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Casual Articles - Franchisor Pro Forma Statements: Marketing - Mendacity - or Malfeasance
Is tackling talent management one of your goals this year? Employees are becoming more demanding, and topping their list is professional growth and development. These are the employees you should be striving to keep. They want new challenges, interesting work, and the opportunity to develop new skills. Even if you don’t have the resources to implement a full-scale career development program, you can still provide your employees with the tools and support to manage their own careers.Provide a Dedicated ResourceThis can be as simple as adding a new page to your intranet or as elaborate as a career development office. Offer as much as your budget will allow, keeping in mind that you can expand as time goes on. Include resources, referrals and tools to aid your employees in their development. With the amount of information available on the Internet, you can easily assemble a wealth of career-related articles, assessments, and planning tools. If you haven’t done so already, publish your company’s internal information. Organization charts, job descriptions, salary ranges, and training schedules are great resources for employees to use in planning.Because career management may be new to your employees, include detailed instructions for using your system and a list of resources available to them in their planning. If you can’t provide a career development consultant, make certain that HR and managers are able to answer any questions that may arise.Programs & External ResourcesThere are several initiatives you can incorporate in your career development program. Executive Career
Because the franchise in question was in the initial stages of entering the Ontario market, it was vital to study the few franchises that had already been established. This is more difficult to do than one might expect, for example, the franchisor has a host of reasons why actual audited financial statements can not be provided. Thus, the potential franchisee is often left to his or her devices to try and determine whether or not the franchise is profitable or the proper fit for the franchisee.
Marketing and Misrepresentation
Sales people seem to feel compelled to exaggerate the value or performance of their product to make a sale. Hence, the franchisor will tend to exaggerate sales and profits while embellishing other aspects of the franchise being sold. To whit, it is rare to see a franchise pro forma statement that depicts a loss in the initial stages of operation, although that is precisely what should be expected. As a result, the franchisee may come to view the franchisor’s enhanced claims as misrepresentation; thus, problems and disputes often follow the opening of the franchise.
On the other hand, many franchisees buy their franchises with unrealistic expectations about the potential for financial gain.
However adverts are used to gain much more purposes. An organization usually sponsors media advertising to convince consumers that its products will benefit them. However this is no the sole motivation behind sponsoring advertisements. Some are merely intended to inform but not persuade. For whatever reasons the advertisement is made it is meant to affect the consumer in the process spawn benefits for its sponsor. It must therefore be made in such way as to make achievement of its purpose highly. Its impact on consumer should lead consumer to the action that is favourable to advertiser. Large--scale efforts are made, often with impressive success, to channel consumers unthinking habits, purchasing decisions and thought processes by the use of insights gleaned from psychiatry and social sciences.Advertising is meant to have a serious economic purpose. It is meant to provide information about products to the consumer who can then make buying decisions. It is meant to allow producers to invest in their brand equity which in turn protects consumers because it means that any drop in product quality has disastrous financial consequences for the consumer to buy better. If advertising is to be effective and handled with maximum efficiency it is necessary to know what is intended to achieve. The advertiser must know whether his advert is meant to increase sales, maintain sales and introduce a new product or there is another objective. This can be used as one of the guidelines on what information is needed to make the desired impact.The various attributes of the product can be communicated in the advert to ensu
In theory, the franchise relationship is a symbiotic relationship, such as a marriage, or a partnership. However, as often happens, there is a significant gap between theory and practice. What should be well understood is that the goal of the franchisor is the same as any other business entity: maximize profits. Moreover, we live in an era of immediate gratification; therefore, in many business entities long-term planning is limited to managing earnings per share (EPS) for the current reporting period. Thus, many franchisors will maximize profits in the short-term whether of not this has a deleterious effect on the franchisee. I owned and operated a ‘family restaurant’ franchise; therefore, this discussion will tend to focus on this type of franchise.
Clearly, the franchise relationship mimics a marriage in that there is a strong tendency for disputes to become more frequent and bitter as the business relationship evolves from the honeymoon stage to an actual business relationship, a partnership where one partner controls the other. Often, the franchisor is soon viewed as a greedy control freak by the franchisee as the realization dawns that the franchisor is not be the savior that he made himself out to be during the courting period. In fact, it soon becomes evident that the franchisor may have been somewhat less than candid during the sale of the franchise.
