Page 153 - Business Plans that Work A Guide for Small Business

144 • Business Plans that Work

Note that this is the model to include annual increases in service prices. We
also a critical risk that Dan make the critical assumption that sales growth on all new
d iscussed in the previous
critical risk section of the company stores and franchises will basically follow the growth
plan.
curve experienced at existing locations.
Essentially, we are assuming that local managers and franchisees will be able to
perform at least as well as the company’s founders did, because they will have access
to all the systems developed and lessons learned over the last 15 years and are
motivated entrepreneurs. History has shown that franchisees typically perform at
about the same revenue levels of company stores but outperform company stores on
the bottom line. 2

Established Company Stores (Syracuse and Madison)
Red flag word. B asically
same as “conservative.” These locations’ year one revenues are their actual
Don’t need this adjective.
revenues from 2007 adjusted up by 20 percent. This
We generally advise 20 percent increase is a cautious extrapolation from the
that you provide an explana- actual Syracuse and Madison revenues as of October 2008.
tion as to why revenues will
continue to grow. In the The revenues at these two locations are then assumed
Lazybones case, it could be
a function of growing their to increase by 10 percent each subsequent year of the
client base or raising prices. financial plan.
In either event, 10 percent
increases can’t go on forever.
At some point, the stores
would reach their capacity
and either have to expand New Company Stores (Boston, Boulder)
or open a second location
within that city. We have created a five-year income (revenue and cost)
model (the model store) for all new Lazybones locations based on Syracuse’s
and Madison’s historical numbers. Since both Boston and Boulder will have been
in business for a full year by Fall 2009, their “first-year” revenue contributions to
the financial plan are based on the “second-year” numbers of this model store. In
other words, Boston and Boulder are treated as new locations that have already
Be careful not to been open a full year in “year one.”
complicate the analysis and
get diverted from the key
message. In this case, the
L azybones message is that
the model is sound and
can be scaled to a national Future Company Stores
brand.
The same model used for the foregoing new company stores’ revenues is used
for all future company stores (i.e., company stores opened in year one or later of
the development plan). The correlation between model store year and financial

2 S. Spinelli, R. Rosenberg, and S. Birley, “Franchising: Pathway to Wealth Creation,” 2001.http://www.
amazon.com/s/?ie=UTF8&keywords=pathway+to+wealth+creation&tag=googhydr-20&index=
stripbooks&hvadid=3401380751&ref=pd_sl_41jsp1ooy6_b