Cow’s London Udderlie’s Situation：
Both well educated and employable Financially stable
Want flexibility in their investment Claim to have an entrepreneurial spirit
Udderlie’s Requests：
Need help preparing for a meeting to receive financing from Confederation Bank Requested
Evaluation of overall idea
Preparation of the Pro Forma Statements Ideas for Collateral
Identify potential issues bank may have
Initial Recommendation：
Want to maintain current work/family balance
Franchise may not provide independence or creative outlet Viewing as investment, not as a business venture
Bank’s Required Information：
Looking for concrete information
Need to be assured they can invest in you Want pro forma financial statements Prove you will be able to pay them back
Research Conducted by the Udderlies：
Done extensive market research, James has a background in the field and can analyze market research properly
Target market of employed individuals, recognizing high price point Franchiser Information Franchiser has well developed store design standards and specifications Franchiser offers a lot of support and provides costs Great location
meets high quality target market segment and is a high traffic area
Numerical Analysis for Bank：
Aggressive debt repayment plan: Debt to Equity
1995-1996 Fiscal = 1.02
1996-1997 Fiscal = 2.38 * large loss in first year reduced equity by over 50% ROI
Fiscal year 1996-1997 = 17.5% Growth
Sales increased $278,586 or 69% in one year Calculation of Forecasts
Sales forecasts based on information from franchisor and seasonality:
Many costs are variable and dependent on amount of sales Help with seasonality of business No tax expense in first operating year Loss carry forward for the next year
Several items are required by the franchiser
Collateral Options:
$160,000 of Equipment
$50,000 of Merchandise Inventory
Potential Bank Terms:
Maximum Debt-to-Equity Minimum Cash Balance
Floating Rates on Loans due to hostility in the market
Summary:
Timing of the deal is critical, to line up franchisor and landlord
Financing is required during off seasons in early years of the company New government small business grants/loans are a great opportunity Bank is looking to make relationships
Final Thoughts:
Main issue that the Cow’s Franchise may not be the best investment for the Udderlies
Do not desire to invest a lot of time, already seeking to hire a full time investment manager Do not have creative control Steady return will take a few years Many other investing options available
