Looking for a coffee shop franchise business plan? You're in the right place.
A franchisee answers to two parties: a lender who wants to see the debt covered, and a franchisor whose fees come off the top of every sale. How much does the franchise fee and build-out really cost? What is left of a dollar of sales after royalty and the brand fund? How long before the cafe pays its owners? A franchisor's disclosure document gives the fees and leaves the answers to you.
In this article we'll walk through a complete sample business plan for one franchised cafe in Atlanta, Georgia, section by section. We'll cover the executive summary, the terms of the franchise agreement, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The franchise terms table: see which fees a plan has to carry, so you can lay your own disclosure document next to it and spot what you have missed
- The start-up budget: find out how a build-out, equipment, required opening inventory and a cash reserve add up to the raise a lender will ask you to defend
- The fee stack: learn how royalty, brand fund and technology fee together take about 8% of sales, and what that does to break-even
- The first year, month by month: spot the weeks that lose money before you open, and plan your reserve around them
- The local marketing plan: see what an owner spends on top of the brand's fund to win office orders and app members
- The five-year profit, cash flow and balance sheet: understand how pay rises, a second manager and loan repayments show up in the numbers
- The downside case: have an answer ready for "what if sales are a fifth short?", along with the steps the owner takes in response
If you're weighing a coffee franchise, read this before you sign. The brand and the cafe are fictional, so take what fits your own agreement and change the rest.
In this plan
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Ridge Row at a Glance
Ridge Row, LLC will own and run one franchised Harlow & Pine Coffee cafe in Midtown Atlanta, Georgia. Harlow & Pine is a regional cafe brand invented for this plan. The unit takes about 1,650 square feet of in-line space on the ground floor of a mixed-use building, on a corridor of offices and apartments. It opens in January 2027 under a ten-year franchise agreement, with the lease written to run for the same term.
Denise Calloway owns 75% and works in the cafe full time as owner-operator. A silent investor owns the other 25%. The company needs $632,000: $130,000 of Denise's savings, $150,000 from the investor and a $352,000 bank term loan. Of that, $424,000 goes into the build-out, equipment and signage the brand requires, $40,000 into the initial franchise fee, $21,000 into required opening inventory, $70,500 into a cash reserve and the remaining $76,500 into training, permits, legal work, loan costs and the opening campaign.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $930,250 | $1,136,270 | $1,267,033 |
| Net income after start-up costs | ($83,853) | $55,230 | $89,352 |
| Closing cash | $135,611 | $214,659 | $265,626 |
The cafe earns an operating profit in Year 1 but shows a loss after the $116,500 of start-up costs that are written off at opening. January to March lose money while traffic builds, and every month from April is positive. About 8% of every dollar of sales leaves the building again as royalty, brand fund and technology fee, which is why the plan lists the stack as its own lines.
A one-fifth sales shortfall is modeled as well. With fewer crew hours, no second assistant manager, a cut to the owner's pay and no distributions, the cafe keeps cash in the bank in every year and loses money only in Year 1. Net margin in the base case peaks at 7.1% in Year 3 and does not reach 8%. The plan does not push prices or trim crew to close the gap.
The Franchise Agreement and the Company
Legal name: Ridge Row, LLC, a Georgia limited liability company. Franchisor: Harlow & Pine Coffee, a fictional brand with company-owned and franchised cafes across the Southeast. Owners: Denise Calloway 75%, silent investor 25%. Premises: 1,650 square feet in Midtown Atlanta, ten-year lease. Stage: the disclosure document has been read, the site has been approved by the franchisor and the lease is in negotiation.
What Ridge Row sells
Espresso drinks, drip and cold brew, a short breakfast and lunch menu from the brand's approved list, office coffee boxes and bagged beans. The brand sets the menu, the recipes and most of the suppliers. Ridge Row sets its hours, its crew and the way it works with the neighborhood.
