Hlc franchise business plan (for franchisee)

Franchise Business Plan

Submitted by:

Happy Learning Centre Franchise Business Plan

Page 1

Contents EXECUTIVE SUMMARY .................................................................................................................... 3

OVERALL BUSINESS SYSTEM ........................................................................................................... 5

Center Set-up Phase.................................................................................................................... 5

Ongoing Revenue Generation Source......................................................................................... 5

Operational Expenses ................................................................................................................. 5

Marketing Expenses .................................................................................................................... 6

IMPLICATION FOR FRANCHISEE OFFERING .................................................................................... 7

FRANCHISEE PROFILE FOR HAPPY LEARNING CENTRE ................................................................... 8

FRANCHISING STRATEGY FOR HAPPY LEARNING CENTRE .............................................................. 9

FRANCHISE TERMS ...................................................................................................................... 9

FRANCHISE AGREEMENT ............................................................................................................ 9

REVENUE AND EXPENSES SHARING .......................................................................................... 10

FRANCHISOR-FRANCHISEE RELATIONSHIP ................................................................................... 11

UNIT FRANCHISEE’S OBLIGATIONS ........................................................................................... 11

FRANCHISOR OBLIGATIONS ...................................................................................................... 11

FRANCHISE SUPPORT MECHANISM .............................................................................................. 12

PRE-OPENING FRANCHISE SUPPORT .................................................................................... 12

POST OPENING FRANCHISE SUPPORT .................................................................................. 12

MARKETING PROGRAMS .............................................................................................................. 13

LOCAL ADVERTISING ............................................................................................................. 13

COOPERATIVE ADVERTISING ................................................................................................ 13

SUPPORT PROGRAMS ................................................................................................................... 14

INITIAL INVESTMENT ..................................................................................................................... 15

ESTIMATED INVESTMENT & PROJECTIONS: HOME BASED .......................................................... 16

KEY HIGHLIGHTS ........................................................................................................................ 16

UNIT FRANCHISEE INCOME STATEMENT ...................................................................................... 17


Page 2

ESTIMATED INVESTMENT & PROJECTIONS: STAND-ALONE FRANCHISE ...................................... 18

KEY HIGHLIGHTS ........................................................................................................................ 18

UNIT FRANCHISEE INCOME STATEMENT ...................................................................................... 19

DISCLAIMER................................................................................................................................... 20


Page 3

EXECUTIVE SUMMARY

The following business plan is prepared by Franchise India Consultants for the Client Business

Entity ‘Happy Learning Education Trust’. The following are the highlights of the franchise

business plan.

The Company:

Happy Learning Center is a home based K12 and higher study tutorial institute. It helps children

to increase the mental strength by several innovative ways. It is the most highly rated tutorials

were people come from 15 km distance to study. Every teacher can teach 4 kids per batch for 1.5 hours and 0.5 hours is for Meditation and Goal Visualization and Food break, i.e. 2 hours per batch timing.

Happy Learning Center is now looking at expanding its operations in India and is keen on opening franchise units. The financial projections of the franchise units have been observed in the present report.

Franchisee Profiling

High ability means less amount of value addition required in current set of skills/facility to

run the franchise

Experience in Education & Training Industry

Sound Financial Bandwidth

Property at the Desired Location

Supervisory Involvement in the Daily Operations

Giving franchise to a franchisee with the investment appetite and right property is

important with low rentals.

Franchise Fee:

Unit Franchise Fee for a home based format is INR 1 lakhs (Excluding Service Tax) and for standalone unit franchise fee is INR 1.5 lakhs (Excluding Service Tax).

Franchising is also preferred individuals with experience in teaching and education training.

Entrepreneurs meeting with the investment and space prerequisite.

Roll-out: Major cities Pan-India starting from Maharashtra and Central India


Page 4

Business required very minimum area under home based and required 500 sq. ft. for standalone unit franchise for individual to start the franchise.