Pro Forma Statements
Pro forma financial statements is the term applied to financial statements that would result if certain projections for costs and revenues had occurred during the financial year of the pro forma statements. Clearly, they are ‘what if’ statements based upon assumptions made by those generating the statements. The validity of the pro forma statements is directly related to the validity of the underlying assumptions. To be sure, pro forma statements are a valid accounting tool; they are used frequently for planning purposes. For example, they are part of the annual budgeting process for most organizations. What the pro forma financial statements depict for management is what the financial statements will look like if the planned activities for the budgeted year actually come to pass as forecasted during the budgeting process.
In summary, the key for anyone working with pro forma statements is to determine precisely what the underlying assumptions are, and the validity of those assumptions. Hence, it is not surprising that most theorists and advisors believe that the client should to seek professional accounting help when considering the purchase of a franchise.
The Role of the Accountant
Invariably, theorists and advisors suggest that the franchisee’s accounting advisor should, amongst other things, assist in:
• Assessing capital requirements;
• Reviewing pro forma financial statements;
• Examining the accounting information and reporting system;
• Determining the reserves necessary to finance the losses associated with a ‘start-up’ due to promotion, staff training, and possible economic downturns;
• Investigating the financial strength of the franchisor through credit checks or the review financial data, if the franchisor is a public company or has filed information in a jurisdiction where such disclosures are required by law;
• Planning personal and corporate taxes; and
• Evaluating the real value, if any, of the franchise itself.
Normally the franchisor provides pro forma statements and the accountant merely performs a typical financial analysis on the statements. Recall that the pro forma statements can be useful if, and only if, the assumptions underlying the statements are valid. Sadly, without a great deal of industry expertise, most accountants have difficulty in determining whether or not some of the underlying assumptions are valid, especially some of the more detail oriented assumptions such as what percentage of a sales dollar should be allocated for wait staff, kitchen staff, bar staff, or management. In my case, the cost to replace lost, stolen, and damaged eating utensils amounted to several thousand dollars per year. It should be noted here that many pro forma statements are general in nature and such expenses are overlooked or, if included, are not clearly detailed or outlined.
I acted as my own accountant because I am, in fact, an accountant by training. And, in the process of doing my ‘due diligence’ I spent well over a week doing computer modeling in an attempt to determine the validity of the most important number: sales! Sales are important because high revenues can provide some slack to offset any errors or omissions. My model was based on a number of factors, for example, population demographics, disposable income, and expected population growth patterns for the future. In addition, I performed an analysis of ‘dining out’ out statistics, for example, I examined the amount expended per capita, consumption patterns, and average distances traveled. With respect to the location of the franchise, the old real estate platitude certainly applies, the three most important things are: “Location, location, and location!” Therefore, one should study the traffic patterns, accessibility, parking, and other consumer draws, such as theatres, banks, or liquor stores, in order to determine if the location is economically feasible. For example, the parking must be close, above ground, well lit, and free from through traffic or street crossings. Thus, shopping mall parking tends to be ideal for consumer oriented retail businesses such as family restaurants.
Because the franchise in question was in the initial stages of entering the Ontario market, it was vital to study the few franchises that had already been established. This is more difficult to do than one might expect, for example, the franchisor has a host of reasons why actual audited financial statements can not be provided. Thus, the potential franchisee is often left to his or her devices to try and determine whether or not the franchise is profitable or the proper fit for the franchisee.
Marketing and Misrepresentation
Sales people seem to feel compelled to exaggerate the value or performance of their product to make a sale. Hence, the franchisor will tend to exaggerate sales and profits while embellishing other aspects of the franchise being sold. To whit, it is rare to see a franchise pro forma statement that depicts a loss in the initial stages of operation, although that is precisely what should be expected. As a result, the franchisee may come to view the franchisor’s enhanced claims as misrepresentation; thus, problems and disputes often follow the opening of the franchise.
