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ALL IN
ONE
BUSINESS
MODULE

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FRANCHISING
FUNDAMENTALS

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 Sample of a positive net income

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 Franchising your business, is it a
good choice?

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 Let us begin identifying your business tools,
capabilities, and status
At the first part we asked you to answer a few questions and here are a few reasons
why we asked those.

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 We begin by checking how many branches you
have?
franchise buyers usually wanted to know if your business can sustain in the long
run. To our survey usually, they are looking for 4 to 5 company-owned or
franchisee owned stores.

The franchisee will check the following,

1. Can you sustain the business process?
a. This includes not limited to product deliveries, marketing strategies, and
operational support.
i. In product deliveries, you need to identify what is your mean to
transport the goods to their store or location.
ii. How many times you can deliver in a week?
iii. What will you do if there is an out of stock?
iv. Marketing Strategy you need to ensure that you outlined the
promotions and events that you have for the business "again don’t
limit your presentation by saying you'll use social media.
v. Next Operational Support, what are the dos and don'ts of the
business franchise?
2. Do you have uniforms?
3. How to recruit the right person?
4. Do you support them in their Grand Opening?

Are you financially capable?

• How much do you need for implementation?

• Suggested amount is at Five Hundred Thousand

(Php 500,000.00). and salary to at least one
accountant to do your books and other finance related
reports.
• Operational Expenses, this includes your rent, utilities, internet, manpower
salaries, etc.

• Funds for your stocks unless you made agreed terms with your suppliers.
• Logistic Cost either you have your own cars/trucks for deliveries use or you
will use third party movers like LALAMOVE, TRANSPORTIFY, GRAB,
NINJA VAN, etc.
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 • Marketing Expense this is the part the business owners forget to plan,
analyze, and strategize their expenses. Remember not all marketing
expenses are converted to sales, they are either paid ads to add likes to
your Facebook page or advertising boards for your store promos.

• Tools and Equipment o You need to ensure that your staff is equipped with
the right tools like Point of Sale, ERP (enterprise resource planning tool)
this will help the business ensure that every sale are counted and your
inventory are recorded in the system.

Do you have a team that will support the

business?
• What will the support team need to do? o These employees will do
encoding at the back end, do an audit at the store, prepare your deliveries
etc.
o Family members can help the business, but you need experts on other
things that you are not good at. The heart of the business is within its
people. Ensure you pre-qualify them with the skill set you need.
o Franchisor will train franchisee and their hired staff/crew on business
processes. Having said that, your training must be fun, easy to
understand, can do mock orders, emphasize health and sanitation.

Do you have a location/site finder?

▪ Site Acquisition Team

▪ This team will check the volume and competition in the area.
▪ They must create a study based on profitability of other
businesses in the area, the location food traffic and buying
capacity of the consumers.
▪ They will also check if your business can do marketing in area
like giving flyers, do promos, run events and other marketing
activities.

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Is Hiring Consultants needed for the business?
• Documentation o Consulting a lawyer or accountant for your documentation is a yes.
o Everything you have in your business must be documented and to protect your
business from any possible legal situation.
▪ Franchise Agreement, this is to document whatever you agreed during a business
presentation.
▪ Financial Statement, you need to divulge this but optional for some cases.

▪ Operations Manual, though this can be done by your trainer, you need to ensure that
this follows safety and sanitation standards.
▪ Permits and Licenses ensure to get all requirements for your business to operate to
avoid penalties and other cases.
▪ Government Benefits make sure to register and pay necessary benefits for you and
your employees.
▪ Insurance could save either your business or yourself for any possible knock-on-wood
situation.
▪ Lastly, even if you register your business does not mean you have the copyright for
your brand name. You need to register it at the Intellectual Property Office of the
Philippines.

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 What are the legal documents needed?

