Faculty of Business and Law

Module Title: Understanding Business Part 2

Module Code: UGB 123

Module Leader: Graeme Price

2014-15

Task 1 - FRANCHISE APPLICATION

Eastern Foods - Franchise Application

Since the announcement that Eastern Foods was to continue its global expansion by
opening a number of UK Restaurants there has been a great deal of interest from potential
franchisees. This has not been part of its business model in other countries. The company
has only operated with an internal structure of appointed managers.
The franchise model does however seem to have potential. Eastern Foods have,
therefore, decided to make four of their UK outlets available to franchise partners if there
are suitable applicants. One of the outlets available is Sunderland.
They have advertised the opportunities and a summary of the details made available is
shown below:
What are the requirements to open an Eastern Foods franchise?
If you qualify to open a franchise and are willing to invest your time and money it can be a
financially rewarding and life-changing experience.
What does a franchise cost?
As a guide, the cost of the Sunderland restaurant will be 150,000. You will need to
provide at least 25% of the value as unencumbered funds - from non-borrowed personal
resources. The remaining 75% can be funded through a bank loan with favourable funding
terms.
Theres also a one-off franchise fee of 15,000 and a training deposit of 5,000 which is
refunded when you complete your training
There are also ongoing fees:
* Monthly rent on the premises, based on sales and profitability (10%).
* Service Fee for the use of the Eastern Foods system 5% of sales
* Contribution to the national marketing spend, currently 4.5% sales
Other requirements the franchisee/s need to provide or demonstrate at the
presentation are:
* The ability to develop and execute a business plan.
* The ability to manage finances including an understanding of basic financial statements.
* Good management skills and a commitment to personally manage the day-to-day
operations of the restaurant business.

* A willingness to complete a comprehensive world class training programme

* The capability to effectively manage an organization that recruits, trains, and motivates
restaurant employees who deliver an exceptional customer experience.

Task
Eastern Foods have indicated that they are to select the franchisees by interview. At the
interview the teams will be required to:
1. Provide a business plan which details their proposals for the franchise
2. Make a 15 minute presentation to outline your plans for the development of the
business with respect to:
Management
Finance
Marketing
Operations
Human Resources
You and a team of colleagues have decided to prepare a bid for the franchise at
Sunderland.
The 1st stage of the interview process will require the production of a report to outline your
proposals/application for the franchise.
This will be handed in by Friday of the end of week 39 24 th April.
The second stage presentations will take place in week in the workshops of week 40
29th April.
The assessment will be weighted as follows:
Written business plan (30%) and presentation (20%).

There are a number of sections included in a typical business plan, whether franchise or
other.
The plan should include:
Introduction.
A complete description of the business, including an identification of the product or service
involved, the size and competitive nature of the market for the business, a description of
the operational approach used to take the business to market, and the challenges and
risks associated with the business start-up.
Management.
A description of the key management roles in the new business, including naming the
persons who will fill the roles and providing background information on these people which
is relevant to success in the new business.
Marketing.
Explanation of how you're going to attract customers for the new business. This includes
an explanation of the competitive advantages the new business would enjoy, an
examination of the value equation related to the product or service as it relates to potential
customers and, of course, detailed marketing and advertising plans for the business.
Financial Projections.
Income statements, cash flow statements and balance sheets that project the anticipated
financial performance of the business when it begins operation. The statements should
include extensive notes concerning all material assumptions used to prepare the
projections. These projections should always be prepared on a very conservative basis,
since it's not possible to project the unexpected delays or challenges that always seem to
happen on any new business start-up.
Financing Needs.
Regardless of the source of funding for the new business (even if all funding is coming
from your savings), you should always prepare a section of the business plan related to
financing needs. This section involves a complete analysis of all start-up costs related to
the new business, including sufficient working capital to cover initial marketing plans and
operating losses until the projected breakeven point for the business. The process of
carefully detailing this information, even if you're not borrowing anything from an outside
source, will better prepare you for whatever might happen as you get the business set up
and operating.