On the other hand, many franchisees buy their franchises with unrealistic expectations about the potential for financial gain. A
Over the years I have worked with numerous people on career development, from the high flyers in the city to mothers that wanted to start a home based business. Some of the people that I worked with said that they had their dream job, or it would be if only they could get a pay rise and be adequately paid for the great job that they do.So if you are one of these guys, I have made a short list of tips that you can use to work towards that all important pay rise that you so rightly deserve!1. Before you speak with the boss, think about the contribution that you make to the company and then highlight this to him in talks. Think about past projects that you have achieved for him and current stuff that you are achieving that needs you for completion. Don’t be afraid to sell yourself, but do remember to not over sell yourself.2. Come up with a figure that you want and know that your boss can say ‘yes’ too. Just aim high, however be realistic. If you aim too high then you run the risk of your boss not taking you seriously from the start. Remember that instead of one massive hike in your pay right now it may be the best thing to encourage several smaller hikes over the next few years.3. Just like your needs – your boss will want certain things too. Make sure that you are ready and willing to offer these in negotiations. There might be a slight change in your working times, a move to another department or even a promotion that you would need to prepare for and take. Remember that you are asking your boss to be flexible, so you may need to be flexible too.4. Come up with a backup plan. What
Pro Forma Statements
Pro forma financial statements is the term applied to financial statements that would result if certain projections for costs and revenues had occurred during the financial year of the pro forma statements. Clearly, they are ‘what if’ statements based upon assumptions made by those generating the statements. The validity of the pro forma statements is directly related to the validity of the underlying assumptions. To be sure, pro forma statements are a valid accounting tool; they are used frequently for planning purposes. For example, they are part of the annual budgeting process for most organizations. What the pro forma financial statements depict for management is what the financial statements will look like if the planned activities for the budgeted year actually come to pass as forecasted during the budgeting process.
In summary, the key for anyone working with pro forma statements is to determine precisely what the underlying assumptions are, and the validity of those assumptions. Hence, it is not surprising that most theorists and advisors believe that the client should to seek professional accounting help when considering the purchase of a franchise.
The Role of the Accountant
Invariably, theorists and advisors suggest that the franchisee’s accounting advisor should, amongst other things, assist in:
• Assessing capital requirements;
• Reviewing pro forma financial statements;
• Examining the accounting information and reporting system;
• Determining the reserves necessary to finance the losses associated with a ‘start-up’ due to promotion, staff training, and possible economic downturns;
• Investigating the financial strength of the franchisor through credit checks or the review financial data, if the franchisor is a public company or has filed information in a jurisdiction where such disclosures are required by law;
• Planning personal and corporate taxes; and
• Evaluating the real value, if any, of the franchise itself.
Normally the franchisor provides pro forma statements and the accountant merely performs a typical financial analysis on the statements. Recall that the pro forma statements can be useful if, and only if, the assumptions underlying the statements are valid. Sadly, without a great deal of industry expertise, most accountants have difficulty in determining whether or not some of the underlying assumptions are valid, especially some of the more detail oriented assumptions such as what percentage of a sales dollar should be allocated for wait staff, kitchen staff, bar staff, or management. In my case, the cost to replace lost, stolen, and damaged eating utensils amounted to several thousand dollars per year. It should be noted here that many pro forma statements are general in nature and such expenses are overlooked or, if included, are not clearly detailed or outlined.
I acted as my own accountant because I am, in fact, an accountant by training. And, in the process of doing my ‘due diligence’ I spent well over a week doing computer modeling in an attempt to determine the validity of the most important number: sales! Sales are important because high revenues can provide some slack to offset any errors or omissions. My model was based on a number of factors, for example, population demographics, disposable income, and expected population growth patterns for the future. In addition, I performed an analysis of ‘dining out’ out statistics, for example, I examined the amount expended per capita, consumption patterns, and average distances traveled. With respect to the location of the franchise, the old real estate platitude certainly applies, the three most important things are: “Location, location, and location!” Therefore, one should study the traffic patterns, accessibility, parking, and other consumer draws, such as theatres, banks, or liquor stores, in order to determine if the location is economically feasible. For example, the parking must be close, above ground, well lit, and free from through traffic or street crossings. Thus, shopping mall parking tends to be ideal for consumer oriented retail businesses such as family restaurants.
Because the franchise in question was in the initial stages of entering the Ontario market, it was vital to study the few franchises that had already been established. This is more difficult to do than one might expect, for example, the franchisor has a host of reasons why actual audited financial statements can not be provided. Thus, the potential franchisee is often left to his or her devices to try and determine whether or not the franchise is profitable or the proper fit for the franchisee.
Marketing and Misrepresentation
Sales people seem to feel compelled to exaggerate the value or performance of their product to make a sale. Hence, the franchisor will tend to exaggerate sales and profits while embellishing other aspects of the franchise being sold. To whit, it is rare to see a franchise pro forma statement that depicts a loss in the initial stages of operation, although that is precisely what should be expected. As a result, the franchisee may come to view the franchisor’s enhanced claims as misrepresentation; thus, problems and disputes often follow the opening of the franchise.
On the other hand, many franchisees buy their franchises with unrealistic expectations about the potential for financial gain.