Financial Details: Unit Franchise: Home based business Initial Investment: INR 2 - 3 lakhs approximately

Royalty of 15% of gross sales paid on a monthly basis

Include total of 1.5% central marketing fund contribution, wherein 1.5% would be contributed towards local marketing

Unit Franchise: Standalone franchise format Initial Investment: INR 7 - 8 lakhs approximately

Royalty of 15% of gross sales paid on a monthly basis

Include total of 1.5% central marketing fund contribution, wherein 1.5% would be contributed towards local marketing


Page 5

OVERALL BUSINESS SYSTEM

Center Set-up Phase

Ongoing Revenue Generation Source

Unit Franchise will have following ongoing revenue sources:

Tuition fee collection through enrollment of students

Operational Expenses

The Unit Franchisee will bear the following operational expenses on a monthly basis:

Employee Cost

Referral to Faculty

Incentives to Full time Faculty

Commission to Part Time Faculty

Royalty to Franchisor

Rent

Electricity

Cost of refreshments/gifts

Communication Expenses (Tel + Internet)

Printing & Stationery

Quality Monitoring Charges

Misc Expenses

Marketing Expenses

o Local marketing Overheads

o Contribution to central marketing fund

Unit Franchise Franchisor Launch & Pre-Opening Marketing

Expenses

Software & Licensing cost

Training (Lodging & Boarding)


Page 6

Marketing Expenses

The Franchisee will contribute to the Local and Central Marketing. The Franchisee will spend a

3% of gross sales towards marketing on Monthly basis, out of which 1.5% will be on Local

Marketing against which franchisee will be producing the bill and 1.5% of gross sales will be

contributed towards central marketing.


Page 7

IMPLICATION FOR FRANCHISEE OFFERING

Higher Returns

Higher returns in short run will be an attractive proposition against the initial investment risk.

Longevity

Longevity of the business is important for a franchisee to put in such investment. It is advisable

to have the term of franchise agreement for a longer period which will bring stability in the

business and franchisee will also focus on long term goals.

Training Program

The staff at franchisee Center needs to be adequately trained by a team of professionals from

‘Happy Learning Centre’ about all the micro and macro aspects of the operations.

Investment Disbursement

Being a strong concept in franchising & strong regional presence, the credibility attached to

‘Happy Learning Centre’ brand which is substantially good will attracts the investors. As per the

market size; expected sales; a marketing strategy will be framed, which will excite the

franchisee to outlay the investment.


Page 8

FRANCHISEE PROFILE FOR HAPPY LEARNING CENTRE

On the basis of the business concept and format and ratings on the above criteria, following

characteristics are recommended for a franchisee of ‘Happy Learning Centre’:

Investment capacity - Entrepreneurs meeting with the investment and space prerequisite.

Ability to run the business - Franchisees with commitment to efficient service & long-term association.

Experience in education and training industry - Individuals with a teaching and training

background are ideal.

Ability to manage faculty - Conversant with the training, daily administration and staff management

Network strength- An expansive local network.

Passion for education- Should be excited about imparting education.

Although there may be a number of viable franchisee profiles, Management believes that it

should try to attract franchisees that meet the following competency criteria:

Believes in people and capable of motivating team.

High personal standards: discipline, excellence, honesty, integrity, etc.

Able to meet initial investment requirements.

Speed of response and ready to service any time.

Aggressive and Action oriented.

Strives for excellence.

Quick to learn and very quick to implement new learning.

Process/Systems oriented.

Knows how to manage productivity.

Knows how to make profit and where to focus to get it.


Page 9

FRANCHISING STRATEGY FOR HAPPY LEARNING CENTRE

FRANCHISE TERMS

Non-Exclusive area rights according to agreement

Initial unit franchise Fee for a Stand-alone format of 500 sq. ft. is INR 1, 50,000 (Excluding

Service Tax) and INR 1, 00,000 (Excluding Service Tax) for home based.

Initial setting up of the franchise owned center will be coordinated and assisted by

Franchisor.

Franchisor will provide initial training to the respective staff.

Franchisor will provide assistance in running the center

Franchisee will monitor/supervise the business on regular basis by keeping a check on local

team and smooth coordination with the Franchisor.

Business will be run under the brand name of ‘Happy Learning Centre’

Sourcing of manpower will be entire responsibility of the franchisee. However Franchisor

will assist in recruitment and selection. The charges will be applicable in the entire process.

All employees shall be on rolls of the Franchisee and their salaries shall be payable by the

franchisee

FRANCHISE AGREEMENT

The franchise agreement of ‘Happy Learning Centre’ will include the UNIT franchisees across

the complete roll out plan. A property of minimum 500 sq. ft. area will be required for a

stand-alone format.

