franchise. Financial models, especially a cash flow projection, is important for identifying the amount of capital the new franchisee will need. If a franchisor doesn't provide an Item 19 disclosure a franchisee candidate should even consider walking away from the franchise opportunity. If the decision is to proceed, then the candidate should obtain as much financial information as possible from the franchisor and existing franchisees.   Finally, if necessary be sure use an accountant to assist in this process.

Posted on January 3, 2016 at 2:18 PM
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