The paralegal profession is currently experiencing a great deal of growth and prosperity. With the average USA annual salary averaging around $34,000 for local and state work, nearly double that for Federal Government work, and much more in the private sector, it’s no wonder this career field is growing. Let’s take a look at a few reasons why a career as a paralegal is so rewarding.Challenging WorkAttorneys pass much of their workload along to paralegals, also known as legal assistants. Note that paralegals may not perform all attorney tasks, including setting legal fees, giving out legal advice, and presenting court cases.Case preparation is part of the workload. Paralegals help lawyers with background information and research, legal history, case studies, fact-finding investigations, document preparation and analysis, plea documents, folder, record and file handling. The work they perform is often involved with hearings, trials, closing comments, and also corporate functions.Jobs are available for paralegals in many types of companies and organizations. They work with employee benefits, labor law, criminal law, corporate law, government (at all levels), real estate and bankruptcy. And you’ll find them working in personal injury law and litigation as well.Career TidbitsThe following list includes some interesting information about this career field according to the U.S. Department of Labor Bureau of Labor Statistics Occupational Outlook Handbook.- Paralegals most often work year round, although some temporary work is available. Although 40 hours is average, heavy w
• Assessing capital requirements;
• Reviewing pro forma financial statements;
• Examining the accounting information and reporting system;
• Determining the reserves necessary to finance the losses associated with a ‘start-up’ due to promotion, staff training, and possible economic downturns;
• Investigating the financial strength of the franchisor through credit checks or the review financial data, if the franchisor is a public company or has filed information in a jurisdiction where such disclosures are required by law;
• Planning personal and corporate taxes; and
• Evaluating the real value, if any, of the franchise itself.
Normally the franchisor provides pro forma statements and the accountant merely performs a typical financial analysis on the statements. Recall that the pro forma statements can be useful if, and only if, the assumptions underlying the statements are valid. Sadly, without a great deal of industry expertise, most accountants have difficulty in determining whether or not some of the underlying assumptions are valid, especially some of the more detail oriented assumptions such as what percentage of a sales dollar should be allocated for wait staff, kitchen staff, bar staff, or management. In my case, the cost to replace lost, stolen, and damaged eating utensils amounted to several thousand dollars per year. It should be noted here that many pro forma statements are general in nature and such expenses are overlooked or, if included, are not clearly detailed or outlined.
I acted as my own accountant because I am, in fact, an accountant by training. And, in the process of doing my ‘due diligence’ I spent well over a week doing computer modeling in an attempt to determine the validity of the most important number: sales! Sales are important because high revenues can provide some slack to offset any errors or omissions. My model was based on a number of factors, for example, population demographics, disposable income, and expected population growth patterns for the future. In addition, I performed an analysis of ‘dining out’ out statistics, for example, I examined the amount expended per capita, consumption patterns, and average distances traveled. With respect to the location of the franchise, the old real estate platitude certainly applies, the three most important things are: “Location, location, and location!” Therefore, one should study the traffic patterns, accessibility, parking, and other consumer draws, such as theatres, banks, or liquor stores, in order to determine if the location is economically feasible. For example, the parking must be close, above ground, well lit, and free from through traffic or street crossings. Thus, shopping mall parking tends to be ideal for consumer oriented retail businesses such as family restaurants.
Because the franchise in question was in the initial stages of entering the Ontario market, it was vital to study the few franchises that had already been established. This is more difficult to do than one might expect, for example, the franchisor has a host of reasons why actual audited financial statements can not be provided. Thus, the potential franchisee is often left to his or her devices to try and determine whether or not the franchise is profitable or the proper fit for the franchisee.
Marketing and Misrepresentation
Sales people seem to feel compelled to exaggerate the value or performance of their product to make a sale. Hence, the franchisor will tend to exaggerate sales and profits while embellishing other aspects of the franchise being sold. To whit, it is rare to see a franchise pro forma statement that depicts a loss in the initial stages of operation, although that is precisely what should be expected. As a result, the franchisee may come to view the franchisor’s enhanced claims as misrepresentation; thus, problems and disputes often follow the opening of the franchise.
On the other hand, many franchisees buy their franchises with unrealistic expectations about the potential for financial gain.
