Is your Belgian business financially ready for franchising?

A profitable business does not automatically make a financially viable franchise model. A future franchisee may pay a different rent, need to finance an initial investment and face costs that your existing outlet does not have. Anyone looking to build a sustainable franchise network in Belgium should therefore start with one question: does the business model remain attractive when another independent operator takes it on?

1. Turn your accounts into a comparable outlet model

Start with the actual figures from your existing business. Ideally, use several completed financial years alongside recent monthly figures to highlight seasonal patterns and exceptional periods. Break down income by your main products or services. Look beyond turnover and focus on what each activity contributes after direct costs.

Then adjust for items that make your own circumstances unusual. Premises you already own, an exceptionally favourable lease or fully depreciated equipment may make your current results look better than those of a new outlet.

Make at least the following adjustments explicit:

• Premises: use a rental estimate supported by evidence for the intended type of location.
• Labour: include realistic remuneration for the owner's work, even if your own remuneration is currently treated differently in the accounts.
• Equipment: allow for maintenance and future replacement, not just current depreciation.
• Purchasing: check whether a new outlet would genuinely receive the same purchasing terms.
• Exceptional items: keep one-off grants, unusual contracts and non-recurring costs separate.

Always retain the original figures alongside the adjusted model. This makes it possible to distinguish actual performance from assumptions.

2. Calculate what is left for the franchisee

Now prepare a separate profit and loss forecast for one future franchise outlet. Include all expected costs: staff, rent, energy, insurance, software, local marketing and the anticipated payments required under the franchise model. The aim here is not to set franchise fees, but to assess their combined effect on viability.

Watch out for double counting. If certain software is included in a recurring fee, do not list the same licence again as a separate expense. Equally, a franchisee should not discover that essential tools have been left out of the budget.

Next, calculate the break-even point: the turnover at which revenue covers all the costs included in your forecast. Use the weighted contribution margin of your actual sales mix. An average margin can be misleading if growth comes mainly from less profitable products.

Then assess whether that turnover is achievable in practice. How many customers, orders or billable hours would it require? Is that feasible within the opening hours, staffing levels and available space? A spreadsheet can show growth that an outlet cannot handle operationally.

3. Separate profit from available cash

Even a profitable outlet can struggle to pay its bills. Stock may need to be paid for before it is sold, customers may pay later, and loan repayments reduce available cash without appearing in full as an expense in the profit and loss account.

Alongside your profit and loss forecast, prepare a monthly cash flow forecast. Cover the preparation stage, opening and the period leading up to stable operations. Record when money actually comes in or goes out.

Include:

• the rental deposit, fit-out and installation costs;
• opening stock and initial supplier payments;
• training, wages and other pre-opening expenses;
• VAT payments and any refunds;
• interest and loan principal repayments;
• essential personal drawings or remuneration for the owner.

The lowest point in this forecast indicates the expected funding requirement before adding a contingency buffer. Base that buffer on specific risks, such as a delayed opening or slower customer growth. Do not confuse supplier credit with a reliable source of long-term funding.

4. Test setbacks and define when not to proceed

Develop a base-case scenario and at least one downside scenario. Do not change turnover alone. Also examine the effects of a lower gross margin, higher staffing costs and a longer start-up period. Some setbacks compound one another: fewer customers do not mean that rent or minimum staffing levels fall proportionately.

Decide in advance under what circumstances you would not yet proceed with franchising. Examples include a model that only works with exceptionally low rent, consistently leaves the owner with inadequate remuneration or requires extra funding as soon as a modest setback occurs.

Ask an accountant to review the assumptions and calculations and check that they reconcile with your accounts. Specifically ask which assumptions have the greatest impact on the outcome. This is more valuable than simply checking the arithmetic.

5. Share financial information carefully under Belgian law

For a franchise network in Belgium, transparency also has legal significance. Book X, Title 2 of the Belgian Code of Economic Law governs pre-contractual information for commercial cooperation agreements. Under Article X.27, a prospective franchisee must receive the draft agreement and the pre-contractual disclosure document at least one month before entering into the agreement. Article X.28 sets out what that document must contain.

Your financial feasibility analysis does not replace this statutory information. When sharing figures, clearly distinguish between historical results, adjusted calculations and forecasts. State the source, period covered and key assumptions; never present a scenario as a guaranteed return. Have a specialist lawyer check that the information complies with the current legal framework.

Practical conclusion: only start offering your franchise model when a realistic outlet budget, cash flow forecast and downside scenario together show that an independent franchisee can build a viable business with it.