The agreement term is suggested to be of at least 3+3 years with an option for further

renewal, subject to mutual agreement of both the parties.

Royalty fee will be paid to the franchisor by franchisee on gross sale, which is 15%


Page 10

REVENUE AND EXPENSES SHARING

Unit Franchise Fee: INR 100,000, as per area required, and for rights & obligation of

opening one home based and INR 150,000 stand-alone center (Excluding Service Tax)

Local Marketing Expenses: Local marketing expenses will be a monthly contribution of a

percentage of sales borne by the franchisee, which will be 1.5% of gross sales.

Central Marketing Fund: Franchise will contribute 1.5% of gross sales towards central

marketing fund which will be paid on a monthly basis.

Royalty Fee: Franchisee will give 15% of gross sale to franchiser as royalty fees.


Page 11

FRANCHISOR-FRANCHISEE RELATIONSHIP

UNIT FRANCHISEE’S OBLIGATIONS

Franchise set up cost investment.

Payment of initial unit franchise Fee for a Stand-alone format of 500 sq. ft. is INR 1, 50,000

(Excluding Service Tax) and INR 1, 00,000 (Excluding Service Tax) for home based.

Center site selection.

Franchisee will work as a core investor who will be providing the property at an appropriate

location and will do the Initial Investment

Quality Control

Overall supervisory control including feedback, quality control, timely sales reporting

FRANCHISOR OBLIGATIONS

Site Approval.

Fit-outs of the center.

Providing the equipment needed at the center for Business Operations

Proper maintenance of books and accounts.

Training programs on a regular basis for Franchisee staff.

Creation and installation of Marketing material, POS etc.

All national level promotional activities and events.

Providing printed material like Brochures, Pamphlets and Flex Banners on cost basis

Franchisee will operate and manage the business to make sure that the successful business

formulae and systems get implemented at the franchisee end to run it on profit. Franchisor will

take care of quality of teaching to be delivered at franchisee end by property audit & training.


Page 12

FRANCHISE SUPPORT MECHANISM

‘Happy Learning Centre’ will manage the business to make sure that the successful business

formulae and systems get implemented at the franchisee end to run it on profit.

PRE-OPENING FRANCHISE SUPPORT

Comprehensive turn-key assistance from set-up to start operations.

Layout and design; architectural support.

Pre-opening purchasing assistance.

Assistance in organizing of launch promo.

The process starts with the location and identification of a suitable site that meets our

stringent criteria (the location, exposure, and access of a ‘Happy Learning Centre’ center).

The company can help in providing following assistance to its franchisees during the period:

Locating a suitable site for the center.

Negotiation of suitable terms and organizing for lease.

Organizing of all necessary regulatory approvals.

POST OPENING FRANCHISE SUPPORT

Advertising & local promotion

Operational Management: Daily operations and Administrative advices

Frequent official visits, advices on local promotions programs etc.

Marketing Ideas structured to suit a location.

PR support: Regular PR coverage at national, regional as well as town level. Centralized

Brand Building through all media - Print, Outdoor, Web, Retail, and Electronic.


Page 13

MARKETING PROGRAMS

LOCAL ADVERTISING

The Franchisor will provide local promotional support in association with Franchisee to spread

awareness in the given geography, which will be on a cost basis.

COOPERATIVE ADVERTISING

If two or more franchisees are established in a common market, the Franchisor will adjust the

manner in which local advertising money spent to make combined advertising expenditures more

effective. In this situation, the Franchisor may require all or part of the local advertising

expenditures to be used as cooperative advertising in that individual market.


Page 14

SUPPORT PROGRAMS

The Franchisor will incorporate a formalized mechanism for ensuring smooth and structured

operations among franchisees that will be monitored and implemented by franchise

development manager.

In addition to management of Franchise center, members of the Franchisor organization will

provide the services listed below. The Franchisor must assign a specific person to cover each of

these support areas (one person can be assigned to more than one task). The Franchisor has

the responsibility to assign a person/people to each task during the development of the

franchise program.

Operational Management -- The Franchisor will assist in the Franchise center operations,

including unit operations and maintenance, efficient student training and administrative

procedures.

Accounting/Audit/Legal -- Reporting directly to administration, this department is

responsible for the financial and legal oversight of franchisees.