The terms this plan uses
The figures below are this plan's own. A real franchisor's figures sit in its disclosure document, in Item 5 (initial fees), Item 6 (other fees) and Item 7 (estimated initial investment), and they differ by brand.
| Term | In this plan |
|---|---|
| Initial franchise fee | $40,000, paid at signing |
| Royalty | 5.5% of gross sales, paid weekly |
| Brand and advertising fund | 2% of gross sales |
| Technology fee | $495 a month for point of sale, app and reporting |
| Term | Ten years, with a renewal on conditions set by the franchisor |
| Territory | A protected area around the cafe, defined by the agreement |
| Supply | Beans, syrups, paper goods and food from the brand's approved suppliers |
| Local marketing minimum | A share of sales set by the franchisor; the plan spends about 1.1% of sales each year |
| Renewal and transfer | Fees set by the agreement and not modeled in the five years |
| Remodel | A refresh to the brand standard late in the term; the plan builds $3,000 to $15,000 a year toward it, and the real cost sits in the disclosure document and may be far higher |
Franchise rules that apply
The Federal Trade Commission's Franchise Rule requires a franchisor to give a prospective buyer a disclosure document before the buyer signs or pays, with a minimum waiting period that counsel should confirm. Some states add their own registration or filing requirements. Whether Georgia or the franchisor's home state does is a question for a franchise lawyer, and the plan relies on neither answer. The disclosure document's Item 19 may report franchisee sales if the franchisor chooses to include it; the sales in this plan are the owner's own estimates, not franchisor figures. Ridge Row's lawyer reads the agreement and the lease together, because the franchise term, the lease term and the personal guarantee on each have to line up.
Targets for the first three years
- Reach 218 orders a day in Year 1 and 269 a day by Year 3.
- Cover operating costs, fees included, in every month from April 2027.
- Show a profit after tax in every year from Year 2, after the start-up costs.
- Repay the bank loan on schedule and begin owner distributions in Year 3.
The Atlanta Coffee Market
Where cafe coffee is bought
A cafe customer chooses among several kinds of seller, and the franchise brand sits in only one of them.
| Alternative | What it offers | Why a customer picks it | What Ridge Row offers instead |
|---|---|---|---|
| National drive-thru coffee chains | Speed, app ordering, wide menus | A car and a short window | A place to sit and meet, and walk-up service in a dense neighborhood |
| Other franchised cafes | The same model with different brands | Familiar names and loyalty apps | A tested menu and an owner on site |
| Independent specialty cafes | Small-batch roasts and a distinct look | A local identity | Longer hours, consistent product and an app |
| Convenience stores and fast food | Low price and long hours | Price and convenience | Cafe-quality drinks and a food menu |
| Office coffee and home brewing | Cost per cup | Nothing to buy on the way | Catering boxes, which turn the office pot into an order |
The table describes categories of seller, not named competitors. Prices and openings change often, and the plan quotes none of them.
What makes a franchise unit different
A cafe in a franchise system competes with every other cafe on the block, and its own brand gives it three things an independent lacks: a menu that has been tested elsewhere, a purchasing price on supplies and a shared marketing fund. In exchange, it gives up about 8% of sales and gives up control of the menu, the suppliers and the look. The plan treats that exchange as the decision at the center of the business.
Strengths, weaknesses, opportunities, threats
| Strengths | Weaknesses |
|---|---|
| A full-time owner-operator with twelve years in cafe operations | The fee stack is paid whether the cafe makes money or not |
| A brand with an app, a loyalty program and regional marketing | Menu, suppliers and look are set by the franchisor |
| A site approved by the franchisor and a lease matched to the term | Build-out debt is fixed for ten years |
| Opportunities | Threats |
|---|---|
| Office catering at a high ticket and a low labor cost | Supplier price rises passed on by the franchisor |
| A second unit or a drive-thru kiosk later, if the agreement allows | A competing cafe opening just outside the protected area |
| Retail bags and cold-brew bottles at the December peak | Crew turnover and rising wages |
Who Comes Through the Door
The weekday regular
An office worker or resident within a short walk who buys one drink most mornings and comes back three or four days a week. This is the bulk of the 56,000 counter and walk-up orders in Year 1. The regular rewards speed and a familiar order, and notices a wrong order quickly.
The app member
A customer who orders ahead and collects. The plan expects an average of about 2,250 active app members in Year 1, each ordering about ten times on average (many order only now and then), for 22,500 app orders. App orders run at $8.20, above the $7.40 at the counter, because a customer composing an order on a phone tends to add a second drink.
The office manager
One person who orders for a meeting, a team or an event. Catering is the smallest stream in Year 1, at $48,000, and the highest order value at $64 a box.
The occasional visitor and the gift buyer
Weekend visitors and December shoppers. They carry the packaged beans, mugs and cold-brew bottles, which sell $9,166 in December against $2,483 in January.
Building the Daily Order Count
From opening day to a settled week
Ridge Row opens at about 60% of its settled counter traffic and reaches settled traffic by month 11. The app starts lower, at about 30% of settled volume, because members join over time. The plan counts 218 orders a day across the counter and the app over Year 1, rising to 269 a day by Year 3 from steadier regulars, a larger app base and the 3% annual price increase.