Take Note: In the Philippines, there is no requirement to register a franchising

agreement. A Technology Transfer Arrangement need not be registered with the
Intellectual Property Office if it complies with the mandatory provisions and does not
contain any of the prohibited clauses.
However, Bureau Order No. 10-24, series of 2010 advises the franchisee to ask
disclosure information from the Franchisor, as follows:

▪ Business address, email address, internet home page/website, fax numbers

and other contact details
▪ Copy of DTI or SEC Registration
▪ Parent companies and affiliates, if any, and their respective roles in the
Franchise, and Franchisor’s declaration if any affiliate is a supplier and what
they will supply.
▪ Names of the Board of Directors and officers with a brief description of their
qualifications and background, ownership of interests and references
▪ The contact number and business location of existing Franchisees
▪ Executed promotional / marketing materials
▪ Description of the business concept, which includes brand image, brand
personality, unique selling proposition, target market, mission, and vision,
among others.
▪ Basic Information on training, commercial and /or technical assistance
▪ Certificate that the Franchisor is a member in good standing of any franchisor
association and that the franchisor has no pending administrative, civil, or
criminal case.
▪ Declaration of the Initial Fee, amount that will be collected and services
covering these fees.
▪ Training that will be provided, number of persons, how long and training
modules
▪ Number of years company has operated and number of years it has
franchised with corresponding numbers of company owned branches and
franchised outlets
▪ Draft Franchise Agreement
▪ Full disclosure of the Financial requirements of the franchise business

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 and expansion goals. In addition, a franchisor may offer a start-up franchise or a
conversion franchise (to a compatible existing business) or both.
 Determination of Territory - Upon the nature of your franchise business, there
are competition and other factors to be considered and you need to identify
and analyze whether a certain area is appropriate for the franchisee to open
his outlet. Here are some criteria to check: population, competition, income
levels, size of the market.
 Franchise Support Programs - Franchisor will provide the type and scope of
services to be provided to franchisees, including initial training, supervisory
visits, site selection and advertising support. In this manner, a comprehensive
support program can be planned, and the cost of that program can be
anticipated.
 Internal Staffing - In our Org Chart representation earlier, the franchisor needs
to assess its human resources. Either you need to have same positions in
specific level to carry on tasks or eliminate some positions that are doing
redundant tasks in the Organization. This task needs for implementing the
franchise program and will determine if these can meet the expected output.
 Franchise Revenue Sources - As franchisor you also need to identify your
revenue sources that will contribute to your income and profits. Among the
available revenue sources are the following:

1. Initial Franchise – these is the initial franchise fee that is determined after
weighing various factors, among them the marketability of the franchise.
Recommended initial franchise fee is considered by front-end selling expenses,
advertising, commissions, training, site and start up assistance costs, market
needs and other variables.
2. Royalties – This is recommended if your business have state-of-the-art industry
practices. This will maintain corporate cash flow, to support general and
administrative costs and franchise services and to provide ongoing income for
the continuing operation of the franchise.
3. Advertising – All business needs to be advertised and on the onset of the
franchise this needs to be discussed to maximize the Franchisor capability to
compete either local advertising or international advertising.
4. Others – franchisor can also derive income from other resources as well,
including the sale of products and services, leasing of assets and real property
and financing.

FRANCHISE MARKETING PLAN

You need to present your marketing plan and strategy for the company possible for
the next 4 to 6 months. This marketing plan must be specific, measurable, attainable,
realistic and time bound. To ensure franchisee solid trust on your franchise
foundation.

For marketing strategy, ensure it is aligned with your plan and focused on place, promo,
price and lastly your product. You may also consider positioning of your brand;
packaging of your products and you have the people to implement this.

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 FRANCHISE SALES AND
OPERATIONS TRAINING
Sales Training and Sales Manual
Conducting a Sales training could be crucial for franchisee and this is one of the
tasks that the franchisor must be good at. Sales training is equipping your
franchisee and their employees with product knowledge, sales skills, and
techniques to make a sale. This should not be limited to actual role playing, sales
situations, processing the sale and lead generation.

Sales Manual - Your franchisee must receive at least one (1) hard copy of your
proven sales process and strategy manual.

Operations Training and Operations Manual

Operations training includes everything the franchisee needs to know in operating
your business franchise. From opening to closing the stall, submitting reports,
using the POS machine and food equipment. The training must include safety
and sanitation practices to avoid food contamination.

Lastly it is important to add full customer service handling complaint in your

manual.