Business cards are a very good way of advertising a business that you are just getting off the ground or for an old established business. It is a very inexpensive way of advertising and the cards can be designed and made on a home computer and printed at home or in the office.The success of these cards depends on the way they are distributed. It must be an ongoing commitment. Never leave home without your cards so that at any time you want one, you will be able to produce it. See every passer by as a potential customer and hand your cards out with diligence.You must adopt the habit of always leaving a card behind wherever you have been. Leave it in a conspicuous place where it will be found by someone who is curious enough to pick it up and read it. You could leave a couple in a restroom. This is always a good place as there are people continually coming in and going out. Some one is very likely to pick one up and take it with them. Every time you go into a store leave a card on the counter or at the cash out desk. There will be someone that is curious enough to pick it up. You could possibly be contacting your future good customer.A good idea is to magnetize your cards. These magnets can be pasted on the back of the cards by your self to save money. They now have extra value added to them and fewer people will throw them away. They will be taken home and put on the fridge to remain for quite a while. It will now be easier to leave a card behind. Put them at eye level on metal poles and metal benches. The wind cannot blow them away and they will remain there for people to read.
I acted as my own accountant because I am, in fact, an accountant by training. And, in the process of doing my ‘due diligence’ I spent well over a week doing computer modeling in an attempt to determine the validity of the most important number: sales! Sales are important because high revenues can provide some slack to offset any errors or omissions. My model was based on a number of factors, for example, population demographics, disposable income, and expected population growth patterns for the future. In addition, I performed an analysis of ‘dining out’ out statistics, for example, I examined the amount expended per capita, consumption patterns, and average distances traveled. With respect to the location of the franchise, the old real estate platitude certainly applies, the three most important things are: “Location, location, and location!” Therefore, one should study the traffic patterns, accessibility, parking, and other consumer draws, such as theatres, banks, or liquor stores, in order to determine if the location is economically feasible. For example, the parking must be close, above ground, well lit, and free from through traffic or street crossings. Thus, shopping mall parking tends to be ideal for consumer oriented retail businesses such as family restaurants.
Because the franchise in question was in the initial stages of entering the Ontario market, it was vital to study the few franchises that had already been established. This is more difficult to do than one might expect, for example, the franchisor has a host of reasons why actual audited financial statements can not be provided. Thus, the potential franchisee is often left to his or her devices to try and determine whether or not the franchise is profitable or the proper fit for the franchisee.
Marketing and Misrepresentation
Sales people seem to feel compelled to exaggerate the value or performance of their product to make a sale. Hence, the franchisor will tend to exaggerate sales and profits while embellishing other aspects of the franchise being sold. To whit, it is rare to see a franchise pro forma statement that depicts a loss in the initial stages of operation, although that is precisely what should be expected. As a result, the franchisee may come to view the franchisor’s enhanced claims as misrepresentation; thus, problems and disputes often follow the opening of the franchise.
On the other hand, many franchisees buy their franchises with unrealistic expectations about the potential for financial gain.
Incorporating in Nevada has many outstanding benefits for savvy entrepreneurs who incorporate their businesses in the silver state. However, you must take care in setting up the corporation correctly if you are to take advantage of the tax advantages and liability protection benefits Nevada has to offer. If you are new to Nevada corporations, you will want to use a qualified nevada incorporation service to set things up right from the start. People who try incorporating in Nevada themselves can easily set themselves up to be in hot water with the IRS if they are selected for an audit. The IRS pays special attention to Nevada corporations when selecting candidates for an audit, so it is imperative that a Nevada corporation be set up with care.Common Nevada Incorporation MistakesBusiness owners new to incorporation in Nevada most frequently make the following mistakes when forming a Nevada corporation themselves: Failing to have employees in the corporation Not having adequate proof of Nevada-based operations Allowing independent contractors corporate benefits intended only for employees Not issuing stock Nevada Incorporation Services ChecklistIf you decide to go with an incorporation service, make sure you go with a firm that has experience with Nevada incorporation. Compare what they offer to the list below. A quality incorporation firm should offer the following services as part of its package: Creation of the Articles of Incorporation Filing of the Articles with the Nevada Secretary of State crossings. Thus, shopping mall parking tends to be ideal for consumer oriented retail businesses such as family restaurants.
Because the franchise in question was in the initial stages of entering the Ontario market, it was vital to study the few franchises that had already been established. This is more difficult to do than one might expect, for example, the franchisor has a host of reasons why actual audited financial statements can not be provided. Thus, the potential franchisee is often left to his or her devices to try and determine whether or not the franchise is profitable or the proper fit for the franchisee.
Marketing and Misrepresentation
Sales people seem to feel compelled to exaggerate the value or performance of their product to make a sale. Hence, the franchisor will tend to exaggerate sales and profits while embellishing other aspects of the franchise being sold. To whit, it is rare to see a franchise pro forma statement that depicts a loss in the initial stages of operation, although that is precisely what should be expected. As a result, the franchisee may come to view the franchisor’s enhanced claims as misrepresentation; thus, problems and disputes often follow the opening of the franchise.