What each stream earns
| Stream | Year 1 revenue | Share of Year 1 | Cost of goods |
|---|---|---|---|
| Counter and walk-up drinks | $414,400 | 44.5% | 23% |
| Mobile-app pickup | $184,500 | 19.8% | 24% |
| Food and bakery | $232,200 | 25.0% | 33% |
| Office catering | $48,000 | 5.2% | 28% |
| Packaged beans and merchandise | $51,150 | 5.5% | 50% |
Where the mix and the margin come from
Two choices lift the plan above a plain walk-in cafe. The first is mobile pickup: the site has a marked pickup shelf by the door, so app orders (higher ticket, handed over without a queue) rise from 29% of orders in Year 1 to 35% by Year 5. The second is a food program. The brand's breakfast sandwiches and lunch items reach about 5.5 items for every ten orders in Year 1 and six in ten by Year 5, and a part-time prep cook works the lunch station from month 1. Food costs 33% of its price against 23% for a counter drink, so it earns less per dollar, but each added item rides on a ticket that is already paying for the crew. Together with the smaller loan they carry net margin to 7.1% in Year 3, the best year in the plan. It does not reach 8%, and the plan does not raise prices or trim crew to get there.
How the first catering accounts are won
The owner and assistant manager visit offices within a short walk with a tasting box during the first six weeks. About 12 recurring accounts ordering every second week would give 312 orders in a full year. With start dates spread through Year 1 they produce about 200, and one-off meetings and events supply the remaining 550 of the 750 catering orders.
Price and menu
Prices are the brand's menu prices adjusted for Midtown, and the plan applies a 3% increase each year from Year 2. A counter order averages $7.40 including add-ons such as an extra shot, alternative milk or a second drink on some orders, and an app order $8.20. Food is counted separately, so a ticket that includes food averages about $10.60 across the cafe's drink and food sales. Menu changes, seasonal drinks and limited offers come from the franchisor's calendar, so Ridge Row can time them to the neighborhood but not originate them.
Local Marketing Inside a Regional Brand
The three layers
Marketing reaches the customer in three layers: the brand's regional advertising, paid for by the 2% fund contribution, the required grand-opening program, and Ridge Row's own local spending.
| Layer | Year 1 amount | What it does |
|---|---|---|
| Brand and advertising fund | $18,605 | Regional campaigns, the app and the loyalty program |
| Grand-opening program | $16,000 | Required launch campaign, sampling and opening-week offers |
| Local marketing | $10,500 | Office outreach, sponsorships, local ads and sampling |
| Total | $45,105 | 4.8% of Year 1 revenue |
Where the local $10,500 goes
| Item | Year 1 spend |
|---|---|
| Office and building outreach: tasting boxes for about 60 offices | $2,600 |
| Community sponsorships: neighborhood events and school fundraisers | $2,400 |
| Local social media and search ads | $2,500 |
| Loyalty offers and sampling | $1,800 |
| Printed inserts for building residents | $1,200 |
Marketing milestones
- January 2027: opening week, with the franchisor's launch support on site.
- March 2027: about 1,500 app members and the first recurring catering account.
- June 2027: counter traffic at about 90% of settled level.
- December 2027: about 3,000 app members at year end and the holiday bean and gift program.
Running the Cafe to Brand Standard
The space
About 1,650 square feet on the ground floor of a mixed-use building, at about $40 a square foot a year including shared charges and property tax, which is $66,000 in Year 1. The landlord's allowance is netted off the build-out. The lease runs ten years to match the franchise term, with a guarantee from Denise.
Hours and shifts
Open 6:00 a.m. to 6:00 p.m., seven days a week. Two people work the floor at quiet hours and three at the morning peak. Morning crew covers opening to early afternoon, and a second crew covers the afternoon and weekends.
Supply and required opening inventory
The brand's approved suppliers deliver beans, dairy, syrups, cups and most of the food. Opening inventory of $21,000 is the brand's required starter package. Stock on hand then rises with sales to $26,105 at the end of Year 1, which is about 10 turns a year on cost of goods and 14 by Year 5. The starter package holds more than weekly ordering needs. Perishables are ordered several times a week, which keeps spoilage near 1.3% of sales, including food.
Systems the franchisor supplies
Point of sale, the app and loyalty program, the scheduling tool and weekly reporting, covered by the $495 monthly technology fee. The franchisor audits recipes, cleanliness and cash handling, and the plan sets aside $2,500 in Year 1 for conference, training and audit costs.
