Is Your Business Financially Ready for Franchising in Belarus?

Profit from an existing business is not, on its own, proof that the model can work for a franchise partner. The owner may manage the outlet without taking a salary, use their own premises and receive personal discounts. Before developing a franchise network in Belarus, recalculate the results as though the business were run by an independent entrepreneur. The steps below explain how to carry out this assessment, without setting a franchise price or promising a payback period.

1. Separate the outlet’s performance from the owner’s resources

Start not with a sales presentation for prospective franchisees, but with a management income and expenditure report for one existing outlet. Choose a period covering a full seasonal cycle. If the business has been operating for less than that, clearly identify the months and fluctuations in demand you have yet to observe.

Bring together revenue, refunds, purchasing costs, payroll, rent, utilities, advertising and other expenses. Reconcile till records, bank statements and data from your accounting system. Money received into the bank account is not always revenue: receipts may include loans from the owner and advance payments for orders not yet fulfilled.

Then draw up a separate list of resources the outlet receives free of charge or at below-market rates:

• the owner’s work as a manager, buyer or salesperson;
• premises owned by the business owner;
• accounting and advertising paid for by another company belonging to the owner;
• transport, equipment and storage whose costs are not reflected in the report;
• supplier discounts based on personal relationships or total purchasing volumes.

For each resource, record its actual cost and the likely cost to an independent partner. Support the latter with quotations from landlords, service providers or suppliers, rather than a convenient estimate. This will give you a list of adjustments needed to move from the owner’s profit to a result another operator could reproduce.

2. Calculate profit without hidden subsidies

Normalised profit is the result after replacing the owner’s special arrangements with terms available to a future franchisee. It is a management measure, not a separate statutory reporting format.

If the owner manages the business every day, add the market cost of that work, including any applicable compulsory payroll charges. Even if the partner intends to do the work themselves, show two results: before and after remuneration for their labour. Otherwise, a manager’s earnings will be misrepresented as a return on invested capital.

For the premises, use a substantiated rental estimate for a comparable property. For centralised services, establish which functions the partner will purchase independently and which the franchisor will provide. Do not count the same service twice, but do not leave it without a source of funding either.

Remove one-off income unrelated to normal operations, such as proceeds from selling old equipment. Show one-off expenses separately and explain why you have excluded them. Routine repairs cannot be treated as exceptional simply because they reduce profit.

A table with four columns is useful: item, actual amount, adjustment and supporting evidence. Every change should be verifiable. The aim is not to produce the most attractive profit figure, but a transparent calculation another entrepreneur can reproduce.

3. Check for cash shortfalls and equipment replacement needs

A positive profit does not guarantee cash availability. An outlet may need to buy stock in advance, offer customers payment terms and pay wages at the same time. A cash flow forecast is therefore needed alongside the profit and loss report.

Divide funding requirements into three parts:

• initial investment before opening;
• working capital for stock and day-to-day payments;
• a reserve for adverse scenarios and unexpected costs.

A rental security deposit and opening stock require cash, although they may not be recognised in full as expenses for the period. Show them separately. Treat loan principal repayments similarly: they affect the cash balance but are not an expense in the profit and loss report.

Draw up a maintenance and replacement schedule for key equipment. If today’s profit depends on equipment bought long ago, the partner will still need to fund its eventual replacement. Do not confuse accounting depreciation with actual future payments.

Test several scenarios: slower sales growth, higher purchasing costs, a delayed opening, and an equipment breakdown coinciding with a seasonal fall in demand. For each, state the source of your assumptions, the minimum cash balance and the additional funding required. There is no single reserve amount that is sufficient for every franchise.

4. Document the conditions under which the model works

The assessment should produce a financial profile of the business format: the type of outlet, required operating volumes, staffing, cost structure, cash requirements and the conditions under which the calculations apply. Separately identify any advantages you cannot yet guarantee to a partner. For example, a supplier discount should not be included in the base case unless its availability has been confirmed.

In Belarus, tax assumptions must be checked with an accountant for the specific prospective franchisee, taking account of their legal form, business activity and applicable tax regime. You cannot simply transfer your own company’s tax burden into the partner’s model.

Franchising in Belarus is specifically governed by Chapter 53¹ of the Civil Code, ‘Comprehensive Business Licence (Franchising)’. Article 910 defines the contractual arrangement, while Article 910¹ requires the agreement to be in writing and registered with the patent authority, the National Centre of Intellectual Property. The financial profile does not replace this agreement, and registration of the agreement does not validate projected profits.

Before offering the franchise, check the financial model against the draft contractual obligations: it must include all mandatory payments, purchases and costs the partner will incur. If the result becomes negative after the adjustments, first revise the business format or remove its dependence on the owner’s resources.

Practical takeaway: prepare a franchise for sale only when you can explain not just how much profit it makes, but also the cost of the owner’s labour, its working capital needs and the conditions under which the calculations no longer hold.