Operations Manual- same with Sales Manual your franchise must receive at least
one (1) hard copy of your operations manual. However unlike with sales manual
the Operations manual is required or somewhat a must in franchising your
business as this enclose your best business practices in operation.
Note: Sales and Operations Training can be done simultaneously. As franchisor you can
schedule training prior to franchisee store opening and could do a weekly scheduled
training for replacement for termed/resigned staff or reliever for those crew who are on
leave.

FRANCHISE EXCLUSIVITY
Core Products/Services
Franchise is known for its exclusivity there are certain products or services that
you could only avail from the franchisor.
Franchisor must determine what are these products and services that they could
only bought from you. These exclusive products and services must always be
available to avoid gaps in sales.
After determining your company core product / service you may now allow
franchisee to buy those non – core items separately.
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 Note: One reason why Franchisor needs to do an audit whether the franchisee is using your
core products so that it would not damage the brand and company reputation.

FRANCHISE SYSTEM AND

PROCESSES
Franchise Disclosure Document
This is an international process in which you provide a disclosure of franchise
information prior to franchise agreement.

Due Diligence only of the Franchisor but not required during franchising. We
strongly suggest you to disclose those that are needed by the franchisee.

Franchise Agreement
This is the legal document which details the rights and obligations of the
franchisor and the franchisee, including the length of term, the start and end
periods of the agreement, the renewal provisions, and the end of the contract.

Trademark Registration
A trademark protects a business’ brand identity in the marketplace. Registration of
it gives the owner the exclusive rights to prevent others from using or exploiting
the mark in any way.

Aside from functioning as a ‘source-identifier’, the mark may be a source of

revenue for the owner through licensing or franchising of it to third parties.

The Philippine trademark system follows a first-to-file rule, meaning the rights to the
trademark is given to the party who first filed the mark.

On the latter part of this document, there are steps in registering their Trademark in
the Philippines.

Non-Disclosure Agreement
As mentioned earlier a document that will protect the secrets or the processes
you made solely for your franchising.

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Franchise Business Model
There is a legal and commercial relationship between the owner of the brand
(franchisor) and the individual (franchisee).

A franchisee pays a franchisor an initial fee and ongoing royalties. The

franchisee, in return, gains the use of a trademark, the franchisor’s ongoing
support, as well as the right to use the franchisor’s business system and sell its
products or services.

The business model for each franchise concept is different and you will need to
evaluate it as part of your due diligence. What exactly does it encompass?

Value Proposition
Revenue Model
Market Opportunity and Advantage
Support
Marketing Strategy
Organizational Expansion

WHAT WILL HAPPEN NEXT?

Profiling the franchisee
As the owner of a franchise business, a huge success factor will be your ability to
choose the right franchisees to represent your brand to customers.

Making mistakes when choosing franchisees can potentially take a devastating

toll on your company’s reputation and relationships with other franchisees. It can
also be expensive and time-consuming to resolve difficult situations.

These include doing interviews, and background checks to see whether the
candidate is well suited to your organization.

1. Do they have a passion for the business?

One quality that all franchise businesses should look for in their
franchisees is a passion for the business and the brand. It is their
commitment to the business that will make them want to work hard and
maintain your standards and brand promise to customers.

2. Do they have the necessary financial means and business acumen? Buying a
franchise requires an upfront investment and ongoing fees and royalties. That is
why, as part of your selection process, you should carefully consider the finances
of the prospective franchisees.

Besides having them disclose financial information on an application, you

should verify it by asking for banking and investment statements. You
should also do a credit check on candidates.

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 You should also ask candidates for a resumé that outlines their education
and business experience. This will help you assess whether they are likely
to have the business acumen to successfully run a franchise.

3. Will they maintain your standards?

A hallmark of franchising is continuity of customer experience across the
system. To maintain that continuity, franchises must strictly adhere
standardized methods, processes, and routines.

A big part of your job in evaluating the suitability of candidates will be

judging whether they will deliver on your brand promise.

4. Is your franchise a good fit for them?

Buying a franchise is like joining a family in a contractual relationship that
will last for many years. That is why it is important for both sides to make
sure there is a good fit by doing due diligence on one another.