Internal Support -- The functional areas of franchisee communications, and research and

development are typically included in such a department.

Overall Program Oversight -- The Franchisor will provide the overall coordination and

planning for the system.


Page 15

INITIAL INVESTMENT

Management has provided Franchise India with financial information for an average ‘Happy

Learning Centre’ unit. It represents the range of the initial investment for a new franchise and is a

required item in the Disclosure Document. It shows the potential franchise buyer what it will cost

to open the business. The range represents the potential variations in rental and other expenses

in each area. The expense items are pre-opening start-up expenses and do not represent any

ongoing expenses unless identified otherwise. These results are based on the following

assumptions:

Real Estate/Rent: The franchisee will typically be required to pay three to nine (can vary

based on location) months' rent as a security deposit.

Centre Furnishing/Improvement: Although some of these items may be leased, the estimate

represents the actual purchase price.

Equipment and Misc Items: The range of costs represents the cost involved in purchase

against all equipment’s for the franchisee center.

Marketing: Initial marketing expense in the neighborhood area and in the city will be

conducted and an initial launch of the franchise center will be conducted by the franchisee.


Page 16

ESTIMATED INVESTMENT & PROJECTIONS: HOME BASED

ELEMENTS

Centre Furnishing / Improvement etc. INR.

Signage (Int/ext) 15,000

Sub-Total 15,000

Equipments & misc items

Laptops -

Projector 40,000

Printer/Scanner/Fax -

CCTV 25,000

Sound System -

Communication equipments & Internet

Connection -

Misc (display boards, stationery etc.) 5,000

Sub-Total 70,000

Total capital investment 85,000

Launch & Pre-Opening Marketing Expenses 20,000

Software & Licensing cost 10,000

Training (Lodging & Boarding) 15,000

Total Financial Requirement for Setup 130,000

Franchise Fee 100,000

Service Tax (12.36%) 12,360

TOTAL PROJECT COST 242,000

Franchise set up cost

KEY HIGHLIGHTS

Minimum initial Investment: Approximately around INR 2-3 lakhs for an center (Including

Franchisee Fee)

Average ROI of Ist year for minimum investment: Around 375% - 425%

Pay Back Period: 0.3 years


Page 17

UNIT FRANCHISEE INCOME STATEMENT

Year 1 Year 2 Year 3 Year 4 Year 5

Franchisee's revenue 3,233,320 3,880,000 4,656,000 5,587,000 6,704,000

Expenses

Cost of Educational Kit Delivered 162,000 194,000 233,000 279,000 335,000

Cost of Operations

Employee Cost - - - - -

Referral Commission to Faculty 161,666 194,000 232,800 279,350 335,200

Incentives to Full time Faculty - - - - -

Commission to Part Time Faculty 970,000 1,164,000 1,397,000 1,676,000 2,011,000

Royalty to Franchisor 485,000 582,000 698,000 838,000 1,006,000

Electricity 30,000 30,000 30,000 30,000 30,000

Cost of refreshments/gifts 162,000 194,000 233,000 279,000 335,000

Communication Expenses (Tel + Internet) 36,000 36,000 36,000 36,000 36,000

Printing & Stationery 24,000 24,000 24,000 24,000 24,000

Quality Monitoring Charges 115,000 138,000 166,000 199,000 239,000

Misc Expenses 36,000 36,000 36,000 36,000 36,000

Marketing Expenses

Local marketing Overheads 48,000 58,000 70,000 84,000 101,000

Contribution to central marketing fund 48,000 58,000 70,000 84,000 101,000

Total Expenses 2,278,000 2,708,000 3,226,000 3,844,000 4,589,000

% of Gross Receipts 70% 70% 69% 69% 68%

PBDIT 955,320 1,172,000 1,430,000 1,743,000 2,115,000

Depreciation 8,500 8,500 8,500 8,500 8,500

PBIT 947,000 1,164,000 1,422,000 1,735,000 2,107,000

PBT Margin (%) 29% 30% 31% 31% 31%

Project Cost 242,000

ROI (%) 391% 481% 588% 717% 871%

Payback 0.3

Income projections


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ESTIMATED INVESTMENT & PROJECTIONS: STAND-ALONE FRANCHISE

ELEMENTS

Total Area 500

Centre Furnishing / Improvement etc. INR.