Permits and food safety
Ridge Row needs a county health permit, a city business license and sign permits before opening, budgeted at $3,500. Midtown is in Fulton County, so the permit would come from the county health department there, which confirms its own requirements. Georgia's food service rules generally call for a certified food protection manager on site, which the health department confirms. Denise and the assistant manager both hold the certification.
Insurance
General liability, property, workers' compensation and the coverages the franchisor requires, at $10,800 in Year 1.
The Owners
Denise Calloway, owner-operator
Twelve years in cafe and quick-service operations in the Atlanta area, the last six as general manager of a high-volume cafe belonging to a regional chain, where she managed about 30 crew. She holds a food protection manager certification and a degree in hospitality management. Her $130,000 is the savings of those years, and she signs the bank's personal guarantee.
What the team lacks
Denise has run another owner's cafe and has not carried a lease, a loan and a franchise agreement on her own account. The plan covers this with a franchise lawyer's review before signing, the franchisor's field consultant during the first 90 days and a quarterly review of the numbers with an accountant who works with food businesses.
The silent investor
A local businessperson who owns 25% and takes no part in operations. The 75/25 split reflects Denise's full-time work and her personal guarantee on the lease and the loan, set against the investor's $150,000 for a quarter of the company. The shareholder agreement sets out distributions in proportion to ownership, a right of first refusal on any sale of shares, a buyback option for Denise at an agreed multiple of earnings after Year 5 and what happens if the franchisor requires a further investment.
If the owner is out
The assistant manager runs a shift alone from month 1, and the shift lead covers the morning. The second shift lead from month 15 and the second assistant manager from month 38 deepen that cover. A franchise agreement usually names an approved operator, so the plan treats any longer absence as a matter for the franchisor.
What the Fee Stack and the Build-Out Do to the Numbers
The five-year model sits behind every table that follows: monthly detail for 2027, one column per year after that. Franchise terms and cafe inputs come first, so each result can be traced to a stated figure. Royalty and brand fund appear on their own lines in the profit and loss, because they move with sales and a lender will look for them there.
Fee, build-out, opening stock and who funds them
| Use of funds | Amount |
|---|---|
| Initial franchise fee, paid when the agreement is signed | $40,000 |
| Cafe build-out to brand standard, net of the landlord allowance | $268,000 |
| Espresso machines, grinders, refrigeration, ice, brewers and point of sale (brand-approved list) | $124,000 |
| Signage, menu boards and furniture package | $32,000 |
| Required opening inventory: beans, milks, syrups, cups, lids, food and retail stock | $21,000 |
| Franchisor training travel, pre-opening payroll and rent before opening | $38,000 |
| Required grand-opening marketing program | $16,000 |
| Franchise agreement and lease review, entity set-up, accountant | $11,500 |
| Health permit, city business license and sign permits | $3,500 |
| Loan packaging, guarantee fee and closing costs | $7,500 |
| Cash reserve for the ramp, the fee stack and the first summer | $70,500 |
| Total uses | $632,000 |
| Source of funds | Amount |
|---|---|
| Denise Calloway's savings | $130,000 |
| Silent investor (25% of the company) | $150,000 |
| Bank term loan (SBA-guaranteed in this example) | $352,000 |
| Total sources | $632,000 |
The company raises $632,000. Denise Calloway puts in $130,000 of savings, a silent investor buys 25% of the company for $150,000, and a bank lends $352,000 over ten years at 10.5%, interest-only for the first six months, with a personal guarantee from Denise. The rate is an illustration for this example, not a quoted lending rate. Build-out, equipment and signage take $424,000, which is 67% of the raise. The franchise fee is $40,000 and required opening inventory $21,000. Pre-opening costs of $38,000 cover franchisor training, a crew trained before the doors open and rent before opening. Loan packaging, the guarantee fee and closing costs take another $7,500. The $70,500 reserve is 11% of the raise, and it exists because the cafe loses money for three months while traffic builds and pays its royalty from the first week. The investor takes a quarter of the company so that the loan stays at $352,000, which puts Year 1 interest and principal at $47,832. An SBA-backed loan would normally ask the investor for a guarantee as well, since owners of 20% or more are usually required to give one; confirm that with the lender. A lender also checks whether the brand qualifies for SBA-backed lending, and the plan does not rely on the answer.