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Included in this process is the examination of your trademark to check if it complies with
the rules and regulations. Aside from similarity to existing trademarks, it should not also
be too generic , deceptive, immoral, or scandalous; among other rules.
Step 3: Publication in IP Philippines Gazette
If the trademark is approved, you will receive a notice and it will now be published in the
IP Philippines Gazette. This is to inform the public of the application and give a chance
for anyone to oppose the registration. Any individual or company can oppose if it
violates an existing trademark they have, or if they find it grossly damaging to their
reputation or business.
Step 4: Registration
The public is given up to 30 days to act. If no opposition is received and verified by the
Director of the Bureau of Legal Affairs, the Intellectual Property Office will now issue the
Certificate of Registration.
The trademark will again be published in the I P Philippines Gazette, which marks its
official entry to the records. The certificate is valid of ten (10) years and can be
renewed after.
Before the entire process will take any time between 18 to 24 months. I am not sure
right now how much time it would take for it to be approved.

Membership to Franchise Association

Beside the fact that your company is licensed and registered in appropriate government
offices like DTI and SEC. It also helps to check if you are a part of reputable franchise
groups like Philippine Franchise Association or Filipino

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CHECKLIST: FRANCHISING YOUR
BUSINESS IN THE PHILIPPINES
Since there is no specific law that caters Philippines Franchising, there are no specific
order to follow or timelines to expect for starting a franchise. Here is our checklist you
can follow.

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 Given that you have all the permits and licenses to operate a business, these include
mandatory and additional benefits.

For newly set-up companies:

1. Securities and Exchange Commission (SEC) Registration
2. Bureau of Internal Revenue (BIR) Registration
3. SSS, Philhealth, and Pag-ibig (HDMF) Registration
4. Mayor’s Permit
5. Barangay Clearance
6. Building Permit
7. Occupancy Permit (Building and Unit)
8. Sanitary Permit
9. Locational Clearance
10. Fire Clearance
For renewal of business permit:
1. Previous Mayor’s Permit and receipt
2. Previous Barangay Clearance and receipt
3. Previous Sanitary Permit
Assess your business and prepare your budget for implementation.
Finalized your Company or Business Mission and Vision
Create a process and document each of the activities needed to support your
expansion and your possible franchisee. (including your Operations Manual and HR
Admin Guidelines)
Create a realistic franchise plan which includes plans for marketing, budget, logistics,
and other related items.
Hire and equip your team with proper skills set ✓ Hire an accountant and Consult a
lawyer.
For processes and things needed for planning you can consult with us.
Register your trademark (the brand name your company wants.) ✓ Prepare your
franchise presentation material.
Prepare your franchise agreement (Contract).
Prepare your Financial Projection for 3 to 5 years.
Ready your Income Statement (just in case the franchisee asks for it) ✓ Become a
member of Franchise Associations to boost credibility and branding.
Buy a domain and create your website to locate all your business branches. Partner
with a BIR approved POS system to avoid manual task.
Ready your delivery to franchisee services or partner with third party logistic.
Prepare your warehouse for deliveries
Contact a site acquisition expert
Prepare your marketing materials
Prepare your training materials
Set your production with safety and sanitation practices
Ready your report generating software or excel based sheets for your manual reports
Ready a team who will troubleshoot technology-based software and hardware and
repair store equipment.

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 Present to Franchisee, Set Expectation and Timeline for deliverables including
construction.

ALL SAMPLE
ORG CHART AND THEIR RESPECTIVE RESPONSIBILITIES

FOUNDER OR THE OWNERS, overall decision maker and the one who will approve
executive level transactions.
HR AND ADMIN, HR is the specialized field dealing with HUMAN resources.
Administration deals with policies, procedures, rules regulations, maintenance of office
buildings, discipline, arrangement of transportation and make sure that everyday
requirements of organization are met. Training is also under HR and AD
FINANCE AND ACCOUNTING, accounting focuses on the day-to-day flow of money in
and out of a company or institution, whereas finance is a broader term for the
management of assets and liabilities and the planning of future growth.
MARKETING plays a vital role in promoting the business and mission of an organization.
It serves as the face of your company, coordinating and producing all materials
representing the business. It is the Marketing Department's job to reach out to prospects,
customers, investors, and/or the community, while creating an overarching image that
represents your company in a positive light.
SUPPLY CHAIN, from planning, purchasing, production, transportation, storage,
distribution, and customer service. They connect all the major departments in the
organization. From controlling expense to boosting sales supply chain team maximize the
profit of a company.

