Cash Flow Forecast Template for Franchises

Franchisees pay a share of every sale back to the franchisor, typically as a royalty and a marketing fund contribution, usually calculated on gross sales and paid the following week or month. Add inventory bought from approved suppliers, payroll and rent, and the margin left for the owner can be thin. A cash flow forecast shows what’s really left after the franchisor is paid.

Why franchise cash flow is different

• Royalties are on gross sales. You pay them whether or not the store is profitable that month.
• Fees are paid in arrears. Royalties and marketing fund contributions are often due the week or month after the sales.
• Approved suppliers. Inventory from approved suppliers may carry set prices and payment terms.
• Technology and other fees. Point-of-sale systems, software and training fees add to fixed costs.
• Refurbishment requirements. Franchise agreements may require periodic updates to the store.

A worked example

A franchised store sells about $87,000 a month. The royalty is 6 percent and the marketing fund 2 percent, both paid the month after the sale. Inventory costs 30 percent of sales.

January’s fees are based on December’s stronger sales of $92,500, so a quiet January pays for a busy December. Paying fees a month in arrears makes the first quiet month of the year tighter than the sales suggest.

How to build a franchise cash forecast

1. Forecast store sales by month from your trading history or the franchisor’s benchmarks.
2. Calculate royalty and marketing fund contributions, paid on your agreement’s timing.
3. Tie inventory purchases to sales.
4. Add payroll, rent, equipment finance and technology fees.
5. Schedule any refurbishment or renewal fees.
6. Keep a buffer for the months after your peak.

Common mistakes

Forecasting profit before royalties. Forgetting that fees are due on last month’s sales. Underestimating required refurbishments. And comparing your costs to franchisor averages without checking your local rent and wages.

What the template gives you

The Franchise template includes a Royalties & Fees tab that calculates royalty, marketing fund and inventory as percentages of store sales, with royalties paid a month in arrears. Change your sales forecast and every fee updates automatically.

Key assumptions built into the Franchise template

• The Royalties & Fees tab calculates royalty at 6% of store sales, paid 1 month later, marketing fund at 2% of store sales, paid 1 month later and inventory at 30% of store sales. Change a percentage once and every month of the forecast updates, so costs rise and fall with the sales that drive them.
• 4 cash in lines and 7 cash out lines are already named for franchise businesses, and every one can be renamed or extended.
• The example figures follow a typical franchise year, busiest in December and October and quietest in January and February, so the tight months show up where they usually fall.

Every assumption sits in a yellow input cell, so you replace the example with your own numbers in minutes. The same figures flow through a 13-week weekly view, a 12-month monthly view and a 3-year outlook, and a dashboard shows your lowest balance, the weeks that fall below your minimum buffer and your cash runway.

Free or premium?

If you only need the basics, the free 12-month template or the free 13-week template will get you started today. The premium Franchise template saves the setup time and adds the tabs above, best and worst case scenarios, and an actual vs forecast tracker that shows where your forecast was wrong, so next month’s is better.

Franchise cash flow forecasting: questions

How are franchise royalties calculated?

Usually as a percentage of gross sales, commonly 4 to 8 percent, plus a marketing fund contribution of 1 to 4 percent. Check your franchise agreement for the exact terms.

When are franchise royalties paid?

Often weekly or monthly in arrears, based on the previous period’s sales. Forecast them in the period they’re actually paid.

Should franchise fees be included in a cash flow forecast?

Yes. Royalties, marketing contributions, technology fees and renewal fees are all real cash out and can be a large share of costs.