Cafe and franchise terms behind the forecast
- Counter and walk-up orders number 56,000 in Year 1 at an average of $7.40 including add-ons, and mobile-app pickup orders number 22,500 at $8.20. Together they are about 218 orders a day over 360 trading days, rising to 269 a day by Year 3. Mobile pickup is 29% of orders in Year 1 and 35% by Year 5. The 1,650 square feet put Year 1 sales at about $564 a square foot and Year 3 at about $768.
- Food and bakery sales are 43,000 items in Year 1 at an average of $5.40, about 5.5 items for every ten orders, rising to six in ten by Year 5 as the breakfast and lunch program matures. Including food, the average ticket is about $10.60. Office catering is 750 orders at $64, starting at 10% of its settled rate in month 1 and reaching it in month 10. Packaged beans and merchandise are 3,100 units at $16.50, with December the largest month.
- Prices rise 3% a year from Year 2. Counter orders rise 11% in Year 2, as the cafe moves from its opening ramp to settled traffic, then 4%, 2% and 2%. App orders rise 29%, then 12%, 6% and 4% as members join. Year 2 revenue growth of 22% is therefore mostly the end of the ramp, with the 3% price rise on top.
- Cost of goods runs 23% on counter drinks, 24% on app orders, 33% on food, 28% on catering and 50% on packaged goods, which blends to 27.4% in every year. These rates reflect purchasing through the brand's approved suppliers. Waste, comped drinks and cash shortages are a further 1.3% of sales, higher than a drinks-only cafe because food spoils faster.
- Royalty is 5.5% of gross sales and the brand fund is 2%. With the $495 monthly technology fee the stack is $75,709 in Year 1, 8.1% of sales, and $100,968 in Year 3, 8.0%. These are planning figures for this example. A real franchisor states its own in Items 5 and 6 of its disclosure document.
- Payroll adds 27% to wages for payroll taxes, workers' compensation, paid leave and health contributions (15% for part-time roles). Wages in the crew table are launch rates, and 3% pay raises are charged as a separate line from Year 2. Denise draws $55,000 as owner-operator. Part-time baristas are paid about $14.50 to $15.50 an hour, the lunch prep cook about $15.10 for 28 hours a week, and the table shows each part-time person as 0.5 of a full-time equivalent.
- Rent is $66,000 in Year 1 for 1,650 square feet, about $40 a square foot including shared charges and property tax, and rises 3% a year under a ten-year lease that matches the franchise term. The landlord's allowance is already netted off the $268,000 build-out. Utilities are $19,200. Local marketing is held at about 1.1% of sales each year, which the plan treats as the franchisor's minimum.
- Card sales settle in about two days and catering invoices in 15 to 30, which averages 4 days of receivables, or $10,195 at the end of Year 1. Suppliers are paid in about 14 days. Stock on hand is the $21,000 starter package the brand requires plus 2% of each year's cost of goods, $26,105 at the end of Year 1 and $29,015 in Year 5, or 10 to 14 turns a year. Weekly ordering alone would need less, so the starter package is what keeps the figure high.
- Tax is charged at the 21% federal corporate rate and a 5.19% Georgia planning rate that a CPA should confirm. The model taxes operating profit and takes no deduction for the $116,500 of start-up costs, so tax is slightly overstated, and the $116,500 is a figure a CPA would spread differently. An S corporation election would move the tax to the owners' returns; confirm the choice with a CPA.
- Owner distributions of $60,000, $70,000 and $90,000 are paid in Years 3 to 5, split 75/25 between Denise and the investor, and each stays below that year's profit. The loan stays in place for its full term. Brand refresh and equipment replacement is budgeted at $3,000 in Year 2 and rises to $15,000, a build-up toward the brand's required remodel.
Revenue by order type
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Counter and walk-up orders (drinks and add-ons) | $414,400 | $472,564 | $506,368 | $529,645 | $553,863 |
| Mobile-app pickup orders | $184,500 | $244,934 | $282,730 | $309,132 | $332,250 |
| Food and bakery | $232,200 | $289,224 | $326,545 | $351,093 | $376,820 |
| Office catering and coffee boxes | $48,000 | $69,216 | $84,872 | $104,902 | $122,455 |
| Packaged beans and merchandise | $51,150 | $60,332 | $66,518 | $71,218 | $75,212 |
| Total revenue | $930,250 | $1,136,270 | $1,267,033 | $1,365,990 | $1,460,600 |
| Growth on prior year | – | 22% | 12% | 8% | 7% |
Counter and walk-up drinks are 44.5% of Year 1 revenue and 40% of Year 3. Mobile-app orders grow from 19.8% to 22.3% of revenue as members join, and office catering grows fastest, from 5.2% of Year 1 revenue to 6.7% in Year 3 and 8.4% in Year 5, because each recurring account keeps ordering. Food holds near 25% to 26%. Packaged goods are the smallest steady line and the one with the highest cost of goods, 50%.
