Popeye's Franchise

1.1 Introduction

Major businesses such as Coca-Cola are using various ways to venture into new and lucrative markets in different countries. These ways include foreign direct investments, joint ventures with other existing firms, mergers and acquisitions as well as through the establishment of franchises in order to succeed in foreign markets. To achieve set business objectives, effective planning, implementation and evaluation of the business idea is of vital importance. As Thompson & Stanton (2010) aver, success of a franchise depends upon effective planning and implementation as well as a comprehensive research on the elements of the existing market.

Coca-Cola has decided to establish a franchise with a business partner to distribute its products and this proposal highlights the business idea in a wholesome manner from planning to implementation in a bid to attract investor funding. Essentially, franchising is the practice of using another firm’s successful business model and involves licensing rights and obligations to copy that market’s unique brand (Thompson & Stanton, 2010).  The business can adopt the franchisor’s entire business format including marketing strategies and plans, quality control, operating standards and manuals, ongoing two-way communication as well as assistance to enable the franchisee replicate.

The new Coca-Cola franchise will distribute Coca-Cola products and primarily the soft drinks. The business will be geared towards achieving increased revenues as well as create a market niche in the area. The establishment process will incorporate various phases of the project’s management including initiation, planning, execution, control and evaluation in a bid to comprehensively allocate tasks and set out time parameters to ensure the various elements involved are implemented successfully (Project Management Docs, 2012).

2.0 Project Description

Principally, the franchise will distribute Coca-Cola products especially the soft drinks and will involve a comprehensive planning process that will essentially discuss in detail the financial aspect of the business. The project will involve renting premises, which will act as the distribution point of the merchandise as well as transport vessels including three Lorries and a personal car. It will also require three drivers with two support personnel for loading and off-loading purposes. Franchise fees will also be estimated as well as the minor equipment requirements for the implementation process to ensure allocation of effective and adequate budget provisions and resources. The business will be established to gain increased revenues from the existing market in addition to establishing a product market niche and potential expansion of the business.

3.0 Project Initiation and Planning

In this phase, the project activities will include drafting the general requirements of the business including resources needed especially finances, acquisition of licenses as well as business registration requirements. It will also consider the type of staff required in terms of qualifications, terms of employment and salaries among other important staff requirements. Additionally, general objectives, mission and vision statement and goals of the business will be discussed. This will provide a framework or basis for the next phase through brainstorming sessions where the next phase will involve drafting a more detailed plan for the project’s implementation and management.

Generally, this will involve a meeting consisting of the project manager and his team where the activities discussed in the initiation stage will be laid down in its details into a comprehensive project plan. The business objectives and goals, short-term and long-term, as well as mission and vision statements, will be drawn. The resources needed, which include personnel, three Lorries and a personal car, premises, licenses and other registration requirements and their associated costs will also be laid down in the plan. Evaluation and monitoring procedures will also be set out to ensure the implementation process is followed effectively according to plan while addressing upcoming challenges and initiation of necessary changes.

4.0 Project Execution, Control and Evaluation

The phase entails the actual implementation of the project where the outlined requirements in the planning stage will be provided to start the business actually. Requirements needed include three Lorries, a personal car, and premises including an office and the major store, personnel, finances as well as projected budget provisions including cash flow statements as written reports. The licenses for the business also will be paid for, as required by license regulations as well as negotiating for the franchise licenses in the form of contracts with the franchisor. Control of the project will involve evaluation of the implementation process through the reports written at each stage and outcomes in order to ensure the project is being implemented according to the plan.

It will also involve following up on the drafted risk management plan, which shows the various risks in every stage of planning and implementation. This implies that the risk management plan will be drafted in the planning stages and reports will be documented about the implementation process. An audit will also be carried out of all hardware and supplies procured for the project to ensure that all procured products are utilized for the required purposes and also accounted for. All files and records also will be updated to reflect the progress of the project in addition to enabling staff to analyze comprehensively the project’s progress to initiate any necessary changes. The project’s Gantt chart, a graphical representation of task durations against time and effective for project planning and scheduling will provide details for the various tasks and their timelines (”About Gantt Charts” , 2012).

