Unit: Managing financial resource and Decisions
Assignment: A Pizza Hut Franchise
Compiled by: Binh Truong, MSc.
A Pizza Hut Franchise
After some years working in the tertiary sector including spells as a manager for a restaurant and as General Manager for a 5 star Sheraton hotel you have decided that it is time to start your own business.
After looking around at the opportunities available you have de cided that a franchise of a fast food restaurant is a suitable business for you to operate. You know how the franchise system works and have seen other colleagues successfully start up their own franchises from some of the major operators in this sector.
You have, after considerable research in your local area, decided that a nearby shopping centre – Gunwharf Quay - has potential as an outlet for a further fast food operator and that a “Pizza Hut” franchise placed in the centre would meet customers´ needs. You have contacted the corporate headquarters of the “Pizza Hut” chain – an American pizza business- and now know what sort of start up costs you are looking at and have realised that you will require some sort of financing in order to purchase the franchise and lease and equip suitable premises.
The projected start-up costs are:
Initial Cost of Pizza Hut Franchise – £13000*
Training course costs – £1200
Deposit and initial lease payment for premises – £12000
Estimated costs of equipping premises – £7500
Sundry costs – £5000
The balance in your savings account is £9500
* Pizza Hut also charges a payment out of your pre-tax profits of 12% for the continued use of the franchise, to be paid at the end of each financial year. You will produce an individual written report for this assignment. The report should be approximately 1500 words and presented in a formal report style.
Sources of Finance
This task addresses LO1 – 1.1, 1.2, 1.3/ LO2 -2.1
Produce a report that can be used to determine the best source(s) of finance for you as you look to open your new Pizza Hut franchise. Please include sections on the following: 1. Describe and explain a range of sources of finance for different businesses. Include appropriate sources of finance for your personal franchise (operated as a sole trader) and also for the franchise holder (operated as a Public Limited Company). (1.1) 2. For each of the sources of finance you have commented on add a paragraph in which you assess the implications of that particular source of finance for the business concerned. (1.2)
3. Add another paragraph to each of the sources of finance you have commented on in which you identify the various advantages and disadvantages of the finance option. Once you have done this you need to clearly evaluate whether the finance option is appropriate for you as you look to obtain the necessary funding for setting up your franchise. (1.3)
4. Lastly, for each of the finance options you have studied, add a paragraph in which you analyse the various costs associated with each option. (2.1)
You have managed to obtain the necessary finance for your new business and now need to give consideration to the use of finance as a resource
You will produce a formal written report with financial statements and analysis.
This task addresses LO2 – 2.2, 2.3, 2.4
Produce a report that shows your understanding of financial planning, decision making and accounting for finance. Please include sections on the following: 1. Planning your finances is crucial if you hope to succeed in your new business venture and so the first part of this task requires you to explain the importance of financial planning. Explain why it is important to identify cash shortages and surpluses and construct a cash flow forecast to illustrate your points. Then explain what the implications are if you fail to finance your business adequately and also the concept and implications...