Month by month in 2027
| Month | Counter and walk-up orders (drinks and add-ons) | Mobile-app pickup orders | Food and bakery | Office catering and coffee boxes | Packaged beans and merchandise | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $21,171 | $5,232 | $12,547 | $431 | $2,483 | $41,864 | ($15,091) |
| Feb 2027 | $24,643 | $7,374 | $14,585 | $841 | $2,614 | $50,057 | ($9,146) |
| Mar 2027 | $29,287 | $10,214 | $17,261 | $1,654 | $3,063 | $61,479 | ($858) |
| Apr 2027 | $32,425 | $12,282 | $18,875 | $2,703 | $3,406 | $69,691 | $5,101 |
| May 2027 | $35,667 | $14,798 | $19,827 | $3,638 | $3,719 | $77,649 | $10,876 |
| Jun 2027 | $38,194 | $17,145 | $19,566 | $3,523 | $3,684 | $82,112 | $14,114 |
| Jul 2027 | $37,727 | $17,977 | $19,239 | $3,221 | $3,699 | $81,863 | $13,934 |
| Aug 2027 | $38,504 | $18,854 | $21,395 | $5,306 | $3,932 | $87,991 | $18,380 |
| Sep 2027 | $38,852 | $19,462 | $22,886 | $6,694 | $4,244 | $92,138 | $21,389 |
| Oct 2027 | $39,253 | $20,057 | $23,122 | $7,191 | $4,636 | $94,259 | $22,928 |
| Nov 2027 | $39,100 | $20,428 | $22,253 | $6,615 | $6,504 | $94,900 | $23,394 |
| Dec 2027 | $39,577 | $20,677 | $20,644 | $6,183 | $9,166 | $96,247 | $24,371 |
Sales build from January to June as the cafe reaches settled traffic, ease slightly in July and climb through the fall, and bag and gift sales lift December. EBITDA, profit before interest, depreciation and tax, is negative from January to March and positive in every month from April. Lowest month-end cash falls in March, at about $28,000.
Crew and management schedule
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Owner-operator | $55,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Assistant manager | $42,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Shift lead | $36,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Barista, morning (part time, 25 hours a week) | $19,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Barista, morning (part time, 25 hours a week), second | $19,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Barista, afternoon and weekend (part time) | $14,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Barista, afternoon and weekend (part time), second | $14,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Barista, afternoon and weekend (part time), third | $14,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Lunch prep and sandwich station (part time, 28 hours a week) | $22,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Catering and mobile-order runner (part time) | $16,000 | Month 6 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Second shift lead | $36,000 | Month 15 | – | 1 | 1 | 1 | 1 |
| Barista, peak coverage (part time) | $13,000 | Month 15 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Barista, peak coverage (part time), second | $13,000 | Month 15 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Second assistant manager | $42,000 | Month 38 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $296,943 | $367,627 | $380,230 | $429,125 | $433,570 |
Denise, an assistant manager, a shift lead, five part-time baristas and a part-time lunch prep cook open the doors, and a part-time runner joins in month 6 (June 2027) as catering and app orders grow. A second shift lead and two more part-time baristas arrive in month 15 (March 2028), as settled volume arrives, and a second assistant manager joins in month 38 (February 2030), which lets Denise step off the floor to build the catering route that grows from 1,250 orders in Year 3 to 1,700 in Year 5. Part-time roles show as 0.5 and carry the pay actually paid. Denise's $55,000 is in the costs from month 1, so profit here is what remains after she is paid.
