Profit Mapping

"Franchising"

Issues to consider:

1. The model

Franchising begins with a thorough examination of the model to be franchised to determine its viability.

· Description of the uniqueness of service or product

· Gross and net profits of existing operation

· Demographic similar businesses and competition

· Short, mid and long term viability of the product or service

· Geographic limitations

· History of model

· Population needed to support model.

2. Franchising the model (the franchise plan)

· Description of the franchise

· Legal costs and timeline to establish master franchise for both nation and provincial registration

· Profile of potential franchises

· Determining market size (population or geographical ) for market exclusivity

· Business plan for potential franchisees

· Costs to purchase and maintain franchise

· Methods to cure franchises

· Business development programs offered

· Advertising, trademark and logo descriptions

· Training programs offered 5 year saturation plan

· Group purchasing opportunities

· Marketing plan to sell franchises, sales projections, and detailed budgets

· Capitalization requirements

PROFIT MAPPING

· Strategies to develop market share/increase net revenues.

· Profit growth is not just revenue growth.

· Profit may be distributed among many sub groups, some more profitable than others, e.g. manufacturing sales, leasing. Where you focus is perhaps as important as how well you focus, e.g. all revenue $$ are not alike.

· You must understand the profit structure of your industry and focus on activities that generate disproportionate share of total profit. This is critical in selecting, investing, dominating a market.

· EG allocating profit, a rock star, music retailer, stereo manufacturer, CD distributor; printer of CD covers by allocating profit, you’ll know which to invest in.

· EG Software profit > hardware - but latter doesn’t know how to write code.

· No market is completely homogeneous, …channels, customers, locations, products, regions will impact on results. You have to know your own profit pools to achieve superior results.

RULES

1. Define the Pool’s Boundaries - What value chain activities affect profit potential, examine your industry from 3 perspectives, yours, customers, and competitors.

2. Estimate Size of Pool - Estimate total profit of entire value chain, as a guide to plans, from biggest component to smallest and extrapolate as appropriate to profits by company and product and comparee.

3. Judge Distribution of Profit - By activities in chain to establish where you want to be, … from pure players to mixed to small to establish size-related opportunities.

4. Check Your Sums - 2 & 3 should be equal. If profit is concentrated in certain value chains, and product type or customer segment or distribution channels or geographic region, them map separately.