Franchise Financial Projections Template

How to build a projection you can defend

The workbook does the arithmetic; the judgment is yours. A few rules keep a franchise projection realistic rather than wishful.

• Build three scenarios, not one. Run a conservative, a middle, and an optimistic version by changing your revenue assumptions, and plan around the conservative one.
• Ramp your first year. New locations rarely open at full volume, so model a slower Year 1 that builds, rather than assuming a mature run rate from day one.
• Use real fee percentages. Pull the royalty and ad-fund rates straight from the brand's FDD Item 6; the sheet turns them into dollars against your revenue automatically.
• Do not borrow a franchisor's numbers as your own. If a brand provides an Item 19, read its metric and sample size; it is not a promise, and its absence is not evidence either way. Your projection should rest on your assumptions, not its illustration.
• Pressure-test against people. Before you trust a revenue line, call current franchisees from the Item 20 list and ask how long their ramp actually took.

What the workbook computes, and what it leaves out

The workbook has one sheet with three yearly columns. It does five calculations, all live formulas:

• Total revenue = the sum of your three revenue-stream rows.
• Gross profit = total revenue minus total cost of goods sold (the sum of two COGS rows).
• Total operating expenses = the sum of six rows: labor, occupancy, utilities, marketing, insurance, and other.
• Royalty dollars = total revenue times your royalty rate; ad-fund dollars = total revenue times your ad-fund rate; total franchise fees = the two added together.
• Net operating income = gross profit minus total operating expenses minus total franchise fees; net operating margin = net operating income divided by total revenue (blank if revenue is zero).

It has no line for loan principal and interest, depreciation, income taxes, or owner pay, so net operating income is a number before all of them. If you put interest or depreciation in the “other operating expenses” row, you understate the figure a lender will use. It also has no royalty-or-fee row beyond the royalty and the ad fund. Item 6 can list other fees, and the Dunn Brothers franchise FAQ, for one, says ongoing fees include “royalties, marketing fund contributions, and technology fees where applicable” (dunnbrothers.com, retrieved September 29, 2026), so add any others to the “other operating expenses” row. There is no month-by-month view and no ramp built in. You create the ramp by choosing the Year 1 numbers. Enter the royalty rate against the same sales base the agreement uses: the Scooter’s Coffeeinvestment pagestates its royalty (6 percent) and advertising fee (2 percent) as percentages of “net sales,” and the definition of the base sits in the franchise agreement, so check what it counts.

A worked example (invented numbers)

These figures are made up to show the arithmetic. They are not a benchmark for any brand or any cafe. The royalty (6 percent) and ad fund (2 percent) rates are also illustrative. COGS is entered as 32.5 percent of revenue in both years.

Year 1 operating expenses are labor $140,000, occupancy $42,000, utilities $11,000, marketing $12,000, insurance $6,000, and other $15,000. Year 2 are $148,000, $43,000, $11,500, $12,500, $6,200, and $15,500. The point of the two columns is the shape: a thin first year and a stronger second. The workbook does not know which shape is realistic. That is your research.

Turn the projection into a loan test

If you borrow under the SBA 7(a) program, the lender tests your projection against the SBA rulebook,SOP 50 10(version 8 effective June 1, 2025; version 8.1 effective October 1, 2026, which the following figures are from). It defines debt service coverage as operating cash flow divided by debt service, with operating cash flow defined as EBITDA, which is close to what the workbook’s net operating income measures if you keep interest and depreciation out of the expense rows. Lenders may add back or subtract items such as rent payments and owner’s draw. The minimums vary by loan:

• For a 7(a) Small loan of $350,000 or less that is not a change of ownership: 1.10:1, on either a historical or projected basis, where projections are 12-month projections that must reach 1.10:1 within one year of loan funding.
• For a standard 7(a) loan above $350,000: 1.15 on a historical and/or projected basis, and 1:1 on a global basis.
• For an initial acquisition of an existing business: 1.25:1 on historical results, and the lender “may not rely on” post-closing projections to meet it.

Apply it to the example. Suppose the buyer borrows $250,000 at 10 percent over 10 years. The payment is about $3,304 a month, or $39,645 a year. Year 1 coverage is $12,000 divided by $39,645, about 0.30. Year 2 is $60,800 divided by $39,645, about 1.53. For a 7(a) Small loan the Year 1 test is 1.10, which needs about $43,610 of operating cash flow, so this projection would not support the loan on a 12-month basis, however good Year 2 looks. The levers are real: a smaller loan (use the loan payment calculator), more equity, or a lower-cost concept. Adjusting revenue until the ratio passes is not one of them, because the lender must document the justification for revenue growth and expense cuts and compare them with current industry trends. Note also that this figure is before any pay to you, and a lender may test it globally.

For a purchase of an existing unit, the projection does not carry the loan; the seller’s historical statements do. Use the workbook to check whether the payment fits after you buy, and ask the seller for the historical numbers the lender will use.

Cover the gaps the workbook has

• Monthly first year. The SBA’s business plan guidance says a traditional plan should give a five-year outlook including income statements, balance sheets, cash flow statements, and capital expenditure budgets, and to be even more specific for the first year, using quarterly or monthly projections. This workbook is three annual columns, so build a separate month-by-month Year 1.
• Working capital. Item 7 must include “additional funds” for an initial period, and the FTC Franchise Rule says a reasonable period is at least three months or a reasonable period for the industry (16 CFR 436.5(g), on Cornell LII). If your monthly view shows losses past that period, the shortfall is yours to fund.
• Records that tie to the model. The IRS says to keep records that support an item of income, deduction, or credit until the period of limitations for that return runs out, generally three years, and employment tax records for at least four years (IRS, How long should I keep records). Revenue in your model should reconcile to your point-of-sale reports, because your fee base is your reported sales.

Pair this with our guide to how much a franchise really costs to open for the startup side, ourexplainer on royalty and ad-fund fees for the percentages this sheet uses, and how to read an Item 19 so you never mistake a franchisor's figure for your own.