5.0 Cost Estimates

Cost estimation involves a prediction of cost and quantities of resources required by the business and hence includes an acknowledgement of the various risks and uncertainties involved (“Attachment D to Planning Procedure 4”, 2010). The project initiation and planning phases will utilize few resources as the process will require only a meeting place or venue, which will be rented for two days for the two phases. Additionally, few supplies such as writing materials and a provision for tea among others will be required also with the overall cost going for about $250 for the initiation and planning phases including any rise in costs.   

Much of the costs will be felt in the project execution, control and evaluation phases, which involve implementation of the project. Estimation of costs is tied to calculations of cash inflows and outflows with regards to the business. According to Principles of Accounting.com (2012), cash inflows in terms of operating activities primarily include receipts from customers for the provision of goods and services in terms of revenues. On the other hand, cash outflows comprise payments for employee salaries and wages, inventory, taxes and license expenses in addition to other varied business expenses. Since the implementation process is based on cost estimates, contingencies in cost estimation will be utilized.

5.1 Estimates, Accuracy and Project Stages

To reiterate, cost estimates should consider various risks and uncertainties inherent in the different stages of the project’s planning and implementation phases. The risks and uncertainties define the accuracy of the estimates in relation to the actual costs involved. The types of estimates, which will be involved generally include planning and procurement estimates for the initiation and planning and execution, control and evaluation project phases respectively.

The level of detail in the estimate increases as the project develops from initiation to execution. The level of project definition highlights the number of processes involved in the stages while the type of estimate shows the main variable estimate as in procurement of resources in the execution stage. Suggested contingency levels and expected accuracy ranges show decreases with an increase in level of definition implying that estimates should be as near to the actual costs as possible.

5.2 Project Cost Summary

The project cost summary will be highlighted by estimates on costs of various elements in the various stages of the project. They include labor, equipment and supplies, premises contingencies for the above elements and escalation estimates, which include percentage allocations on unknown risks such as prohibitive government legislations that may arise in the course of the project.

5.3 Cash Inflows and Assumptions

In order to assess the viability of a business or whether, the business is capable of attracting revenues and profits, a cash flow analysis is done. This analysis enables to determine a business solvency and the ability of the business to run its daily operations in the long term. Cash flow analysis highlights the movement of money to and from the business and allows management to assess whether the business has enough cash for business operations (Ward, 2012). The price for distribution of the commodity is estimated at $144,000 per lorry for a single distribution task.

The associated assumptions include: the job may require a flexible number of employees, which the franchise has allocated two or more support personnel as a contingency measure. It was also assumed that the Lorries would be working per day therefore the monthly and per annum calculations on the business’ revenues. It was also assumed that the hours needed by lorry drivers would not require working in shifts. The costs included in terms of escalation were more likely to happen or change than those involving contingencies. That is why the calculations have been calculated according to the potential risks and uncertainties experienced as a result of any contingencies or escalation variables and thus allowing for the possibility of failure if costs rise unexpectedly.

Estimated cash inflows per annum as sales forecasts amount to $1,728,000 per Lorry, which is dependent upon distribution being in terms of full lorry purchase of merchandise. In contrast to the expenses or costs incurred, which amount to $929,400, the business can be seen as viable as it has a high profit margin considering the projected revenue amount calculated is for one Lorry. Projected cash inflows for year one, two, three, four and five are 150000, 180000, 200000, 400,000 and 800,000 respectively. Total expenses for upcoming five years will include the start up costs of $929,400 in addition to projected annual expenses of 700,000 equating to $1,629,000. Taking the base profit percentage required to be 30%, calculation of net present value, which highlights the amount of profitability of the business in the future shows higher profits according to present value of the franchise.

Net present value calculations

Addition of 10% of each of the projected cash inflows individually per year will amount to $519000 and when added to the original amounts will add up to $2,249,000. The projected future cash-inflows minus the gross expenses amount to $620,000. This highlights the net present value of the business after five years, which shows that the business will be earning a profit after a five-year period (Demand Media, 2012).

6.0 Conclusion

In conclusion, the above information highlights the potential of the described business franchise. The Gantt chart below highlights the details of operations and the time parameters that will be utilized for the implementation of the Popeye’s project. Estimated cash inflows highlight the viability of the business as the projected revenues minus the projected expenses show that the business will be quite lucrative. Therefore, the proposal represents a good business venture for interested investors.