Page 104 - Business Plans that Work A Guide for Small Business

Marketing Plan: Reaching the Customer • 95

infrastructure. Their knowledge of the “unit economics” allows them to
understand how fast and to what size a franchised operation should grow
at any given location. Also, instead of having a corporate operation of
three people (Dan, his cofounder Reg, and newly hired Joel), Lazybones
will need to build a corporate infrastructure to support its franchisees.
The strategy will be to create marketing economies on a regional and
national level. Benchmarking other franchise operations and identifying
how quickly they scaled from a few company-owned operations to a na-
tionwide network will help Dan develop realistic projections.
In the buildup method, the entrepreneur identifies all the revenue
sources and then estimates how much of each revenue type the start-up
can generate per day, or some other small time period. The buildup tech-
nique is an imprecise method for the new startup with limited operating
history, but it is critically important to assess the viability of the oppor-
tunity. So important in fact, that we advise entrepreneurs to use both the
comparable and buildup techniques to assess how well they converge. If
the two methods are widely divergent, go back through and try to de-
termine why. The deep knowledge you gain of your business model will
greatly help you articulate the opportunity to stakeholders, as well as
manage the business when it is launched.
There is a plethora of information about franchising companies that
Lazybones can use to implement a buildup revenue and unit growth pro-
jection. The Federal Trade Commission requires franchisors to complete
3
a Franchise Disclosure Document (FDD). Item 19 of the FDD calls for a
disclosure of franchise revenues. Additionally, a number of states require
more detailed disclosure. Lazybones could look at a number of franchise
operations that have taken different growth paths. The popular press also
provides interesting data for a potential franchise company. In particu-
lar Lazybones might look at Entrepreneur Magazine’s Franchise 500 is-
4
sue. They have been ranking franchises by quantitative data for about
30 years. Also, Franchise Times compiles its own annual Top 200 Fran-
chise Chains list, which is based on worldwide sales.
Because Lazybones has 15 years of experience they would start with
the data from their current operations. The company has to decide whether
they are going to grow regionally (like Dunkin Donuts when they started)
or nationally (Subway). Then they would project how economies of

3 www.ftc.gov/opa/1995/10/unfr.shtm.
4 www.entrepreneur.com/franchise500/index.html.