Profit and loss, fees shown line by line
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $930,250 | $1,136,270 | $1,267,033 | $1,365,990 | $1,460,600 |
| Cost of goods (coffee, milk, syrups, cups, food and retail stock) | ($255,233) | ($311,759) | ($347,636) | ($374,787) | ($400,745) |
| Gross profit | $675,017 | $824,511 | $919,397 | $991,203 | $1,059,855 |
| Payroll incl. on-costs | ($296,943) | ($367,627) | ($380,230) | ($429,125) | ($433,570) |
| Rent | ($66,000) | ($68,000) | ($70,000) | ($72,100) | ($74,300) |
| Utilities | ($19,200) | ($19,800) | ($20,400) | ($21,000) | ($21,600) |
| Marketing | ($10,500) | ($12,499) | ($13,937) | ($15,026) | ($16,067) |
| Insurance | ($10,800) | ($11,500) | ($12,200) | ($12,900) | ($13,500) |
| Professional fees | ($6,500) | ($6,800) | ($7,100) | ($7,400) | ($7,700) |
| Software subscriptions | ($1,800) | ($2,000) | ($2,200) | ($2,400) | ($2,600) |
| Technology fee to the franchisor ($495 a month) | ($5,940) | ($5,940) | ($5,940) | ($5,940) | ($5,940) |
| Royalty to the franchisor (5.5% of gross sales) | ($51,164) | ($62,495) | ($69,687) | ($75,129) | ($80,333) |
| Brand and advertising fund contribution (2% of gross sales) | ($18,605) | ($22,725) | ($25,341) | ($27,320) | ($29,212) |
| Card processing fees (about 2.4% of sales) | ($22,326) | ($27,270) | ($30,409) | ($32,784) | ($35,054) |
| Delivery-app commissions (20% on about 6% of drink and food sales) | ($9,973) | ($12,081) | ($13,388) | ($14,278) | ($15,155) |
| Spoilage, comped drinks and cash shortages (1.3% of sales) | ($12,093) | ($14,772) | ($16,471) | ($17,758) | ($18,988) |
| Cleaning, paper goods and smallwares outside the brand supply list | ($8,400) | ($9,000) | ($9,500) | ($9,900) | ($10,200) |
| Equipment service contracts and repairs | ($2,400) | ($6,600) | ($7,800) | ($8,600) | ($9,400) |
| Brand refresh and equipment replacement | $0 | ($3,000) | ($7,000) | ($11,000) | ($15,000) |
| Franchisor conference, training and audit fees | ($2,500) | ($3,200) | ($3,400) | ($3,600) | ($3,800) |
| Bad debt allowance (catering invoices) | ($480) | ($692) | ($849) | ($1,049) | ($1,225) |
| Annual pay raises (3% a year) | $0 | ($11,029) | ($23,156) | ($39,791) | ($54,417) |
| EBITDA | $129,393 | $157,482 | $200,389 | $184,103 | $211,794 |
| Depreciation | ($49,086) | ($49,086) | ($49,086) | ($49,086) | ($49,086) |
| Interest | ($36,719) | ($34,658) | ($32,008) | ($29,066) | ($25,799) |
| Income tax | ($10,941) | ($18,508) | ($29,943) | ($26,594) | ($34,364) |
| Net income before start-up costs | $32,647 | $55,230 | $89,352 | $79,358 | $102,544 |
| Start-up costs expensed at opening (franchise fee, permits, training, loan costs, launch) | ($116,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($83,853) | $55,230 | $89,352 | $79,358 | $102,544 |
Year 1 earns $129,393 at EBITDA, a 13.9% margin, and $32,647 after depreciation, interest and tax. After the $116,500 of start-up costs written off at opening it loses $83,853. Year 2 earns $55,230, a 4.9% net margin, and Year 3 $89,352, 7.1%. Year 4 falls to $79,358, 5.8%, because the second assistant manager (about $53,300 with on-costs) and accumulated pay raises of $39,791 take payroll from 32% to 34% of revenue. Year 5 recovers to $102,544, 7.0%. Interest falls each year as principal is repaid, from $36,719 to $25,799. Net margin does not reach 8% in any year of this plan. The 8.1% fee stack, the owner's $55,000 pay and $49,086 a year of depreciation sit on top of the cafe's own costs, and the plan does not raise prices or cut crew to close the gap. The shift toward mobile pickup and food, and a smaller loan, are what lift it to 7.1% at best.
Where the cash goes
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($61,277) | $103,095 | $137,663 | $127,857 | $151,070 |
| Build-out, equipment and signage | ($424,000) | $0 | $0 | $0 | $0 |
| Funding received | $632,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | ($11,113) | ($24,047) | ($26,697) | ($29,639) | ($32,905) |
| Owner distributions | $0 | $0 | ($60,000) | ($70,000) | ($90,000) |
| Net change in cash | $135,611 | $79,049 | $50,967 | $28,219 | $28,165 |
| Closing cash | $135,611 | $214,659 | $265,626 | $293,845 | $322,010 |
Closing cash is positive in every year. It rises from $135,611 to $265,626 by Year 3 and reaches $322,010 in Year 5, about three months of operating costs. The plan keeps that cushion because the brand's required remodel late in the term may cost far more than the $15,000 a year set aside. Principal repayments start in month 7 and total $11,113 in Year 1 and $32,905 in Year 5. Distributions begin in Year 3 and stay below each year's profit.