SALES AND OPERATION Sales Team Ensure “Sales”. Sales Operations is a division
within a business that is charged with ensuring the efficiency and effectiveness of a
company’s sales. Also supports a company’s sales team by creating, evaluating, and
optimizing data sets and sales applications.

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SAMPLE FRANCHISE CONTRACT:

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 Note: This is a sample contract and we recommend still to consult a lawyer before
using.

KNOW ALL MEN BY THESE PRESENTS:

This FRANCHISE AGREEMENT is executed and entered this ___ th day of ____ year
_____
By and between:

___________________________________(Name of Franchisor) , Filipino, of legal age,

with residence and postal address at _______________________________, and doing
business under the name of ________________________(business trade name DTI or
SEC registered) at the same postal address, hereinafter referred to as the
FRANCHISOR;

-And-

____________________________________(Name of Franchisee) , Filipino, of legal age

with residence and postal address at (address) hereinafter referred to as the
FRANCHISEE;

WITNESSETH:

WHEREAS the FRANCHISOR is in the food retail business under the duly registered name of (Use the
one registered under Intellectual Properties of PH), hereinafter referred to as the TRADE NAME.

WHEREAS the FRANCHISOR is offering to qualify individuals or entities franchises to allow

the use of the TRADE NAME.

WHEREAS, the FRANCHISEE has indicated the desire to operate a food retail business
using the TRADE NAME at _________________ , _____________; PHILIPPINES

WHEREAS the FRANCHISEE represents that it has the necessary licenses and relevant
government permit to operate a food retail business.

NOW THEREFORE, for an in consideration of the foregoing premises a mutual covenant

hereinafter specified, the parties hereto agree as follows:

I – GRANT OF FRANCHISE AND FRANCHISE FEE

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The FRANCHISOR hereby grants to the FRANCHISEE the franchise, authority and
privilege to operate a food retail business using the TRADE NAME for a franchise fee of
PESOS: __________________ (Amount of Franchise), Philippine Currency, payable upon
signing of this Franchise Agreement;

The franchise granted under this agreement is non-transferrable not refundable, in whole or
in part for any reason whatsoever.

II – EFFECTIVITY/RENEWAL

This Franchise Agreement shall be effective and in force for a fixed period of five (5)
years from ___________________________ and can be renewed after the said period,
renewal fee will be based on performance of ROI as stipulated in the Franchise Proposal,
based on the prevailing cost of living index;

III - EXCLUSIVITY OF FRANCHISE AREA

The exclusive area under this franchise agreement shall be a radius of five hundred (500)
meters from the FRANCHISEE store location meaning the FANCHISOR cannot grant any
other franchise except where there is a shopping mall within the said area, in which case
another franchise could be granted by the FRANCHISOR;

IV – STORE SPACE/EQUIPMENT
The FRANCHISEE shall provide its own store space and other equipment required for the
operation of the franchise granted herein.

V – EXCLUSIVITY OF SUPPLY/SERVICES
The FRANCHISEE agrees and undertakes to source the materials and ingredients
exclusively from the FRANCHISOR or its accredited suppliers to ensure consistency of the
quality of the food served under the TRADE NAME.

VI – MARKETING STRATEGY/TECHNOLOGY/CONSULTATION
The FRANCHISOR guarantees and commits to provide and make available to the
FRANCHISEE any new technology relative to product development and the mode of
service for customers.
The FRANCHISOR shall assist the FRANCHISEE in the formulation of marketing strategy
that would enhance the latter’s business operations relative to the franchise.
The FRANCHISOR shall make available to the FRANCHISEE such services and business
advices geared toward the development of the latter’s operations.
The FRANCHISEE undertakes and commits to maintain its operations in accordance with
the standards set forth by the FRANCHISOR, including but not limited to store layout, food
service norms and the like.