On the other hand, many franchisees buy their franchises with unrealistic expectations about the potential for financial gain. All too often the franchisee will not seek professional advice, and may even ignore advice that does not agree with their preconceived notions. As a species, we often see and hear what we wish and repress that which we deem to be disagreeable or stressful. Clearly, the need for ‘sober second thought’ or a ‘cooling off’ period can not be over emphasized when purchasing a franchise!
Operating a Franchise
One buys a franchise for a number of reasons: the chance to become financially independent, the psychic pleasure of being your own boss, the freedom to set your own hours, an enhanced life style, and a host of other reasons that vary from one individual to another. In my case, I went from being a university professor and successful business administrator to washing dishes and cleaning toilets literally over night, and these are just a few of the tasks for which you may not be prepared. Simply put, some clich?s are clich?s for a very good reason; for instance, the new franchisee soon learns that there is some truth in the clich? “If you want something done right - Do it yourself!”
In theory, one of the main reasons for buying a franchise is the training and operating expertise that comes with the franchise. However, those claims of expertise may also prove to be more embellishment. In spite of their claims to the contrary, my franchisor proved to be a very poor operator. In fact, their so-called ‘A’ team lost in excess of $200,000 during the three-month start-up period while the restaurant operated at capacity producing sales numbers that were well beyond the franchisor’s projections. Recall that the goal of the franchisor is profit maximization for the franchisor. Thus, it should come as no surprise that the ‘A’ team, a ragtag collection of low paid, contract, head office employees, was billed to the franchise at a substantial hourly rate that generated substantial gross margin for the franchisor. Clearly, the franchisor maximizes its gross margin on everything supplied to the franchisee, including training costs.
As an accountant, I was able to deduce that losses were accumulating even without the benefit of a ‘first class’ information system that had been promised but never delivered. Nevertheless, the franchisor argued that no such losses were occurring, and that they “knew what they were doing” – another exaggeration. Once the losses were confirmed, the franchisor gave no explanations or restitution; they simply blamed the franchisee for any losses, removed the training team, and left the franchisee ‘to die’. It should be noted here that franchisors make money several ways; the collection of franchise fees is only one of those ways. In addition, the franchisor makes a substantial lump sum when a franchise is sold. Therefore, the franchisor is quite willing to resell or ‘flip’ the franchise. Remember, it is all about profit maximization for the franchisor. Thus, if ‘a few eggs have to be broken’ or more precisely ‘a few franchisee nest eggs’ to accomplish that goal, so be it.
Actual Financial Statements
Clearly, it best to obtain the actual financial statements of actual operating franchises for the purposes of analysis if the most optimal purchase decision is to be made. However, franchisors are quite reluctant to provide actual statements. Nevertheless, after sufficient prodding, they may provide financial statements where the unit and identity of the franchisee are withheld. In my case, the franchisor provided actual financial statements for a unit that was currently being operated. Unfortunately, it was some time later before I was to learn that the financial statements provided where for a unit in Florida. Due to the fact that alcohol and fresh produce prices are vastly higher in Canada than Florida, the financial statements depicted financial results that were impossible to attain in a Canadian setting.
Actual Franchise Operations
Once the franchise is operational, the startup losses normally accumulate quite rapidly. It is at this time that the franchisee becomes aware of the fact that it may take some time to obtain results that are remotely close to the results shown on the pro forma statements provided by the franchisor. Of course, the fault for any discrepancy between actual results and the pro forma statements is the fault of the franchisee.
In any event, using the pro forma statements as targets, we were able to turn the unit around and eventually become the most successful unit in the system with respect to both revenues, and costs. However, like every other franchise, we were unable to achieve any of the pro forma numbers. Although we were was able to come close to some of the pro forma numbers, many proved to be quite unrealistic. Ironically, my numbers were used by the franchisor for demonstration purposes at the annual franchisee meeting, a meeting which this franchisee was not allowed to attend.
Conclusion
Beware of pro forma financial statements provided by franchisors, oftentimes these statements are simply a sales tool that has little if any relationship to what one can expect from operating the franchise. Beware of actual financial statements provided by franchisors; these statements may also be a sales tool that has no relationship to what one can expect from operating the franchise in the jurisdiction in which it is located. Beware of any other statements made by franchisors, often those statements are simply a sales tool and has lit
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