Balance sheet and stock on hand
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $135,611 | $214,659 | $265,626 | $293,845 | $322,010 |
| Accounts receivable | $10,195 | $12,452 | $13,885 | $14,970 | $16,007 |
| Stock on hand (beans, dairy, paper goods, food, retail) | $26,105 | $27,235 | $27,953 | $28,496 | $29,015 |
| Build-out, equipment and signage (net) | $374,914 | $325,829 | $276,743 | $227,657 | $178,571 |
| Total assets | $546,824 | $580,175 | $584,207 | $564,967 | $545,602 |
| Supplier balances (accounts payable) | $9,790 | $11,958 | $13,334 | $14,375 | $15,371 |
| Bank term loan | $340,887 | $316,841 | $290,144 | $260,506 | $227,601 |
| Paid-in capital | $280,000 | $280,000 | $280,000 | $280,000 | $280,000 |
| Retained earnings | ($83,853) | ($28,623) | $729 | $10,086 | $22,631 |
| Total liabilities and equity | $546,824 | $580,175 | $584,207 | $564,967 | $545,602 |
Break-even, turns and debt cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | 13.9% | 13.9% | 15.8% | 13.5% | 14.5% |
| Net margin (before start-up costs) | 3.5% | 4.9% | 7.1% | 5.8% | 7.0% |
| Payroll incl. pay raises as share of revenue | 32% | 33% | 32% | 34% | 33% |
| Revenue per full-time equivalent at year end | $143,115 | $133,679 | $149,063 | $143,788 | $153,747 |
| Average monthly revenue | $77,521 | $94,689 | $105,586 | $113,833 | $121,717 |
| Monthly revenue needed to cover operating costs | $62,661 | $76,604 | $82,573 | $92,690 | $97,394 |
| Debt service cover (EBITDA / interest + principal) | 2.7x | 2.7x | 3.4x | 3.1x | 3.6x |
Operating costs are covered when average monthly revenue exceeds the figure in the second-to-last row. Year 1 averages $77,521 a month against $62,661 needed, so the cafe clears the line even in its first year; the loss comes from start-up costs, not trading. Year 4 has the thinnest cushion in proportion, at $113,833 against $92,690. That row counts operating costs only. Adding Year 1's $47,832 of interest and principal lifts the figure the cafe needs to about $68,200 a month, still below the Year 1 average. Debt cover is 2.7x in Year 1, which includes six months of interest-only payments, and sits between 2.7x and 3.6x after that.
Sales one-fifth short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $744,200 | $909,016 | $1,013,626 | $1,092,792 | $1,168,480 |
| Net income before start-up costs | ($33,308) | $16,543 | $13,936 | $34,795 | $56,289 |
| Net income after start-up costs | ($149,808) | $16,543 | $13,936 | $34,795 | $56,289 |
| Closing cash | $70,758 | $111,363 | $147,069 | $200,843 | $272,864 |
This case cuts every revenue line by 20% in every year. Royalty, brand fund, card fees and delivery commissions fall with sales, so the fee stack shrinks to about $61,800 in Year 1. The response: part-time crew hours are cut by 15%, the second shift lead and extra baristas start six months later, the second assistant manager is never hired, marketing is cut by 20%, Denise takes a 20% pay cut, the refresh budget is halved and no distributions are paid. The cafe loses money in Year 1 and earns a profit in every year after, though Year 3 is thin at $13,936, below Year 2 at $16,543, because the delayed hires are on payroll for the full year. It ends every year with cash in the bank. The lowest year-end balance is $70,758, in Year 1, which would leave little room for a second poor year without help from the owners or the bank. Debt cover in Year 1 of this case is about 1.1x, which many lenders would find thin, and equity ends Year 1 at $130,192, so the bank would be told early. The plan books no royalty relief from the franchisor.
Sources
The franchisor, its brand and every figure in this plan are invented. The pages below back the real-world statements.
- Federal Trade Commission, Franchise Rule (16 CFR Part 436): requires a franchisor to give prospective buyers a disclosure document, with items covering fees, estimated initial investment and financial performance representations.
- U.S. Small Business Administration, 7(a) loans: lenders make 7(a) loans and the SBA guarantees a share. Rates and terms are set by the lender; the 10.5% in this plan is a planning figure.
- Georgia Department of Revenue, corporate tax: the plan uses a 5.19% planning rate for the Georgia corporate tax. The Department of Revenue publishes the current rate.
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