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VII – INSURANCE
The FRANCHISEE shall be responsible for obtaining insurance, at its own and exclusive
expense, against fire and other risks relative to the operations of the franchise.

VIII – TERMINATION OF AGREEMENT/CONDITION

This franchise agreement can be terminated prior to the expiration of the term provided
under Clause II above by the FRANCHISOR in the event of violation by the
FRANCHISEE of any provision herein.
Ether party may terminate this franchise agreement by giving the other party written notice
thirty (30) days prior to the desired date of termination; provided that such termination is
without prejudice to any right either party may have against the other party;
Should a termination be initiated by either party, the FRANCHISEE commits to refrain to
engage in any business, on its own or in partnership with any other party, that would be
considered as a competition of the business of the FRANCHISOR;

IX - ARBITRATION
In case of conflict the parties herein agree to submit to arbitration by an
Arbitration Committee whose decision the parties agree to abide with. The Arbitration
Committee shall be composed of three (3) members with each party nominating a member
and the nominated members to nominate a third member who will be arbitration committee’s
chair.
In case the Arbitration Committee fails to resolve any conflict brought before it, the either
party can bring a court action against the other party in a court that would have the proper
jurisdiction on the case.
IN WITNESS WHEREOF, the parties herein have signed these presents this _____DAY of
_____________ at ________________.

____________________________ ______________________________
FRANCHISOR FRANCHISEE
Signed in the presence of:
________________________ _______________________
ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES )

) S. S.

BEFORE ME, a Notary Public for and in ____________________ personally appeared:

Name Evidence of Identity

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_______________________ _________________ _______________________
_________________
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SAMPLE FINANCIAL STATEMENT

MONTH OF MARCH 2020
INCOME STATEMENT SAMPLE
The sample financial statement is for
SALES
a
Sales ₱ 208,207.00
franchisee owned store.
Sales Discount ₱ 452.40 Total Sales of the franchisee store is at
TOTAL SALES ₱ 207,754.60 208,207.00 less sales discount of 452.40
making total sales of 207,754.60.
COST OF SALES
Beginning Inv ₱ 20,161.42 Cost of Sales
Raw materials ₱112,695.55 Beginning inventory + Raw Materials
Purchases Outside (Purchased)+Other Purchases – Ending
Ending Inv ₱ 24,726.72 Inventory.

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TOTAL COST OF SALES ₱ 108,130.25
*This means you need to have a full
TOTAL GROSS INCOME ₱ 99,624.35 beginning inventory count at the start of
the month and ending inventory count at
OPERATING EXPENSES ₱ 7,587.84
the end of the month*
Salary Expense
Basic TOTAL GROSS INCOME is TOTAL SALES
Bonuses – TOTAL COST OF SALES.
SSS
PHILHEALTH TOTAL OPERATING EXPENSES is just
PAG-IBIG the total on the list of operating expenses.
Utility Expense
Rent *make sure that all expenses are
Electricity accounted and have corresponding
Water receipts. If not at least a record of all the
Telephone & Internet transactions made so that you can
Other Expense categorize this depends on the
Office Supplies and Printing ₱ 730.00 categories, you made in your operating
Station and Cleaning Supplies expenses. (General Ledger Accounts)
Repairs and Maintenance Expense ₱ 124.00
Ads and Promos
Delivery Charges ₱ 2,107.00 Thus,
Making OPERATING INCOME =
Pemits, Taxes & Licenses TOTAL GROSS INCOME-TOTAL
Trainings OPERATING EXPESES.
Transportation Expense
NIAT or NET INCOME AFTER TAX =
OPERATING INCOME – INCOME TAX.

₱ 705.00

TOTAL OPERATING EXPENSES ₱ 11,253.84

OPERATING INCOME ₱ 88,370.51

INCOME TAX ₱ 10,604.46

BOOTH SIZE AND
NET INCOME AFTER TAX ₱ 77,766.05
PACKAGE PRICING
SAMPLE ONLY
EQUIPMENT AND CONSTRUCTION PRICE MAY VARY
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