Furniture / Fixtures / wood work 250,000

Signage (Int/ext) 25,000

Sub-Total 275,000

Equipments & misc items

Laptops 35,000

Projector 40,000

Printer/Scanner/Fax 20,000

CCTV 25,000

Sound System 20,000

Communication equipments & Internet

Connection 5,000

LCD 45,000

Misc (display boards, stationery etc.) 15,000

Sub-Total 205,000

Total capital investment 480,000

Launch & Pre-Opening Marketing Expenses 50,000

Software & Licensing cost 10,000

Training (Lodging & Boarding) 25,000

Total Financial Requirement for Setup 565,000

Franchise Fee 150,000

Service Tax (12.36%) 18,540

TOTAL PROJECT COST 734,000

Franchise set up cost

KEY HIGHLIGHTS

Minimum initial Investment: Approximately around INR 7-8 lakhs for an center (Including

Franchisee Fee)

Average ROI of Ist year for minimum investment: Around 50-60%

Pay Back Period: 1.4 years


Page 19

UNIT FRANCHISEE INCOME STATEMENT

Year 1 Year 2 Year 3 Year 4 Year 5

Franchisee's revenue 4,093,645 4,912,000 5,894,000 7,073,000 8,488,000

Expenses

Cost of Educational Kit Delivered 205,000 246,000 295,000 354,000 424,000

Cost of Operations

Employee Cost 642,000 902,000 990,000 1,087,000 1,193,000

Referral to Faculty 204,682 245,600 294,700 353,650 424,400

Incentives to Full time Faculty 307,000 368,500 442,000 530,500 636,500

Commission to Part Time Faculty 511,500 614,000 737,000 884,000 1,061,000

Royalty to Franchisor 614,000 737,000 884,000 1,061,000 1,273,000

Rent 480,000 480,000 480,000 480,000 480,000

Electricity 30,000 30,000 30,000 30,000 30,000

Cost of refreshments/gifts 205,000 246,000 295,000 354,000 424,000

Communication Expenses (Tel + Internet) 36,000 36,000 36,000 36,000 36,000

Printing & Stationery 24,000 24,000 24,000 24,000 24,000

Quality Monitoring Charges 142,000 170,000 204,000 245,000 294,000

Misc Expenses 36,000 36,000 36,000 36,000 36,000

Marketing Expenses

Local marketing Overheads 61,000 74,000 88,000 106,000 127,000

Contribution to central marketing fund 61,000 74,000 88,000 106,000 127,000

Total Expenses 3,559,000 4,283,000 4,924,000 5,687,000 6,590,000

% of Gross Receipts 87% 87% 84% 80% 78%

PBDIT 534,645 629,000 970,000 1,386,000 1,898,000

Depreciation 48,000 48,000 48,000 48,000 48,000

PBIT 487,000 581,000 922,000 1,338,000 1,850,000

PBT Margin (%) 12% 12% 16% 19% 22%

Project Cost 734,000

ROI (%) 66% 79% 126% 182% 252%

Payback 1.4

Income projections


Page 20

DISCLAIMER

This report is not to be used in conjunction with the actual sale of franchises. The profit and loss pro forma contained

in this report reflects revenue and expense assumptions provided by Management. Franchise India has made no

attempt to verify the accuracy of figures provided by Management, and has not verified the financial statements of

any operating units upon which the assumptions are based. Sales targets for selling franchises were derived from

discussions between Franchise India staff and Management, and assumptions regarding franchise development costs

have been set accordingly.

The text and financial pro forma contained herein are intended to be used exclusively by Management and its

associates for internal discussion and planning.

THE PLANS, MATERIALS, AND CONSULTING ADVICE PROVIDED HEREIN HAVE BEEN PREPARED

BASED ON FRANCHISE INDIA'S EXPERIENCE AND THE INFORMATION AVAILABLE TO US.

HOWEVER, BECAUSE THE SUCCESS OF A FRANCHISE PROGRAM DEPENDS UPON A VARIETY OF

FACTORS OUTSIDE FRANCHISE INDIA'S CONTROL, FRANCHISE INDIA CANNOT AND DOES NOT

WARRANT THE SUCCESS OF ANY SUCH PROGRAM OR ANY OF THE PROJECTIONS OR

FORECASTS PROVIDED BY FRANCHISE INDIA CONTAINED HEREIN.