Retail Tennis Shop Business Plan

The growth of Tennis Master will be financed by its successful initial capitalization, followed by franchise fees and royalties.

Initially, a Private Placement of $1 million will be sold, $500,000 is required to start-up.

An additional $500,000 is infused from a continuation of the same placement. The $100,000 infusion in March will permit the corporate headquarters and warehouse to open on schedule.

If franchises are marketed successfully and on schedule that revenue will fuel growth to positive cash flow and profitability in year one.

7.1 Important Assumptions

The following assumptions are used in this plan.

• There is no projected borrowing.
• Retail sales and franchise fees are treated as cash when collected. There are no payment terms on these items.
• Royalties are also treated as cash even though they lag 30 days to collect from the time period incurred. They appear as collected.

Other assumptions appear in the table below:

7.2 Key Financial Indicators

The key indicators in our plan illustrate increasing sales, control of costs, and increasing margins as market maturity is attained.

7.3 Break-even Analysis

The following assumptions are used for the purpose of this break-even analysis. If Tennis Master opens the Anytown flagship corporate retail store and also the new corporate headquarters and incurs the overheads and salaries associated with those two events, then the analysis shows how much monthly revenue in either franchise sales (from corporate) or retail training (from the store) would be required to sustain business until either more investment or more revenues could be developed. Training and franchise sales are figured at 90% gross margins for this purpose. Monthly overhead or “burn rate” approaching $200,000 at that point in time.

The break-even sales required to stay in business is shown below, in either franchise fees or combined franchise fees and retail training revenue. Or, one master franchise sale, or three retail store franchise sales.

7.4 Projected Profit and Loss

The following projected profit and loss table and chart derives from sales projections over operating expenses. Any variance in sales would have an immediate impact on these figures. Two important explanations are required:

1. Leased equipment consists of swing analysis systems and simulators needed for company stores. (The lease payments are projected at rates consistent with high-cost franchise lease rates. Term of leases is five years with a 10% residual buy-out or renewal option).
2. Depreciation is for leasehold improvements for company owned stores ($50,000 depreciated) and corporate headquarters and warehouse ($100,000 depreciated). All depreciation is straight-line five years.

Tennis Master projects bottom-line profits are quite healthy in 1997, and grow steadily through 1999. While it is unusual for a business to show such a substantial profit in its first year of operations, these figures are attainable in a franchise company primarily from the impact of franchise fees alone.

7.5 Projected Cash Flow

The critical time for cash flow for Tennis Master is the first half of 1997. During this time period substantial cash-out is needed to establish both the flagship Anytown store and the new corporate headquarters and warehouse. These cash expenditures are all hard cash out to be recouped by depreciation. Flow-in of investment funds are also critical. The only way to survive through this period is to curtail expansion if that becomes necessary. Additional capital (not planned for) would need to be raised later in 1997 if franchise sales fall far behind expectations.

Given the above assumptions, the following table and chart show that there will be sufficient cash to execute the plan. With successful execution the company would have a hefty cash balance at the end of 1997 and a stable and enviable cash position at the end of 1999.

7.6 Projected Balance Sheet

The following table projects our balance sheet for the next three years:

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5941, Sporting Goods and Bicycle Shops, are shown for comparison.